Dec isi on Sci enc e for

Management

Lecture notes are available at:

http://Arash-
management.blogspot.com

Arash 1
Dec isi on sci ence for
Management

Arash Najmaei

Arash.unity@gmail
Arash.unity@yahoo.com
H/P : 0172116875

Arash 2
 Text Books…
• David R. Anderson, Dennis J. Sweeney, & Thomas
A. Williams, (2003), Introduction to Management
Science, Quantitative Approaches to Decision
Making, 10th Edition West Publishing Company.

• Hiller F. Hiller M (2003), Introduction to

Management Science: a Modeling & Case Studies
approach with spreadsheets, 2nd Edition.

• Stevenson, Introduction To Management Science

With Spreadsheet, Mcgraw Hill
 Assess ment
Assignments 30% ( 3* 10%)
Midterm Examination 20%
Final Exam 50%

Attendance and participation are

warmly welcomed
 Lecture One ( 9th June 2008)

Session Synopsis:

Linear Programming
 Requirements of a linear
programming problem
 Formulating linear programming
problems
Graphical solution to linear
programming :
 maximization problems
 Linear Programming
• Linear Programming (LP) is a
mathematical procedure for
determining optimal allocation of
scarce resources.

• LP is a procedure that has found

practical application in almost all
facets of business, from advertising
to production planning.
 Linear Programming
Any linear program consists of four
parts:

3.a set of decision variables,

4.the parameters,
5.the objective function, and
6.a set of constraints.
 Formulation of Problem
In formulating a given decision problem,
you should practice understanding the
problem. While trying to understand the
problem, ask yourself the following
general questions:
 
3.What are the resources?
4.What is the objective?
5.What are the constraints?
Requirements of a linear programming

 Must seek to maximize or minimize

some quantity

 Presence of restrictions or constraints –

 Must be alternative courses of action to

choose from
 Objectives and constraints must be
expressible as linear equations or
inequalities
 Objective Function
Maximize (or Minimize) Z = C1X1 + C2X2 + ... + CnXn

• Cj is a constant that describes the rate

of contribution to costs or profit of
units being produced (Xj).

Z: is the total cost or profit from the

given number of units being
produced.
 Constraints
A11X1 + A12X2 + ... + A1nXn≤B1
A21X1 + A22X2 + ... + A2nXn ≥B2
:

AM1
 AX 1 + Aresource
are AMnXn=BM
M2X2 + ... +requirements for each of the
ij
related (Xj) decision variables.

 Bi are the available resource requirements.

 Note that the direction of the inequalities

can be all or a combination of ≤, ≥, or =
 Non-Negativity
Requirement
X1,X2, …, Xn ≥ 0

• All linear programming model

formulations require their decision
variables to be non-negative.

• While these non-negativity

requirements take the form of a
constraint, they are considered a
mathematical requirement to
complete the formulation of an LP
model.
 Graphical Solution
Method

2 Variables
Step 1 - Draw graph with vertical & horizontal
axes
 (1st quadrant only)

 Step 2 - Plot constraints as lines

 Use (X1,0), (0,X2) for line

 Step 3 - Plot constraints as planes

 Use < or > signs

 Step 4 - Find feasible region

 Step 5 - Find optimal solution

 Objective function plotted

 Step 6 – Calculate optimized value

 ELECTRONIC COMPANY
PROBLEM
Hours Required to
Produce 1 Unit
X1 X2 Available Hours
Departments Walkmans Watch-TV’s This Week
Electronics 4 3 240
Assembly 2 1 100
Profit/unit $7 $5
4x1 + 3x2 ≤ 240 (Hours of Electronic Time)
Constraints: 2x1 + 1x2 ≤ 100 (Hours of Assembly Time)

Objective: Maximize: 7x1 + 5x2

 120
Step 1 – Draw Graph
100
Number of Watch-TVs (X2)

80

60

40

20

0 10 20 30 40 50 60 70 80

Number of Walkmans (X1)

 Step 5 - Find optimal
solution
• Plot function line
Maximize : 7x1 + 5x 2
First,
Just plot the function using any number to
get the line on the graph
Say : 7x1 + 5x 2 = 350
(just choose any # that is divisible by each)
Now, Plot
7x1 + 5x 2 = 350
Find optimal solution (Cont’d)
In This Case:

Calculate the point where

both constraint lines intersect
For X 2 set to zero :
4X1 + 3X 2 = 240
2X1 +1X 2 =100
Now Multiply by - 3 to get rid of X 2
4X1 + 3X 2 = 240
- 6X1 −3X 2 = −300
X1 =30
 Step 5 - Find optimal
solution (Cont’d)
For X1 set to zero :
4X1 + 3X 2 = 240
2X1 +1X 2 =100
Now Multiply by - 2 to get rid of X1
4X1 + 3X 2 = 240
- 4X1 − 2X 2 = −200
X 2 = 40
Therefore, (30,40)
Step 5 - Find optimal solution
(Cont’d)
Number of Watch-TVs (X2)

120 Electronics
Department
100
Assembly
80
Department
60
40
20
0
0 10 20 30 40 50 60 70 80
Number of Walkmans (X1)
Step 6 – Calculate optimized
value
Plug in values for X1 and X2

7x1 + 5x 2 = Maximized profit

7(30) + 5(40) = 210 + 200 = 410

Therefore: the best profit scenario is

$410.00
 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.
 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.
 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.
 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.
 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.
 Graphical Solution:
x2
Example
50 –

40 –
4 x1 + 3 x2 ≤ 120 lb
30 –

20 –
Area common to
both constraints
10 –

0– x1 + 2 x2 ≤ 40 hr

| | | | | |
10 20 30 40 50 60 x1
Copyright 2006 John
Wiley & Sons, Inc.
 Computing Optimal Values
x1 + 2x2 = 40
x2
4x1 + 3x2 = 120
40 –
4 x1 + 3 x2 ≤ 120 lb 4x1 + 8x2 = 160
30 – -4x1 - 3x2 = -120
5x2 = 40
20 –
x2 = 8
10 – x1 + 2 x2 ≤ 40 hr
x1 + 2(8) = 40
0– x1 = 24
8
| | 24 | | x1
10 20 30 40
Z = $50(24) + $50(8) = $1,360
Copyright 2006 John
Wiley & Sons, Inc.
 Extreme Corner Points

x1 = 0 bowls
x2 x2 = 20 mugs
x1 = 224 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.
 Objective Function
x2
40 –
4x1 + 3x2 ≤ 120 lb

30 – Z = 70x1 + 20x2
Optimal point:
x1 = 30 bowls
20 –
A x2 = 0 mugs
Z = $2,100
10 –

B
0–
x1 + 2x2 ≤ 40 hr
| | | C |
10 20 30 40 x1
Copyright 2006 John
Supplement 13-30
Wiley & Sons, Inc.
 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
x1, x2 ≥ 0
Copyright 2006 John
Wiley & Sons, Inc.
 Graphical Solution
x2

14 – x1 = 0 bags of Gro-plus
x2 = 8 bags of Crop-fast
12 –
Z = $24
10 –
A
8– Z = 6x1 + 3x2

6–

4–
B
2–
C
| | | | | | |
0–
2 4 6 8 10 12 14 x1
Copyright 2006 John
Supplement 13-32
Wiley & Sons, Inc.
Example 1: Maximization Problem

Wyndor Glass
Company
Questions….