DSC1007 Lecture 10

Discrete Optimization

Recap: Last Lecture .

Sensitivity Analysis: How the optimal solution and objective value change
if one of aij, bi, or cj changes
Changing cj rotates the isoquant and direction to optimize
The optimal solution will not change if within the sensitivity range
Changing bi shifts (parallel) the corresponding constraint
The binding constraints and shadow price will not change if within
the sensitivity range
Changing aij rotates the corresponding constraint
Shadow price: The marginal change of the objective value because of an
additional unit of resource/requirement
Excel Solvers Answer Report and Sensitivity Report

The Lego Game Revisited

We have seen fractional solutions for certain numbers of large and
small bricks.
What if we insist that the numbers of chairs and tables to produce
must be whole numbers?

Scenario 1. Some decision variables have to be integers.

Transportation Problem Revisited

What if there is a requirement that each retail outlet can only be
supplied by one plant?
What if Outlet A and Outlet B cannot be supplied by the same plant?

Scenario 2. There is a need to make choice or consider

some logical constraints.

Computer Production Problem Revisited

Scenario 3. There is a need to convert some nonlinear

constraints into linear constraints.

Discrete Optimization
Discrete Optimization is an optimization problem in which
some (or all) of the decision variables must be integer-valued
Examples:
Integer variables: Number of workers, cars, machines, etc.
Binary variables: YES/NO decisions
Mixed Integer Program (MIP): Some variables are integer-valued

Why do we need discrete optimization?

A very powerful modeling method!
CPLEX reports that > 90% of their clients problems are MIPs
Various applications: Sudoku

Discrete Optimization
Taxonomy
Integer Optimization/Programming (IP): Linear
optimization with all the decision variables being integer valued

Binary Optimization: Linear optimization with all the

decision variables being binary valued

Mixed Integer Optimization/Programming (MIP):

Linear optimization with some of the decision variables being
integer or binary valued

Using Binary Constraints

One of the most powerful modeling frameworks for
modeling Yes/No type of decisions
Usually 1 denotes YES and 0 denotes NO

Various use of binary variables

Example: Capital Budgeting Models

$15,000 available to invest
7 investments to choose from
Goal: Choose investments to maximize total NPV
Investment

Cash required

NPV

$5,000

$16,000

$2,500

$8,000

$3,500

$10,000

$6,000

$19,500

$7000

$22,000

$4,500

$12,000

$3,000

$7,500

*No partial investment is allowed for each choice

Example: Capital Budgeting Models

Decision variables: x1, , x7
Binary: xj = 1 if investment j is chosen, and 0 otherwise
Objective: Total return
Constraints: Cash constraint, binary constraint
Investment

Cash required

NPV

$5,000

$16,000

$2,500

$8,000

$3,500

$10,000

$6,000

$19,500

$7000

$22,000

$4,500

$12,000

$3,000

$7,500

Example: Capital Budgeting Models

Formulation:

Investment
1

$5,000

$16,000

$2,500

$8,000

$3,500

$10,000

$6,000

$19,500

$7000

$22,000

$4,500

$12,000

$3,000

$7,500

Example: Capital Budgeting Models

Solution: Select investments 1, 2 and 5.
Total NPV = $46,000

Investment

Cash
required

NPV

$5,000

$16,000

$2,500

$8,000

$3,500

$10,000

$6,000

$19,500

$7000

$22,000

$4,500

$12,000

$3,000

$7,500

 Formulation of the Knapsack Problem

Knapsack problem:
n: number of treasures to pick from
b: the total weight (or volume) that the knapsack can hold
aj: value of each treasure j
cj: weight (or volume) of each treasure j
xj: whether to choose treasure j

It is not so easy!
In reality, there may be additional
conditions to be considered:
At most two investments can be selected
Investments 1 and 2 cannot be selected
together
Investment 5 can be selected only if
Investment 7 is selected.

 Common Uses of Binary Variables

At most one event (among 3) can occur

For two candidates, it is the same as an either-or (not both)

relationship

 Common Uses of Binary Variables

All or Nothing can occur

How about all-or-nothing constraint for three events?

