Linear Programming

Sensitivity Analysis
What if there is uncertainly about one or more
values in the LP model?

Sensitivity analysis allows us to determine how

“sensitive” the optimal solution is to changes
in data values.

This includes analyzing changes in:

1. An Objective Function Coefficient (OFC)
2. A Right Hand Side (RHS) value of a
constraint
 Graphical Sensitivity Analysis

We can use the graph of an LP to see what

happens when:

1. An OFC changes, or
2. A RHS changes
 Flair Furniture Problem

Max z = 7T + 5C (profit)
Subject to the constraints:
3T + 4C < 2400 (carpentry hrs)
2T + 1C < 1000 (painting hrs)
C < 450 (max # chairs)
T > 100 (min # tables)
T, C > 0 (nonnegativity)
 Objective Function
Coefficient (OFC) Changes
What if the profit contribution for tables changed
from $7 to $8 per table?

8
Max X
7T+5C (profit)
Clearly profit goes up, but would we want to make
more tables and less chairs?
(i.e. Does the optimal solution change?)
 Characteristics of OFC Changes
 There is no effect on the feasible region

 The slope of the level profit line changes

 If the slope changes enough, a different corner

point will become optimal
 C
Original
Objective Function Optimal Corner
7T + 5 C = $4040 500 (T=320, C=360)
Still optimal
Revised
400
Objective Function
8T + 5 C = $4360
300

200
Feasible

100
Region

0
0 100 200 300 400 500 T
What if the OFC C
became higher? 1000
Or lower?
Both have new
11T + 5C = $5500 optimal corner
Optimal Solution points
(T=500, C=0) 600
450
3T + 5C = $2850
Optimal Solution
(T=200, C=450)
Feasible
Region
0
0 100 500 800 T
 There is a range for each OFC where the
current optimal corner point remains optimal.

 If the OFC changes beyond that range a new

corner point becomes optimal.

 POM for windows will calculate the OFC

range.
 Right Hand Side (RHS) Changes
What if painting hours available changed from 1000
to 1300?
1300
2T + 1C < 1000 X (painting hrs)

This increase in resources could allow us to

increase production and profit.
 Characteristics of RHS Changes
 The constraint line shifts, which could change the
feasible region

 Slope of constraint line does not change

 Corner point locations can change

 The optimal solution can change

 Old optimal
corner point
C (T=320,C=360)
500 Profit=$4040
Feasible region
400 becomes larger

300 New optimal

corner point
(T=560,C=180)
200

2T
Profit=$4820

2T
Original
+
1C

+1C
100 Feasible
=1

=1
00
0

300
Region
0

0 100 200 300 400 500 600 T

 Effect on Objective Function Value
New profit = $4,820
Old profit = $4,040
Profit increase = $780 from 300 additional
painting hours

$2.60 in profit per hour of painting

 Each additional hour will increase profit by $2.60

 Each hour lost will decrease profit by $2.60
 Shadow Price

The change in the objective function value

per one-unit increase in the RHS of the
constraint.

Will painting hours be worth $2.60 per

hour regardless of how many hours are
available ?
 Range of Shadow Price Validity
Beyond some RHS range the value of each painting
hour will change.

While the RHS stays within this range, the shadow

price does not change.

POM for Windows will calculate this range as well

as the shadow price.
 Constraint RHS Changes

If the change in the RHS value is within the

allowable range, then:
 The shadow price does not change
 The change in objective function value =

(shadow price) x (RHS change)

If the RHS change goes beyond the allowable

range, then the shadow price will change.
 Objective Function
Coefficient (OFC) Changes

If the change in OFC is within the allowable

range, then:
 The optimal solution does not change

 The new objective function value can be

calculated
 Anderson Electronics Example

Decision: How many of each of 4 products

to make?
Objective: Maximize profit
Decision Variables:
V = number of VCR’s
S = number of stereos
T = number of TV’s
D = number of DVD players
 Anderson Electronics Example
Max z = 29V + 32S + 72T + 54D(in $ of profit)
Subject to the constraints:

3V + 4S + 4T + 3D < 4700 (elec. components)

2V + 2S + 4T + 3D < 4500 (nonelec. components)

V + S + 3T + 2D ≤ 2500 (assembly hours)

V, S, T, D > 0 (nonnegativity)
 Anderson Electronics Example
RHS Change Questions
 What if the supply of nonelectrical components
changes?

