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ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
LP UNDER UNCERTAINTY
deterministic
world
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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LP UNDER UNCERTAINTY
LP STRUCTURE
max c T x
s.t.
Ax b
x0
x \ n , A \ mn , b \ m
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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LP STRUCTURE UNDER
UNCERTAINTY
Now, assume that c and b are random with
associated probabilities as illustrated in the
decision tree with 2 possible values for each
state prob.
c 1 , b1 p1
b1
c 1 , b2 p2
c1 b2
c 2, b1 p3
c2 b1
c 2, b2 p4
b2
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
PARAMETER UNCERTAINTY
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EXAMPLE : DAILY STEEL SUPPLY
PLANNING
A plant produces wrenches and pliers
molding machine
1.0 1.0 21
(k h)
assembly machine
0.3 0.5 9
(k h)
daily demand
15 16
(k units)
contribution to
130 100
earnings ($/k units)
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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DAILY STEEL SUPPLY PLANNING :
DECISION VARIABLES
We define
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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DAILY STEEL SUPPLY PLANNING :
NEXT QUARTER
For the current quarter, the plant had contracted
with a steel supplier for the delivery of 27 k lb of
steel each day leading to the steel availability
constraint
1.5 W + 1.0 P 27
Now, suppose that the plant manager is planning
the next quarter daily steel supply and that he
needs to determine how much steel to contract
for each day without imposing a constraint on
the available level
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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DAILY STEEL SUPPLY PLANNING :
REVISED LP FORMULATION
max 130 W + 100 P 58 S
s.t.
1.5 W + 1.0 P S 0 available steel
1.0 W + 1.0 P 21 available molding
0.3 W + 0.5 P 9 available assembly
W 15 wrench demand
P 16 plier demand
W ,P , S 0 nonnegativity
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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DAILY STEEL SUPPLY PLANNING:
SOURCES OF UNCERTAINTY
The assembly machine capacity for next quarter
is uncertain since the plant has ordered new
assembly machines
these machines serve to replace, as well as
to augment, the existing assembly machines,
but it is unknown whether these new
machines will be delivered in time to be used
during the next quarter
there are two distinct daily capacities of the
assembly machine with the associated
probabilities that are considered
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
availability probability
existing
8 k hours 0.7
machines
new
machines 10 k hours 0.3
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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DAILY STEEL SUPPLY PLANNING:
SOURCES OF UNCERTAINTY
The unit contribution to earnings of each
wrench next quarter is also uncertain due to
fluctuations in the market competition for
wrenches, with two possible outcomes:
contribution
probability
low to earnings
$ 160/k units 0.6
competition
high
competition $ 90/k units 0.4
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
S
steel (k lb) 1.5 1.0
(unconstrained)
molding machine
1.0 1.0 21
(k h)
assembly machine P{8} = 0.7
0.3 0.5
(k h) P{10} = 0.3
daily demand
15 16
(k units)
contribution to P{160} = 0.6
100
earnings ($/k units) P{90} = 0.4
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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DAILY STEEL SUPPLY PLANNING
UNDER UNCERTAINTY
Basic assumption: independence of the random
events of the assembly machine availability and
the per unit contribution to earnings of wrenches
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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DAILY STEEL SUPPLY PLANNING :
DECISION VARIABLES
decision variables
(k units)
0.7 W1 P1
0.6
W2 P2
0.3
S
0.7 W3 P3
0.4
0.3 W4 P4
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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DAILY STEEL SUPPLY PLANNING :
UNCERTAIN LP FORMULATION
However, to use a LP formulation, we change the
objective to that of the expected value of the
possible realizations of the objective under
uncertainty
In this way, we have to find the solution again a
deterministic LP problem but with
multiple states to represent the uncertain
outcomes
maximization of the expected value of all the
possible outcomes
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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DAILY STEEL SUPPLY PLANNING:
UNCERTAIN LP FORMULATION
1.5W2 + 1.0 P2 S 0
1.0W2 + 1.0 P2 21
0.3W2 + 0.5 P2 10
state 2 constraints
W2 15
P2 16
W2 , P2 0
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
1.5W3 + 1.0 P3 S 0
1.0W3 + 1.0 P3 21
0.3W3 + 0.5 P3 8
state 3 constraints
W3 15
P3 16
W3 , P3 0
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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DAILY STEEL SUPPLY PLANNING:
UNCERTAIN LP FORMULATION
1.5W4 + 1.0 P4 S 0
1.0W4 + 1.0 P4 21
0.3W4 + 0.5 P4 10
state 4 constraints
W4 15
P4 16
W4 , P4 0
S0
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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DAILY STEEL SUPPLY PLANNING :
INTERPRETATION OF THE SOLUTION
Under the specified uncertainty, the plant should
contract for a daily 28.5 k lb of steel for the next
quarter
With this steel supply, the optimal production
level under any of the 4 states is assured and the
mean value of the objective function is
maximized
However, different production levels result for
each of the 4 possible states as summarized in
the next table
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
1 8 160 15 6
2 10 160 15 6
3 8 90 12.5 8.5
4 10 90 5 16
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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SENSITIVITY CASE
new high
0.5 0.8
machines competition
SENSITIVITY CASE
contribution to assembly
earnings of machine probability
wrenches availability
($/k units) (k h)
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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ANOTHER SENSITIVITY CASE
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ANOTHER SENSITIVITY CASE: DECISION
TREE
W1, P1
W2, P2
S 42 different
states
W42, P42
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
LP MODEL
UNDER UNCERTAINTY
In order to formulate an effective LP model, we
probabilities
states
ECE 307 2006 George Gross, University of Illinois at Urbana-Champaign, All Rights Reserved.
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