 Common Uses of Binary Variables

Conditional: Event 1 must occur if Event 2 occurs

Note that Event 1 can occur without Event 2

Dantzigs Assignment Problem

Assigning 70 workers to 70 jobs
If solved with brutal force, it would take forever
More details:
i: index for workers
j: index for jobs
pij: performance of Worker i doing Job j
IP Formulation
Decision variables: xij whether to assign Worker i to Job j (binary)
Objective: total performance =
Constraints:
Exactly one job for each Worker i
Exactly one worker for each Job j
Binary

Dantzigs Assignment Problem

Math formulation:
70

70

i =1

j =1

maximize pij x ij
subject to
70

ij

= 1 for each worker (row) i = 1, 2, , 70

j =1
70

ij

= 1 for each job (column) j = 1, 2, , 70

i =1

xij binary

70x70 = 4,900 (binary) decision variables

70 + 70 + 4,900 = 5,040 constraints

Dantzigs Assignment Problem

Solution (after 0.09s on Excel Premium Solver with Gurobi engine)
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0
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1
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0
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0
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0
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0
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0
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0
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0
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0
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0
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0
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0
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0
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0
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0
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0
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0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0

 Common Uses of Binary Variables

Conditional Range: If Event x does not occur, then y=0. If
Event x occurs, then 0 y M.

Variable x is an ON/OFF switch

The range of variable y depends on the switch
If OFF, y must be zero
If ON, y can be anything in the given range 0 y M
Example: The production rlow will be zero if one decides to
Shut down a production plant

A Fixed Cost Revisited

Cost of production consists of Gixed and variable costs
Variable cost is per unit cost
Fixed cost is a lump sum cost incurred as long as anything
is produced
Example of a typical cost function:

Textile Manufacturing at Great Threads

Five products
4000 labour hours and 4500 square yards of cloth available in a given
week
Machines are rented on weekly basis

Product
Shirts

$1500

3.0

$35

$20

$15

Shorts

$1200

2.5

$40

$10

$30

Pants

$1600

4.0

$65

$25

$40

Skirts

$1500

4.5

$70

$30

$40

Jackets

$1600

5.5

$110

$35

$75

Goal: Find the optimal production plan that maximizes weekly prorit

Textile Manufacturing at Great Threads

Decision variables:
y1, , y5: On/Off switches
x1, , x5: Quantities to produce
Formulation 1:

Not quite correct: Inter-dependence between xs and ys!

Textile Manufacturing at Great Threads

Formulation 2:

Not good: Non-linear!

Why is linearity important?

Textile Manufacturing at Great Threads

Formulation 3:

How to choose M?
Any sufriciently large number

Set Covering Problem

Hub Location At Western Airlines

Western Airlines runs rlights among 12 cities.

Western wants to set up a hub system.
Some of the 12 cities will be chosen as hubs.
Each hub is used for connecting rlights to and from cities within 1000
miles of the hub.

A sample airlines hub system.
Source:
http://www.airlinepilotforums.com

Goal: To determine the smallest number of hubs that Western will need.

Hub Location At Western Airlines

Set 1: the 12 cities to be covered by the selected hubs.
Set 2 consists of sets of cities that each of the 12 cities can cover

City
Cities within 1000 miles
Atlanta (AT)

AT, CH, HO, NO, NY, PI

Boston (BO)

BO, NY, PI

Chicago (CH)

AT, CH, NY, NO, PI

Denver (DE)

DE, SL

Houston (HO)

AT, HO, NO

Los Angeles (LA)

LA, SL, SF

New Orleans (NO)

AT, CH, HO, NO

New Year (NY)

AT, BO, CH, NY, PI

Pittsburgh (PI)

AT, BO, CH, NY, PI

Salt Lake City (SL)

DE, LA, SL, SF, SE

San Francisco (SF)

LA, SL, SF, SE

Seattle (SE)

SL, SF, SE

One element of Set 2

Set Covering concept: to find the least number of elements from Set 2 that are able to cover all elements of Set 1

Hub Location At Western Airlines

Set 1

Input data: which cities are covered by which potential hubs

Potential hub
City
AT BO
CH DE HO LA NO NY
AT
1
0
1
0
1
0
1
1
BO
0
1
0
0
0
0
0
1
CH
1
0
1
0
0
0
1
1
DE
0
0
0
1
0
0
0
0
HO
1
0
0
0
1
0
1
0
LA
0
0
0
0
0
1
0
0
NO
1
0
1
0
1
0
1
0
NY
1
1
1
0
0
0
0
1
PI
1
1
1
0
0
0
0
1
SL
0
0
0
1
0
1
0
0
SF
0
0
0
0
0
1
0
0
SE
0
0
0
0
0
0
0
0

