LINEAR PROGRAMMING

Definition
A model that consists of linear
relationships representing a firm’s
decision(s) given an objective and
resource constraints
Developer
 Linear programming, as it is known today, was conceived in 1947 by
George B. Dantzig while he was the head of the Air Force Statistical
Control's Combat Analysis Branch at the Pentagon. The military
referred to its plans for training, supplying, and deploying combat
units as "programs." When Dantzig analyzed Air Force planning
problems, he realized that they could be formulated as a system of
linear inequalities hence his original name for the technique,
"programming in a linear structure," which was later shortened to
"linear programming."
Steps in Applying LP Techniques
The problem must be identified as being solvable by linear
programming
The unstructured problem must be formulated as a
mathematical model
The model must be solved by using established mathematical
techniques
Model Formulation
A linear programming model consists of
certain common components and
characteristics. The model components
include decision variables, an objective
function, and model constraints, which
consist of decision variables and
parameters.
Decision Variables
Mathematical symbols that represent levels of activity
by the firm. For example, an electrical manufacturing firm
desires to produce x1 radios, x2 toasters, and x3 clocks,
where x1, x2, and x3 are symbols representing unknown
variable quantities of each item. The final values of x1,
x2, and x3, as determined by the firm, constitute a
decision (e.g., the equation x1 = 100 radios is a decision
by the firm to produce 100 radios).
Objective Variables
Mathematical relationship that describes the objective
of the firm in terms of the decision variables. The
objective function always consists of either maximizing or
minimizing some value (e.g., maximize the profit or
minimize the cost of producing radios).
Model Constraints
 linear relationships of the decision variables
They represent the restrictions placed on the firm by
the operating environment. The restrictions can be in the
form of limited resources or restrictive guidelines. For
example, only 40 hours of labor may be available to
produce radios during production. The actual numeric
values in the objective function and the constraints, such
as the 40 hours of available labor, are parameters.
A Maximization Model Example
Beaver Creek Pottery Company is a small crafts operation
run by a Native American tribal council. The company
employs skilled artisans to produce clay bowls and mugs
with authentic Native American designs and colors. The
two primary resources used by the company are special
pottery clay and skilled labor. Given these limited
resources, the company desires to know how many bowls
and mugs to produce each day in order to maximize profit.
A Maximization Model Example
The two products have the following resource
requirements for production and profit per item produced
(i.e., the model parameters):
Resource Requirements
Product LABOR (HR./UNIT) CLAY (LB./UNIt) PROFIT ($/UNIT)
Bowl 1 4 40
Mug 2 3 50
A Maximization Model Example
There are 40 hours of labor and 120 pounds of clay
available each day for production.
Formulate this problem as a linear programming model
by defining each component of the model separately and
then combining the components into a single model.
A Maximization Model Example
Step 1. Define the decision variables
How many bowls and mugs to produce
Step 2. Define the objective function
Maximize profit
Step 3. Define the constraints
The resources (clay and labor) available
A Maximization Model Example
Step 1. Define the decision variables
x1 = number of bowls to produce
x2 = number of mugs to produce
Step 2. Define the objective function
maximize Z = $40x1 + 50x2
Step 3. Define the constraints
1x1 + 2x2 ≤ 40 hr.
A Maximization Model Example
Step 3. Define the constraints
4x1 + 3x2 120 lb.
A final restriction is that the number of bowls and
mugs produced must be either zero or a positive value
because it is impossible to produce negative items.
These restrictions are referred to as non-negativity
constraints and are expressed mathematically as
x1 ≥ 0, x2 ≥ 0
A Maximization Model Example
Linear Programming Model:
Maximize Z = $40x1 + 50x2
subject to
1x1 + 2x2 ≤ 40
4x1 + 3x2 ≤ 120
x1, x2 ≥ 0
Solution
The solution of this model will result in numeric values for x1
and x2 that will maximize total profit, Z. As one possible
solution, consider x1 = 5 bowls and x2 = 10 mugs. First, we will
substitute this hypothetical solution into each of the
constraints in order to make sure that the solution does not
require more resources than the constraints show are
available:
1(5) + 2(10) ≤ 40 ; 4(5) + 3(10) ≤ 120
25 ≤ 40 50 ≤ 120
Solution
Because neither of the constraints is violated by this hypothetical
solution, we say the solution is feasible (i.e., it is possible).
Substituting these solution values in the objective function gives Z
= 40(5) + 50(10) = $700. However, for the time being, we do not
have any way of knowing whether $700 is the maximum profit.
A feasible solution does not violate any of the constraints.
Solution
Now consider a solution of x1 = 10 bowls and x2 = 20 mugs. This
solution results in a profit of
Z = $40(10) + 50(20)
= 400 + 1,000
= $ 1,400
Solution
Although this is certainly a better solution in terms of profit, it is
infeasible (i.e., not possible) because it violates the resource
constraint for labor:
1(10) + 2(20) ≤ 40
50 ≤ 40
Solution
The solution to this problem must maximize profit without
violating the constraints. The solution that achieves this objective
is x1 = 24 bowls and x2 = 8 mugs, with a corresponding profit of
$1,360