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amelia santoso
Learning Objectives
1. Understand what a mathematical
model is.
2. Understand the advantageous of
building a mathematical model
3. Describe the process of building
mathematical model.
4. Discuss the various formal
approaches used for finding the
optimal solution.
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Mathematical Modeling
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Circle 12: Annual setup cost for setup cost annual number of
stock replenishments per batch stock replenishments
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Order
1
pattern by
special
production
runs
3
Annual
volume by
special
production
runs
Annual
9
handling
cost for big
customers
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Product
handling
cost/unit
Unit product
value
Customer
order pattern
Stock
replenishment
size
Order
pattern met
from stock
Average
stock level
5
4
Annual
number of
special
production
runs
10
Annual
setup cost
for special
production
runs
Annual
volume met
from stock
11 Annual
handling
cost for
small
customers
12
Annual
number
stock
replenishm
ent
Annual
setup cost
for stock
replenishm
ents
8
Average
stock
investment
Investment
holding cost/$
14
13
Annual
stock
holding
cost
Value of
annual
demand
15
Total annual LOD
operating cost
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10
Circle 10: Annual setup cost for production setup annual number of
special production runs cost per batch special production runs
Circle 15:
Total cost Annual setup cost for Annual handling cost
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11
value
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relevant
cost
holding
cost
for
stock
replenishm
ent
cost
value
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12
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Enumeration
If the number of alternative course of action is relatively small,
say in the tens rather than the hundreds, and the
computational effort to evaluate each alternative is relatively
minor, like in the LOD case, then finding the optimal solution
by simply evaluating the performance measure for each
alternative course of action or each discrete value of the
decision variable may be simple and fast.
The best solution is the one which achieves the best of the
performance measure a minimum or a maximum value,
whichever corresponds to the objective.
Search methods
If the performance measure to be optimized is in the form of
an objective function in one or several decision variables,
various search methods may reduce the computational effort
to find the optimal solution.
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Exercise
Describe the OR/MS methodology
steps for your proposed system in
the previous group assignment.
Construct a influence diagram
based on the rich picture of that
proposed system.
Build some mathematical models
for that system based on the
influence diagram.
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Reference
Daellenbach, H.G., 1994, Systems and Decision
Making: A Management Science Approach,
John Wiley & Sons Ltd, Chapter 6.
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