Spreadsheet Modeling

& Decision Analysis

A Practical Introduction to Business Analytics
7th edition

Cliff T. Ragsdale

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Chapter 6

Integer Linear Programming

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Introduction

When one or more variables in an LP problem

must assume an integer value we have an Integer
Linear Programming (ILP) problem.
ILPs occur frequently
Scheduling workers
Manufacturing airplanes
Integer variables also allow us to build more
accurate models for a number of common
business problems.

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Integrality Conditions
MAX: 350X1 + 300X2 } profit
S.T.: 1X1 + 1X2 <= 200 } pumps
9X1 + 6X2 <= 1566 } labor
12X1 + 16X2 <= 2880 } tubing
X1, X2>= 0 } nonnegativity
X1, X2 must be integers } integrality

Integrality conditions are easy to state but make the

problem much more difficult (and sometimes impossible)
to solve.
2014 Cengage Learning. All Rights Reserved. May not
be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Relaxation
Original ILP
MAX: 2X1 + 3X2
S.T.: X1 + 3X2 <= 8.25
2.5X1 + X2 <= 8.75
X1, X2 >= 0
X1, X2 must be integers
LP Relaxation
MAX: 2X1 + 3X2
S.T.: X1 + 3X2 <= 8.25
2.5X1 + X2 <= 8.75
X1, X2 >= 0

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Integer Feasible vs.
X2
LP Feasible Region
Integer Feasible Solutions
3

0
0 1 2 3 4 X1
2014 Cengage Learning. All Rights Reserved. May not
be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Solving ILP Problems

When solving an LP relaxation, sometimes you

get lucky and obtain an integer feasible
solution.
This was the case in the original Blue Ridge Hot
Tubs problem in earlier chapters.
But what if we reduce the amount of labor
available to 1520 hours and the amount of tubing
to 2650 feet?
See file Fig6-2.xlsm

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Bounds
The optimal solution to an LP relaxation of an ILP
problem gives us a bound on the optimal objective
function value.
For maximization problems, the optimal relaxed
objective function values is an upper bound on the
optimal integer value.
For minimization problems, the optimal relaxed
objective function values is a lower bound on the
optimal integer value.
2014 Cengage Learning. All Rights Reserved. May not
be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Rounding
It is tempting to simply round a fractional
solution to the closest integer solution.
In general, this does not work reliably:
The rounded solution may be infeasible.
The rounded solution may be suboptimal.

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
How Rounding Down Can Result
in an Infeasible Solution
X2

3 infeasible solution obtained

by rounding down

2
optimal relaxed solution

0
0 1 2 3 4 X1
2014 Cengage Learning. All Rights Reserved. May not
be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Branch-and-Bound

The Branch-and-Bound (B&B) algorithm can

be used to solve ILP problems.
Requires the solution of a series of LP
problems termed candidate problems.
Theoretically, this can solve any ILP.
Practically, it often takes LOTS of
computational effort (and time).

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Stopping Rules
Because B&B can take so long, most ILP packages allow
you to specify a suboptimality tolerance factor.
This allows you to stop once an integer solution is found
that is within some % of the global optimal solution.
Bounds obtained from LP relaxations are helpful here.
Example
LP relaxation has an optimal obj. value of $64,306.
95% of $64,306 is $61,090.
Thus, an integer solution with obj. value of $61,090 or
better must be within 5% of the optimal solution.

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Using Solver

Lets see how to specify integrality conditions and

suboptimality tolerances using Solver

See file Fig6-8.xlsm

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 An Employee Scheduling Problem:
Air-Express
Day of Week Workers Needed Shift Days Off Wage
Sunday 18 1 Sun & Mon $680
Monday 27 2 Mon & Tue $705
Tuesday 22 3 Tue & Wed $705
Wednesday 26 4 Wed & Thr $705
Thursday 25 5 Thr & Fri $705
Friday 21 6 Fri & Sat $680
Saturday 19 7 Sat & Sun $655

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Defining the Decision Variables

X1 = the number of workers assigned to shift 1

X2 = the number of workers assigned to shift 2
X3 = the number of workers assigned to shift 3
X4 = the number of workers assigned to shift 4
X5 = the number of workers assigned to shift 5
X6 = the number of workers assigned to shift 6
X7 = the number of workers assigned to shift 7

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Defining the Objective Function

Minimize the total wage expense.

