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7: LP Models
Linear Programming
Linear programming: A technique that is useful for allocating scarce resources among competing demands. Objective function: An expression in linear programming models that states mathematically what is being maximized (e.g., profit or present value) or minimized (e.g., cost or scrap). Decision variables: The variables that represent choices the decision maker can control. Constraints: The limitations that restrict the permissible choices for the decision variables.
Parameter: A value that the decision maker cannot control and that
does not change when the solution is implemented.
Assumptions:
Certainty: Numbers are known without doubt and remain unchanged. Proportionality: Constancy between production increases and resource utilization. Additivity: Total of all activities equals the sum of the individual activities. Divisibility: Solutions need not be in whole numbers . Nonnegativity: Decision variables must be positive or zero.
Chap. 7: LP Models
Formulating an LP Problem
The Stratton Company produces 2 basic types of plastic pipe. Three resources are crucial to the output of pipe: extrusion hours, packaging hours, and a special additive to the plastic raw material. Below is next weeks situation. Product Resource Extrusion Packaging Additive mix Type 1 4 hr 2 hr 2 lb Type 2 6 hr 2 hr 1 lb Resource Availability 48 hr 18 hr 16 lb
Chap. 7: LP Models
Type 1 4 hr 2 hr 2 lb
Type 2 6 hr 2 hr 1 lb
4 x1 + 6 x2 48 2 x1 + 2 x2 18 2 x1 + x2 16
LP Constraints Inequalities
Typically the constraining resources have upper or lower limits.
e.g., for the Stratton Company, the total extrusion time must not exceed the 48 hours of capacity available, so we use the sign.
Negative values for constraints x1 and x2 do not make sense, so we add nonnegativity restrictions to the model: x1 0 and x2 0 (nonnegativity restrictions) Other problem might have constraining resources requiring >, >, =, or < restrictions.
Chap. 7: LP Models
Graphical Solution
Most linear programming problems are solved with a computer.
However, insight into the meaning of the computer output, and linear programming concepts in general, can be gained by analyzing a simple two-variable problem graphically.
Graphical method of linear programming: A type of graphic analysis that involves the following five steps: plotting the constraints identifying the feasible region plotting an objective function line finding a visual solution finding the algebraic solution
Graphical Solution
18 16 14 12 10 8 6 4 2 0 | 2 | 4 | 6 | 8 | | 10 12
(Stratton contd)
x2
We begin by plotting the constraint equations, disregarding the inequality portion of the constraints (< or >). Making each constraint an equality (=) transforms it into the equation for a straight line.
x1
Chap. 7: LP Models
x2
Feasible
x1
Even though all the points in the feasible region represent possible solutions, we can limit our search to the corner points.
Corner point: A point that lies at the intersection of two (or possibly more) constraint lines on the boundary of the feasible region.
No interior points in the feasible region need be considered because at least one corner point is better than any interior point.
The best approach is to plot the objective function on the graph of the feasible region for some arbitrary Z values.
x2
For Stratton, the equation for an arbitrary objective function line passing through E is 34x1 + 40x2 = 272
Feasible
Chap. 7: LP Models
x2
A series of dashed lines can be drawn parallel to this first line. Each would have its own Z value. Lines above the first line would have higher Z values. Lines below it would have lower Z values.
Feasible
x1
x2
Our goal is to maximize profits, so the best solution is a point on the iso-profit line farthest from the origin but still touching the feasible region.
Feasible
Algebraic Solution
Step 1: Develop an equation with just one unknown.
Start by multiplying both sides by a constant so that the coefficient for one of the two decision variables is identical in both equations. Then subtract one equation from the other and solve the resulting equation for its single unknown variable.
Step 2: Insert this decision variables value into either one of the original constraints and solve for the other decision variable.
Chap. 7: LP Models
Special Cases
Infeasibility: No feasible region exists. Unboundedness: No finite solution. Redundancy: One or more constraints do not
intersect with feasible region.
Surplus: The amount by which the left-hand side exceeds the right-hand side.
To find the surplus for a constraint, we subtract a surplus variable from the left-hand side to make it an equality.
Chap. 7: LP Models
Sensitivity Analysis
Sensitivity analysis also often involves a series of what-if? questions. For example:
What if the profit on product 1 increases by 10%? What if less money is available in the advertising budget constraint? errors in estimating input parameters to the LP model managements experiments with possible future changes in the firm that may affect profits.
Sensitivity Analysis
Coefficient sensitivity: How much the objective function
coefficient of a decision variable must improve (increase for maximization or decrease for minimization) before the optimal solution changes and the decision variable becomes some positive number. Range of feasibility: The interval over which the righthand-side parameter can vary while its shadow price remains valid. Range of optimality: The lower and upper limits over which the optimal values of the decision variables remain unchanged. Shadow price: The increase in Z resulting from a one-unit increase in the right-hand side of a constraint. (Note: Can be negative.)
Chap. 7: LP Models
Sensitivity Analysis
RHS Values
The right-hand-side values of the constraints often represent resources available to the firm. The resources could be labor hours, machine time, or perhaps money or production materials available. In the High Note Sound Company example, two resources are
- hours available of electricians time and - hours of audio technicians time.
If additional hours were available, a higher total profit could be realized Sensitivity analysis about resources will help answer questions as these:
- How much should the company be willing to pay for additional hours? - Is it profitable to have some electricians work overtime? - Should we be willing to pay for more audio technician time?
Sensitivity Analysis
-
RHS Values
The amount of change in the objective function value that results from a unit change in one of the resources available is called the dual price or dual value. value The dual price for a constraint is the improvement in the objective function value that results from a one-unit increase in the right-hand side of the constraint.
Sensitivity Analysis
RHS Values
The dual price of a resource indicates the amount the objective function will be increased (or decreased) given another unit of the resource. However, the amount of possible increase in the righthand side of a resource is limited. If the RHS increased beyond the upper bound, then the objective function would no longer increase by the dual price.
There may be excess (slack) hours of a resource or the objective function may change by an amount different from the dual price. Thus, the dual price is relevant only within limits.