Lecture Outline

 Model Formulation
 Graphical Solution Method
 Linear Programming Model
 Solution
 Solving Linear Programming
Problems with Excel
 Sensitivity Analysis

Copyright 2006 John Wiley & Sons, Inc. Supplement 13-1

 Linear Programming (LP)

A model consisting of linear relationships

representing a firm’s objective and resource
constraints
LP is a mathematical modeling technique used to
determine a level of operational activity in order to
achieve an objective, subject to restrictions called
constraints

Copyright 2006 John Wiley & Sons, Inc. Supplement 13-2

 Types of LP

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 Types of LP (cont.)

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 Types of LP (cont.)

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 LP Model Formulation

 Decision variables
 mathematical symbols representing levels of activity of
an operation
 Objective function
 a linear relationship reflecting the objective of an
operation
 most frequent objective of business firms is to maximize
profit
 most frequent objective of individual operational units
(such as a production or packaging department) is to
minimize cost
 Constraint
 a linear relationship representing a restriction on
decision making

Copyright 2006 John Wiley & Sons, Inc. Supplement 13-6

 LP Model Formulation (cont.)

Max/min z = c1x1 + c2x2 + ... + cnxn

subject to:
a11x1 + a12x2 + ... + a1nxn (≤, =, ≥) b1
a21x1 + a22x2 + ... + a2nxn (≤, =, ≥) b2
:
am1x1 + am2x2 + ... + amnxn (≤, =, ≥) bm

xj = decision variables
bi = constraint levels
cj = objective function coefficients
aij = constraint coefficients

Copyright 2006 John Wiley & Sons, Inc. Supplement 13-7

 LP Model: Example

RESOURCE REQUIREMENTS
Labor Clay Revenue
PRODUCT (hr/unit) (lb/unit) ($/unit)
Bowl 1 4 40
Mug 2 3 50

There are 40 hours of labor and 120 pounds of clay

available each day

Decision variables
x1 = number of bowls to produce
x2 = number of mugs to produce

Copyright 2006 John Wiley & Sons, Inc. Supplement 13-8

 LP Formulation: Example

Maximize Z = $40 x1 + 50 x2

Subject to
x1 + 2x2 40 hr (labor constraint)
4x1 + 3x2 120 lb (clay constraint)
x1 , x2 0

Solution is x1 = 24 bowls x2 = 8 mugs

Revenue = $1,360

Copyright 2006 John Wiley & Sons, Inc. Supplement 13-9

 Graphical Solution Method

1. Plot model constraint on a set of coordinates

in a plane
2. Identify the feasible solution space on the
graph where all constraints are satisfied
simultaneously
3. Plot objective function to find the point on
boundary of this space that maximizes (or
minimizes) value of objective function

Copyright 2006 John Wiley & Sons, Inc. Supplement 13-10

 Graphical Solution: Example
x2
50 –

40 –
4 x1 + 3 x2 120 lb
30 –

Area common to
20 –
both constraints

10 – x1 + 2 x2 40 hr
| | | | | |
0–
10 20 30 40 50 60 x1

Copyright 2006 John Wiley & Sons, Inc. Supplement 13-11

 Computing Optimal Values
x2 x1 + 2x2 = 40
40 –
4x1 + 3x2 = 120
4 x1 + 3 x2 120 lb
30 – 4x1 + 8x2 = 160
-4x1 - 3x2 = -120
20 –
5x2 = 40
10 – x1 + 2 x2 40 hr
x2 = 8

0–8
| | 24 | | x1 x1 + 2(8) = 40
10 20 30 40
x1 = 24
Z = $50(24) + $50(8) = $1,360

Copyright 2006 John Wiley & Sons, Inc. Supplement 13-12

 Extreme Corner Points

x1 = 0 bowls
x2 x2 =20 mugs
x1 = 24 bowls
Z = $1,000
x2 =8 mugs
40 –
x1 = 30 bowls
Z = $1,360
30 – x2 =0 mugs

20 – A Z = $1,200

10 – B
| | | C|
0–
10 20 30 40 x1

Copyright 2006 John Wiley & Sons, Inc. Supplement 13-13

 Minimization Problem

CHEMICAL CONTRIBUTION
Brand Nitrogen (lb/bag) Phosphate (lb/bag)
Gro-plus 2 4
Crop-fast 4 3

Minimize Z = $6x1 + $3x2

subject to
2x1 + 4x2  16 lb of nitrogen
4x1 + 3x2  24 lb of phosphate
x 1, x 2  0
Copyright 2006 John Wiley & Sons, Inc. Supplement 13-14
 Graphical Solution
x2

14 –
x1 = 0 bags of Gro-plus
12 – x2 = 8 bags of Crop-fast

10 – Z = $24
A
8– Z = 6x1 + 3x2
6–

4–
B
2–
C
| | | | | | |
0–
2 4 6 8 10 12 14 x1
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 Simplex Method
 A mathematical procedure for solving linear
programming problems according to a set of steps
 Slack variables added to ≤ constraints to represent
unused resources

x1 + 2x2 + s1 =40 hours of labor

4x1 + 3x2 + s2 =120 lb of clay
 Surplus variables subtracted from ≥ constraints to
represent excess above resource requirement. For
example

2x1 + 4x2 ≥ 16 is transformed into

2x1 + 4x2 - s1 = 16
 Slack/surplus variables have a 0 coefficient in the
objective function

Z = $40x1 + $50x2 + 0s1 + 0s2

Copyright 2006 John Wiley & Sons, Inc. Supplement 13-16

Solution
Points with
Slack
Variables

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Solution
Points with
Surplus
Variables

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 Solving LP Problems with Excel
Click on “Tools”
to invoke “Solver.”

Objective function
=E6-F6

=E7-F7

=C6*B10+D6*B11

=C7*B10+D7*B11

Decision variables – bowls

(x1)=B10; mugs (x2)=B11

Copyright 2006 John Wiley & Sons, Inc. Supplement 13-19

 Solving LP Problems with Excel
(cont.)
After all parameters and constraints
have been input, click on “Solve.”

Objective function

Decision variables

C6*B10+D6*B11≤40
C7*B10+D7*B11≤120

Click on “Add” to
insert constraints

Copyright 2006 John Wiley & Sons, Inc. Supplement 13-20

 Solving LP Problems with Excel
(cont.)

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 Sensitivity Analysis

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 Sensitivity Range for Labor
Hours

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 Sensitivity Range for Bowls

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Copyright 2006 John Wiley & Sons, Inc. Supplement 13-25