 What happens if the supply of electrical

components
 increased by 400 (to 5100)?

 increased by 4000 (to 8700)?

 Anderson Electronics Example
 What if we could buy an additional 400 elec.
components for $1 more than usual? Would
we want to buy them?

 What if we could get an additional 250 hours of

assembly time by paying $5 per hour more than
usual? Would this be profitable?
 Decision Variables That Equal 0
We are not currently making any VCR’s (V=0)
because they are not profitable enough.

How much would profit need to increase before we

would want to begin making VCR’s?
 Reduced Cost
of a Decision Variable
(marginal contribution to the obj. func. value)
- (marginal value of resources used)
= Reduced Cost

marginal profit of a VCR = $29

- marginal value of resources = ?
Reduced Cost of a VCR = $1.0
Reduced Cost is:

 The minimum amount by which the OFC of a

variable should change to cause that variable to
become non-zero.

 The amount by which the objective function

value would change if the variable were forced
to change from 0 to 1.
 OFC Change Questions
 For what range of profit contributions for DVD
players will the current solution remain optimal?

 What happens to profit if this value drops to $50

per DVD player?
 Alternate Optimal Solutions

May be present when there are 0’s in the

Allowable Increase or Allowable
Decrease values for OFC values.
 Simultaneous Changes

All changes discussed up to this point have

involved only 1 change at a time.

What if several OFC’s change?

Or
What if several RHS’s change?

Note: they cannot be mixed

 The 100% Rule

∑ (change / allowable change) < 1

RHS Example
 Electrical components decrease 500
500 / 950 = 0.5263
 Assembly hours increase 200
200 / 466.67 = 0.4285
0.9548
The sensitivity report can still be used
 Pricing New Variables

Suppose they are considering selling a new

product, Home Theater Systems (HTS)

Need to determine whether making HTS’s would

be sufficiently profitable

Producing HTS’s would take limited resources

away from other products
 To produce one HTS requires:
5 electrical components
4 nonelectrical components
4 hours of assembly time

 Can shadow prices be used to calculate

reduction in profit from other products? ( check
100% rule)
5/950 + 4/560 + 4/1325 = 0.015 < 1
 Required Profit Contribution per HTS
elec cpnts 5 x $ 2 = $10
nonelec cpnts 4x $0= $ 0
assembly hrs 4 x $24 = $96
$106
Shadow
Prices

Making 1 HTS will reduce profit (from other

products) by $106
• Need (HTS profit contribution) > $106
• Cost to produce each HTS:
elec cpnts 5 x $ 7 = $35
nonelec cpnts 4 x $ 5 = $20
assembly hrs 4 x $10 = $40
$95
(HTS profit contribution) = (selling price) - $95

So selling price must be at least $201

 Is HTS Sufficiently Profitable?
 Marketing estimates that selling price should not
exceed $175

 Producing one HTS will cause profit to fall by $26

($201 - $175)
 Sensitivity Analysis for
a Minimization Problem
Burn-Off makes a “miracle” diet drink

Decision: How much of each of 4

ingredients to use?

Objective: Minimize cost of ingredients

 Data

Units of Chemical per Ounce of Ingredient

Ingredient
Chemical A B C D Requirement
X 3 4 8 10 > 280 units
Y 5 3 6 6 > 200 units
Z 10 25 20 40 < 1050 units

$ per ounce of ingredient

$0.40 $0.20 $0.60 $0.30
Min 0.40A + 0.20B + 0.60C + 0.30D ($ of cost)
Subject to the constraints

A+B+C+D > 36 (min daily ounces)

3A + 4B + 8C + 10D > 280 (chem x min)
5A + 3B + 6C + 6D > 200 (chem y min)
10A + 25B + 20C + 40D < 1050 (chem z max)
A, B, C, > 0