MIN: 680X1 +705X2 +705X3 +705X4 +705X5 +680X6 +655X7

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Defining the Constraints
Workers required each day
0X1+ 1X2+ 1X3+ 1X4+ 1X5+ 1X6+ 0X7 >= 18 } Sunday
0X1+ 0X2+ 1X3+ 1X4+ 1X5+ 1X6+ 1X7 >= 27 } Monday
1X1+ 0X2+ 0X3+ 1X4+ 1X5+ 1X6+ 1X7 >= 22 }Tuesday
1X1+ 1X2+ 0X3+ 0X4+ 1X5+ 1X6+ 1X7 >= 26 } Wednesday
1X1+ 1X2+ 1X3+ 0X4+ 0X5+ 1X6+ 1X7 >= 25 } Thursday
1X1+ 1X2+ 1X3+ 1X4+ 0X5+ 0X6+ 1X7 >= 21 } Friday
1X1+ 1X2+ 1X3+ 1X4+ 1X5+ 0X6+ 0X7 >= 19 } Saturday
Nonnegativity & integrality conditions
Xi >= 0 and integer for all i

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Implementing the Model
See file Fig6-13.xlsm

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Binary Variables

Binary variables are integer variables that can

assume only two values: 0 or 1.
These variables can be useful in a number of
practical modeling situations.

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 A Capital Budgeting Problem:
CRT Technologies
Expected NPV Capital (in $000s) Required in
Project (in $000s) Year 1 Year 2 Year 3 Year 4 Year 5
1 $141 $75 $25 $20 $15 $10
2 $187 $90 $35 $0 $0 $30
3 $121 $60 $15 $15 $15 $15
4 $83 $30 $20 $10 $5 $5
5 $265 $100 $25 $20 $20 $20
6 $127 $50 $20 $10 $30 $40

The company has $250,000 available to invest in new projects.

It has budgeted $75,000 for continued support for these
projects in year 2 and $50,000 per year for years 3, 4, and 5.
Unused funds in any year cannot be carried over.
2014 Cengage Learning. All Rights Reserved. May not
be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Defining the Decision Variables

1, if project i is selected
X i 1,2,...,6
i 0, otherwise

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Defining the Objective Function

Maximize the total NPV of selected projects.

MAX: 141X1 + 187X2 + 121X3

+ 83X4 + 265X5 + 127X6

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Defining the Constraints

Capital Constraints
75X1 + 90X2 + 60X3 + 30X4 + 100X5 + 50X6 <= 250 } year 1
25X1 + 35X2 +15X3 + 20X4 + 25X5 + 20X6 <= 75 } year 2
20X1 + 0X2 + 15X3 + 10X4 + 20X5 + 10X6 <= 50 } year 3
15X1 + 0X2 + 15X3 + 5X4 + 20X5 + 30X6 <= 50 } year 4
10X1 +30X2 +15X3 + 5X4 + 20X5 + 40X6 <= 50 } year 5
Binary Constraints
All Xi must be binary

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Implementing the Model
See file Fig6-16.xlsm

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Binary Variables
& Logical Conditions
Binary variables are also useful in modeling a number
of logical conditions.
Of projects 1, 3 & 6, no more than one may be
selected
X1 + X3 + X6 <= 1
Of projects 1, 3 & 6, exactly one must be selected
X1 + X 3 + X 6 = 1
Project 4 cannot be selected unless project 5 is
also selected
X4 X5 <= 0

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 The Fixed-Charge Problem
Many decisions result in a fixed or lump-sum cost
being incurred:
The cost to lease, rent, or purchase a piece of
equipment or a vehicle that will be required if a
particular action is taken.
The setup cost required to prepare a machine or to
produce a different type of product.
The cost to construct a new production line that will
be required if a particular decision is made.
The cost of hiring additional personnel that will be
required if a particular decision is made.
2014 Cengage Learning. All Rights Reserved. May not
be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Example Fixed-Charge Problem:
Remington Manufacturing
Hours Required By:
Operation Prod. 1 Prod. 2 Prod. 3 Hours Available
Machining 2 3 6 600
Grinding 6 3 4 300
Assembly 5 6 2 400
Unit Profit $48 $55 $50
Setup Cost $1000 $800 $900

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Defining the Decision Variables

Xi = the amount of product i to be produced, i = 1, 2, 3

1, if Xi 0

Yi i = 1, 2, 3
0, if Xi 0

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Defining the Objective Function

Maximize total profit.

