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INTRODUCTION The term 'programming' means planning and it refers to a particular plan of action from amongst several alternatives for maximizing profit or minimizing cost etc. Programming problems deal with determining optimal allocation of limited resources to meet the given objectives, such as least cost, maximum profit, highest margin or least time, when resources have alternative uses. The term 'Linear' means that all inequations or equations used and the function to be maximized or minimized are linear. That is why linear programming deals with that class of problems for which all relations among the variables involved are linear. Formally, linear. programming deals with the optimization (maximization or minimization) of a linear function of a number of variables subjectto a number of conditions on the variables, in the form of linear inequations or equations in variables involved. In this chapter, we shall discuss mathematical formulation. of linear programming problems that arise in trade, industry, commerce and military operations. We shall also discuss some elementary techniques to solve linear programming problems in two variables only. The following are a few important Linear Programming Problems(LPP) for the concpet of Linear programming

Manufacturing Problems

The Manufacturing Problems are very important part of linear programming problems(LPP) , Here, we find the number of units of different products that is to be produced and sold by a company/factory. Each product requires the following things - manpower, time, labour hour permit of the product, warehouse space per unit of the output etc. to get the maximum profit.

**Manufacturing problem - Example
**

Example: A manufacturer has 3 machines I, II and III installed in his factory. Machine I and II are capable of being operated for at the most 12 hours, whereas machine III must be operated at least for 5 hours a day. He produces only 2 items, each requiring the use of the three machines. The number of hours required for producing 1 unit of each of the items A and B on the three machines is given below. Machine I 1 2 Machine II Machine III 2 1 1 45

A B

He makes a profit of Rs.60 on item A and Rs.40 on item B. Assuming that he can sell all that he produces, how many of each item should he produce so as to maximize his profit?

Food F1 contains 3 units/kg of vitamin A and 5 units/kg of vitamin B.60 Rs. whereas food F2 contains 4 units/kg of vitamin A and 2 units/kg of vitamin B.60/kg and food F2 costs Rs. Formulate the above problem as a linear programming problem (LPP). So 3x + 4y ≥ 8 Similarly the requirement of vitamin B is 11 units. Let the mixture contain x kg of food F1 and y kg of food F2 Vitamin A 3 4 Vitamin B 5 2 Cost Rs.Formulate the above problem as a linear programming problem. which should be included in a diet so as to minimize the cost of the diet such that it contains a minimum amount of each nutrient. Let 'x' be the number of items A and 'y' be the number of items B produced. Formulate the above problem as a linear programming problem to minimize the cost of the mixture. So 5x + 2y ≥ 11 .80 F1 F2 The minimum requirement of vitamin A is 8 units. Total profit on production = 60x + 40y The objective of the manufacturer is to maximize the profit. Maximize z = 60x + 40y subject to the constraints (Machine 1) 2x + y ≤ 12 (Machine 2) x + 45 y ≥ 5 (Machine 3) and x ≥ 0. y ≥ 0 (Non-negativity restrictions) Diet Problem We find the quantity of different kinds of nutrients. Diet Problem . Food F1 costs Rs.Example linear programming example : A dietician wants to mix 2 types of food F1 and F2 in such a way that the Vitamin contents of the mixture contain at least 8 units of Vitamin A and 11 units of Vitamin B.80/kg.

labour. By using this technique. weather conditions etc. Limitations of Linear Programming Problem • • • Linear Programming Problem is applicable only to problems where the constraints and objective function are linear i. the number of men required may be a fraction and the nearest integer may not be the optimal solution. Factors such as uncertainty. wastage of resources like time and money may be avoided.g. x ≥ 0. when constraints or objective functions are not linear. subject to the constraints 3x + 4y ≥ 8. machines etc..e. . There may not be an integer as the solution. Hence. where they can be expressed as equations which represent straight lines. y ≥ 0 Advantages of Linear Programming Problem • • • The Linear Programming Problem technique helps to make the best possible use of available productive resources (such as time. 5x + 2y ≥ 11 and x ≥ 0. y ≥ 0 Cost of purchasing 1 kg of food F1 is Rs. 60 Cost of purchasing 1 kg food F2 is Rs. this technique cannot be used. In real life situations. the mathematical formulation of the problem is Maximize z = 60x + 80y. are not taken into consideration.Also. e. which is the objective function.. 80 The total cost of producing x kg of food F1 and y kg of food F2 is = 60x + 80y.) The quality of decision making is improved by this technique because the decisions are made objectively and not subjectively.

