Linear Programming

Why a quantitative approach might be used in the

decision-making process:

1. Complex Problem and the manager cannot develop a good

solution without the aid of quantitative analysis.
2. Most Important problem (e.g., a great deal of money is
involved), and the manager desires a thorough analysis before
attempting to make a decision.
3. New problem and the manager has no previous experience
from which to draw.
4. Repetitive problem and the manager saves time and effort by
relying on quantitative procedures to make routine decision
recommendations.
To illustrate some of the properties that all linear programming
problems have in common, consider the following typical
applications:

1. A manufacturer wants to develop a production schedule and an inventory

policy that will satisfy sales demand in future periods. Ideally, the
schedule and policy will enable the company to satisfy demand and at
the same time minimize the total production and inventory costs.
2. A financial analyst must select an investment portfolio from a variety of
stock and bond investment alternatives. The analyst would like to
establish the portfolio that maximizes the return on investment.
3. A marketing manager wants to determine how best to allocate a fixed
advertising budget among alternative advertising media such as radio,
television, newspaper, and magazine. The manager would like to
determine the media mix that maximizes advertising effectiveness.
4. A company has warehouses in a number of locations throughout the
United States. For a set of customer demands, the company would like
to determine how much each warehouse should ship to each customer
so that total transportation costs are minimized.
• Operations Research involves “research
on operations.”
• Operations research is applied to
problems that concern how to conduct and
coordinate the operations (i.e., the
activities) within an organization.
• A prime example is the simplex method
for solving linear programming problems,
developed by George Dantzig in 1947.
 Requirements of an
LP Problem
1. LP problems seek to maximize or
minimize some quantity (usually profit
or cost) expressed as an objective
function
2. The presence of restrictions, or
constraints, limits the degree to which
we can pursue our objective
 Requirements of an
LP Problem
3. There must be alternative courses of
action to choose from
4. The objective and constraints in linear
programming problems must be
expressed in terms of linear equations
or inequalities
 Formulating LP Problems
The product-mix problem at Shader Electronics

 Two products
1. Shader X-pod, a portable music player
2. Shader BlueBerry, an internet-
connected color telephone
 Determine the mix of products that will
produce the maximum profit
 Formulating LP Problems
Hours Required
to Produce 1 Unit
X-pods BlueBerrys Available Hours
Department (X1) (X2) This Week
Electronic 4 3 240
Assembly 2 1 100
Profit per unit $7 $5

Decision Variables:
X1 = number of X-pods to be produced
X2 = number of BlueBerrys to be produced
 Formulating LP Problems
Objective Function:
Maximize Profit = $7X1 + $5X2

There are three types of constraints

 Upper limits where the amount used is ≤ the
amount of a resource
 Lower limits where the amount used is ≥ the
amount of the resource
 Equalities where the amount used is = the
amount of the resource
 Formulating LP Problems
First Constraint:
Electronic Electronic
time used is ≤ time available
4X1 + 3X2 ≤ 240 (hours of electronic time)

Second Constraint:
Assembly Assembly
time used is ≤ time available
2X1 + 1X2 ≤ 100 (hours of assembly time)
 The Simplex Method
• The first step of the simplex method
requires that we convert each inequality
constraint in an LP formulation into an
equation.
• Less-than-or-equal-to constraints (≤)
can be converted to equations by
adding slack variables, which represent
the amount of an unused resource.
 SIMPLEX SOLUTION PROCEDURES
1. Determine which variable to enter into the solution mix next. Identify
the column— hence the variable—with the largest positive number in
the Cj - Zj row of the tableau. This step means that we will now be
producing some of the product contributing the greatest additional profit
per unit.
2. Determine which variable to replace. Because we have just chosen a new
variable to enter into the solution mix, we must decide which variable
currently in the solution to leave.
– To do so, we divide each amount in the quantity column by the corresponding number in
the column selected in step 1. The row with the smallest nonnegative number
calculated in this fashion will be replaced in the next tableau (this smallest number, by
the way, gives the maximum number of units of the variable that we may place in the
solution).
– This row is often referred to as the pivot row, and the column identified in step 1 is
called the pivot column. The number at the intersection of the pivot row and pivot
column is the pivot number.
3. Compute new values for the pivot row. To find them, we simply divide
every number in the row by the pivot number.
4. Compute new values for each remaining row. (In our sample
problems there have been only two rows in the LP tableau, but
most larger problems have many more rows.) All remaining row
(s) are calculated as follows

• Compute the Zj and Cj - Zj rows, as demonstrated in the initial

tableau. If all numbers in the Cj - Zj row are zero or negative,
we have found an optimal solution. If this is not the case, we
must return to step 1
 LP Problem
 Shader Electronics produces two products
1. Shader X-pod, a portable music player
2. Shader BlueBerry, an internet-connected color telephone
It is estimated that 2 hours of machining facilities is required by a
Shader X-pod and 1 hour by Shader BlueBerry. The assembly
facility is available for 100 hours a week. Electronic department
is available for 240 hours a week for production and 4 hours of
electronic department work is required by Shader X-pod and 3
hours of electronic department work required by a Shader
BlueBerry . The company own profit of $ 7 from Shader X-pod
and $ 5 from a Shader BlueBerry
 Determine the mix of products that will produce the maximum profit.
 Problem Formulation
Max Z = $7 x1 + $5 x2
Subjected to,
2 x1 + 1 x2  100 ( Assembly)
4 x1 + 3 x2  240 (packaging)
x1 , x2 =>0x
Simplex Method
Linear Programming : Problem
Solved with Simplex Method
• Objective: Maximize profit = +9X1 +
+7X2
Constraints:
2X1 + 1X2 <= 40
• X1 + 3X2 <= 30
• x1 , x2 =>0