MAX: 48X1 + 55X2 + 50X3 1000Y1 800Y2 900Y3

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Defining the Constraints
Resource Constraints
2X1 + 3X2 + 6X3 <= 600 } machining
6X1 + 3X2 + 4X3 <= 300 } grinding
5X1 + 6X2 + 2X3 <= 400 } assembly
Binary Constraints
All Yi must be binary
Nonnegativity conditions
Xi >= 0, i = 1, 2, ..., 6
Is there a missing link?

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Defining the Constraints (contd)
Linking Constraints (with Big M)
X1 <= M1Y1 or X1 - M1Y1 <= 0
X2 <= M2Y2 or X2 - M2Y2 <= 0
X3 <= M3Y3 or X3 - M3Y3 <= 0
If Xi > 0 these constraints force the associated Yi
to equal 1.
If Xi = 0 these constraints allow Yi to equal 0 or 1,
but the objective will cause Solver to choose 0.
Note that Mi imposes an upper bounds on Xi.
It helps to find reasonable values for the Mi.

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Finding Reasonable Values for M1
Consider the resource constraints
2X1 + 3X2 + 6X3 <= 600 } machining
6X1 + 3X2 + 4X3 <= 300 } grinding
5X1 + 6X2 + 2X3 <= 400 } assembly
What is the maximum value X1 can assume?
Let X2 = X3 = 0
X1 = MIN(600/2, 300/6, 400/5)
= MIN(300, 50, 80)
= 50
Maximum values for X2 & X3 can be found
similarly.
2014 Cengage Learning. All Rights Reserved. May not
be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Summary of the Model

MAX: 48X1 + 55X2 + 50X3 - 1000Y1 - 800Y2 - 900Y3

S.T.: 2X1 + 3X2 + 6X3 <= 600 } machining
6X1 + 3X2 + 4X3 <= 300 } grinding
5X1 + 6X2 + 2X3 <= 400 } assembly
X1 - 50Y1 <= 0
X2 - 67Y2 <= 0 linking constraints
X3 - 75Y3 <= 0
All Yi must be binary
Xi >= 0, i = 1, 2, 3

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Implementing the Model
See file Fig6-20.xlsm

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 On the use if IF( ) functions - I
Avoid the use IF( ) functions to model the relationship
between the Xi and Yi.
Suppose cell A5 represents X1
Suppose cell A6 represents Y1
Youll want to let A6 = IF(A5>0,1,0)
This leads to local optimal solutions with Excels
Solver.
Treat the Yi just like any other variable.
Make them changing cells.
Use the linking constraints to enforce the proper
relationship between the Xi and Yi.
2014 Cengage Learning. All Rights Reserved. May not
be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 On the use if IF( ) functions - II
Risk Solver Platform will attempt to re-formulate
models containing IF( ) functions into equivalent
linear models.
See file Fig6-23.xlsm
This doesnt always work even if an alternate linear
model exists.
You should learn how to formulate your own models
appropriately & not always rely on RSP to do this for
you.
Automatic reformulation is controlled by the
Nonsmooth Model Transformation property on the
Platform tab.
2014 Cengage Learning. All Rights Reserved. May not
be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Minimum Order Size Restrictions
Suppose Remington doesnt want to manufacture any
units of product 3 unless it produces at least 40 units...

Consider,
X3 <= M3Y3
X3 >= 40 Y3

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Quantity Discounts
Assume
If Blue Ridge Hot Tubs produces more than
75 Aqua-Spas, it obtains discounts that
increase the unit profit to $375.
If it produces more than 50 Hydro-Luxes,
the profit increases to $325.

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Quantity Discount Model
MAX: 350X11 + 375X12 + 300X21 + 325X22
S.T.: 1X11 + 1X12 + 1X21 + 1X22 <= 200 } pumps
9X11 + 9X12 + 6X21 + 6X22 <= 1566 } labor
12X11+ 12X12+ 16X21+16X22 <= 2880 } tubing
X12<=M12Y1
X11>=75Y1
X22<=M22Y2
X21>=50Y2
Xij >= 0
Xij must be integers, Yi must be binary
2014 Cengage Learning. All Rights Reserved. May not
be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 A Contract Award Problem

B&G Construction has 4 building projects and can

purchase cement from 3 companies for the
following costs:

Cost per Delivered Ton of Cement Max.