Therefore the field of application is quite broad. this option will be developed in the later example. 2-Graphically. suppose we are running a football club and launching a new merchandising campaign and we have to decide the quantity of scarves and shirts produced. in this case limitations are related with capacity. with the special characteristic that linear programming expect always to maximise or minimise some quantity.ADVANTAGES AND DISADVANTAGES OF LINEAR PROGRAMMING Linear programming has become nowadays. this method is remarkable due to its efficiency and calculating facility. This is a process where verbal statement is translated to mathematical statement. from scheduling. considering current constraints. The first advantage is the calculation facility. requiring shirts and scarves. financial planning to capital budgeting. the mathematical technique most used in solving a variety of problems related with management. the example reflects this property. Two possibilities appear at the solution of a linear-programming problem: 1-Simplex method. Objective function: 35X+10Y Constraints: . First of all it is known that one of the main advantages of linear programming is that it fits strictly with reality. By means of one example we are going to gradually check the advantages and disadvantages of linear programming as a management aid. secondly four times more time is needed to sew a shirt compared with a scarf having at the most 2300 hours a year and finally space is limited up to 2500 square inches. transportation and many others. The sale prices of shirts and scarves are £35 and £10 respectively. The incomes must be maximised knowing the different prices of scarves and shirts but some limitations have been set which are called constraints. In complex cases this method saves time and effort by taking us to the optimal solution in a finite number of steps. 3 and 2 square inches respectively. here this example is quite simple. also we know the maximum annual manufacture capacity is 2000 units. time and sales space. as can be checked in the first step where we have to model or formulate the problem. Example: I have designed this example searching for a high grade of reality. media selection. as we will see. The simplex method can be used where distributions method cannot. developed by Dr.Dantzing.

but it means nothing. furthermore the model is static which means that it does not consider the changes and the evolution of variables as time goes by. that become a disadvantage. To draw the objective function we have suppose that we want to make the maximum profit equal to 3000.1-capacity x+y<=2000 2-time 4x+y<=2300 3-sales space 3x+2y<=2500 4-nonnegativity constraints x. There may be another two problems consisting of numerous optimal solutions. graphical method can be used only under determined conditions. Hence the problem is less rigorous and it lose accuracy and certainly. but this method sometimes cause objections. Another obstacle arises in the formulation process which should be taken into account. the maximum profit point will be found when the line will be completely outside of the feasible region. In this case the problem we have focused on is related with the portfolio selection area. The maximum profit is in the point where the second and third constraints intersect each other. Having seen the example it is obviously that talking in disadvantages terms functions lineality is an important bound. if it would have had more than two variables we would have used the simplex method. Then the largest value is the optimal solution. with the graphical method. because we can choose any number.y>=0 The next step can vary depending of the selected method. In this occasion we have selected the first option due to the fact that only two variables are being studied. feasible region does not exist and therefore any solution cannot be reached. and the other problem could be infeasibility. due to the fact of the impossibility of solving problems having more than two variables. the slope of the line is the matter that concerns us. so that non-lineal function cannot be used. Therefore this is another disadvantage of linear programming. one of the varieties of applications where linear programming can be used. values must be known with certainty. This example has been resolved by graphical method because it has only two variables. this is not a simple matter despite the fact could seem a minor concern. When no solution to the linear programming problem satisfies all the constraints. it means that each decision variable appears in a separate term and has an exponent of 1. helping managers in . As a result is known that X=420 and Y=620 . If we move parallel the function toward larger objective function values. It can be ascertained that in frequent occasions some variables are ignored in this sort of problems (In our example trends and fashions have been ignored but maybe people prefer to buy a shirt than a scarf for certain reasons). two options can be chosen such as graphical or simplex algorithm.