Set 2

PI
1
1
1
0
0
0
0
1
1
0
0
0

SL SF SE
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
1
1
0
0
0
0
0
0
0
0
0
0
1
1
1
1
1
1
1
1
1

Hub Location At Western Airlines

Decision variables:
x1, , x12: binary variable to indicate if city j is selected as
a hub
Formulation:

General Formulation of MIP

Geometry of MIP
The Lego problem as an LP:

MAX 40C + 50T

10

s.t. 1C + 2T 10
4C + 3T 30
C, T 0

(6, 2)

7.5

10

(Big Bricks)
(Small Bricks)

Geometry of MIP
What if (only) C must be an integer?
Feasible set: The set of parallel line segments inside the LP
feasible region
T

MAX 40C + 50T

10

s.t. 1C + 2T 10
4C + 3T 30
C, T 0

(6, 2)

7.5

10

(Big Bricks)
(Small Bricks)

Geometry of MIP
What if both C and T must be integers?
Feasible set: The set of dots with integer valued
coordinates inside the LP feasible region
T

MAX 40C + 50T

10

s.t. 1C + 2T 10
4C + 3T 30
C, T 0

(6, 2)

7.5

10

(Big Bricks)
(Small Bricks)

Solving Discrete Optimization Problems

Methods: Branch & Bound, Cutting plane,
Bad news: Discrete optimization problems are usually hard to solve
How hard is hard?
Very, very, hard! (Clay Millennium Prize Problem: Is P = NP? )
Good news: State-of-the-art solvers (such as CPLEX) are able to
solve many reasonably sized problem of practical importance
When to use Linear Optimization and when to use Discrete
Optimization?
Trade-off between computational efriciency and optimality
Do you need sensitivity analysis/shadow prices?

When to use integer constraints?

Gain
A readily implementable integer solution
Loss
Speed in solving the problem
Sensitivity report and shadow prices!
Guaranteed solution (for the relaxed LP)
So, ignore integer constraints for large quantities
Round off the fractional solution generated by LP
Round up or down? Depends on constraint feasibility
Not necessary optimal, only approximately optimal

Software for Solving Optimization Problems

Excel Solver (Free but not good for IP and NLP)
200 decision variables, 200 constraints
Frontline Premium Solver (15-day trial version at www.solver.com)
A lot more decision variables & constraints (depend on the engine)
Multiple engines to choose from (E.g., Gurobi MIP, LP/ Quadratic)
Excel-based
IBM/ILOG CPLEX
Most famous and widely used
Very fast for large-scale optimization problems
Need to learn modeling/programming language
More expensive
Many other solvers: E.g., Gurobi, Mosek, etc.

Guidelines for Formulating Optimization Problems

Often there are > 1 correct formulations. Find the easiest one
Difriculty: NLP > MIP > LP (generally)
Sometimes we can convert nonlinear constraints to linear ones
X1 + 2X2 + X3 2X2 + 3X3 + 1
- X 1 - X 2 + X3 1
X1 + 2X2 + X3 2X2 + 3X3 - 1
(Because 2X1 + 3X2 - 1 < 0)
Because 2X1 + 3X2 may be > 0 or < 0
No way to convert! Too bad!

Guidelines for Formulating Optimization Problems

Write your problem in the standard format
By convention, write all decision variables on the left-hand side
and constants on the right
Standard math formulation and standard Excel formulation
Decisions:

Constraints: a11


a41



a81

a12


a42



a82

a13


a43



a83

a1n


a4n



a8n

c1

c2

c3

cn

Objec>ve: =sumproduct(F8:L8, F21:L21)

Le& side
=sumproduct(...)


=sumproduct(...)



=sumproduct(...)

Right
side
b1


b4



b8

Guidelines for Formulating Optimization Problems

Whenever in doubt, use inequality instead of equality constraint
Do not try to calculate or optimize. Leave the problem to Solver
Avoid removing seemingly redundant constraints
Do not attempt to simplify the problem for Solver
Always double-check the Solver option
Assume Linear Model
Assume Non-negative