Project 1 Project 2 Project 3 Project 4 Supply
Co. 1 $120 $115 $130 $125 525
Co. 2 $100 $150 $110 $105 450
Co. 3 $140 $95 $145 $165 550
Needs 450 275 300 350
(tons)

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 A Contract Award Problem

Side constraints:
Co. 1 will not supply orders of less than 150
tons for any project
Co. 2 can supply more than 200 tons to no
more than one of the projects
Co. 3 will accept only orders that total 200,
400, or 550 tons

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Defining the Decision Variables

Xij = tons of cement purchased

from company i for project j

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Defining the Objective Function

Minimize total cost

MIN: 120X11 + 115X12 + 130X13 + 125X14

+ 100X21 + 150X22 + 110X23 + 105X24
+ 140X31 + 95X32 + 145X33 + 165X34

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Defining the Constraints
Supply Constraints
X11 + X12 + X13 + X14 <= 525 } company 1
X21 + X22 + X23 + X24 <= 450 } company 2
X31 + X32 + X33 + X34 <= 550 } company 3
Demand Constraints
X11 + X21 + X31 = 450 } project 1
X12 + X22 + X32 = 275 } project 2
X13 + X23 + X33 = 300 } project 3
X14 + X24 + X34 = 350 } project 4

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Implementing the
Transportation Constraints

See file Fig6-24.xlsm

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Defining the Constraints-I
Company 1 Side
Constraints
X11<=525Y11 Co. 1 will not supply
X12<=525Y12 orders of less than 150
tons for any project
X13<=525Y13
X14<=525Y14
X11>=150Y11
X12>=150Y12
X13>=150Y13
X14>=150Y14
Yij binary

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Defining the Constraints-II
Company 2 Side Constraints
X21<=200+250Y21 Co. 2 can supply more
X22<=200+250Y22 than 200 tons to no
more than one of the
X23<=200+250Y23 projects
X24<=200+250Y24
Y21 + Y22 + Y23 + Y24 <= 1

Yij binary

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 Defining the Constraints-III

Company 3 Side Constraints

X31 + X32 + X33 + X34 = 200Y31 + 400Y32 + 550Y33

Y31 + Y32 + Y33 <= 1

Co. 3 will accept only
orders that total 200,
400, or 550 tons

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
Implementing the Side Constraints

See file Fig6-24.xlsm

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
The Branch-And-Bound Algorithm

MAX: 2X1 + 3X2

S.T. X1 + 3X2 <= 8.25
2.5X1 + X2 <= 8.75
X1, X2 >= 0 and integer

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
X2 Solution to LP Relaxation
3 Feasible Integer Solutions

Optimal Relaxed Solution

X1 = 2.769, X2=1.826
2
Obj = 11.019

0
0 1 2 3 4 X1
2014 Cengage Learning. All Rights Reserved. May not
be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
The Branch-And-Bound Algorithm
Problem I MAX: 2X1 + 3X2
S.T. X1 + 3X2 <= 8.25
2.5X1 + X2 <= 8.75
X1 <= 2
X1, X2 >= 0 and integer

Problem II MAX: 2X1 + 3X2

S.T. X1 + 3X2 <= 8.25
2.5X1 + X2 <= 8.75
X1 >= 3
X1, X2 >= 0 and integer

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
X2
Solution to LP Relaxation
3 Problem I

X1=2, X2=2.083, Obj = 10.25

Problem II

0
0 1 2 3 4 X1
2014 Cengage Learning. All Rights Reserved. May not
be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
The Branch-And-Bound Algorithm
Problem III MAX: 2X1 + 3X2
S.T. X1 + 3X2 <= 8.25
2.5X1 + X2 <= 8.75
X1 <= 2
X2 <= 2
X1, X2 >= 0 and integer

Problem IV MAX: 2X1 + 3X2

S.T. X1 + 3X2 <= 8.25
2.5X1 + X2 <= 8.75
X1 <= 2
X2 >= 3
X1, X2 >= 0 and integer
2014 Cengage Learning. All Rights Reserved. May not
be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
X2 Solution to LP Relaxation
3 Problem III

X1=2, X2=2, Obj = 10

2
Problem II

X1=3, X2=1.25, Obj = 9.75

0
0 1 2 3 4 X1
2014 Cengage Learning. All Rights Reserved. May not
be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
 B&B Summary
Original Problem
X1=2.769
X2=1.826
Obj = 11.019 X1>=3
X1<=2
Problem II
Problem I
X1=2 X1=3
X2=2.083 X2=1.25
Obj = 10.25 Obj = 9.75

X2<=2 X2>=3

Problem III Problem IV

X1=2
X2=2 infeasible
Obj = 10

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
End of Chapter 6

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
The Analytic Solver Platform software
featured in this book is provided by
Frontline Systems.

http://www.solver.com

2014 Cengage Learning. All Rights Reserved. May not

be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.