there are sound reasons which take us to select this method solving management problems owing to the complexity of the problems that can be handled. finance (resolving situations of capital budgeting. product mix problems (problems based on blending resources to produce 1 item. now the available space is 2499 square inches. financial planning an so on). which determines how changes affect the optimal solution to the original linear programming problem. is called range of optimality. The new results are X=420. also it can be used in much more different areas such as marketing (helping marketing managers in allocating a fixed advertising budget to various advertising media).2 and Y=619. For example we suppose that the space for sales in the third constraint is reduced. therefore we have changed in one unit the right hand side of the third constraint and as a result the solution has varied. problems with thousands of variables and constraints. which allows solving.2 therefore it can be seen that the solutions have changed in 0. multiple plant location studies (the new location will be where the total production and distribution cost will be minimised). it does not occur.8 respectively these variations are called dual prices as well as implicit cost and shadow prices. The range of values over which the current solution will remain optimal. warning us that the problem is improperly formulated. But this is not the only linear programming advantage. the adapting facility to reality.despite it has several arguments against.inventory design (in the example. without violating any of the constraints. management must decide the quantity of each product). another remarkable characteristic of linear programming problems such as. This is called sensitivity analysis. Dual prices can be used what will happen to the value of the objective function when we make a one unit change in the right-hand side of the constraints. The next step to analyse is what happens when we change the values of the objective function or in the constraints. maximizing material utilization (determine the combination of cuts that will meet requirements for the amounts of the different sizes with a minimum trim loss) and finally data envelopment analysis (has been used in efficiency measure) But there still are more advantages. In conclusion if we evaluate the pros and cons it can be ascertained that is not coincidence that linear programming is the most used program in the management area . As we can see. in control and in capacity planning.2 and in 0. by computer programs. despite the change of the coefficients. in the example. It must be mentioned. linear programming analysis can help both with determining whether management's plans are feasible and in unbounded cases where the value of the solution is infinitely large. when can check easily how the results vary when we change the old coefficients for others. consequently there are finite solutions and therefore we can ascertain that the problem is properly formulated. . This is another advantage of using linear programming. We have to take into account that dual price is only operative for small variations. number of scarves and shirts).

fully and honestly. too" product can reflect poorly on your firm's integrity and ability. This leads to the problem of how to deal effectively with perceived risk specific to your product. You could easily end up not getting the business and never knowing why. All investment products have inherent risks and it is vital to structure the sale to deal effectively with those risks by addressing them head-on. If there were. we're home free. mainstay fare. they don't bring up that issue. you build credibility for both the product and your firm." The reality is quite the opposite: If they don't ask the question. They are a direct outgrowth of key strengths and resources and therefore have built-in credibility. If you don't succeed. You must be prepared to support it with the resources and marketing commitment equivalent to that of your established. you're dealing in a sophisticated marketplace . Early in the product development process they fully address several basic issues.you also put at risk your credibility in the marketplace. you not only lose money and momentum . It follows. After all. . "If they don't ask that question. And when you can clearly demonstrate how the new offering matches your firm's capabilities.one that steers clear of obvious opportunism and greed. I can't emphasize strongly enough the importance of identifying negative market perceptions at the earliest possible time. as opposed to inherent risk. and by clearly demonstrating how they are controlled. Developing a "me. we would all be sitting under the proverbial palm tree clipping coupons. have a natural fit with a firm. the firms that are consistently successful in launching new investment vehicles leave nothing to chance. The following questions provide an effective framework for exploring these points. that any new product you offer should be an honest reflection of who you are and what you do best. In my experience. Are You Prepared to Confront the Product's Weaknesses? There is no such thing as a perfect investment product. they're more than likely harboring it. which helps a product earn quicker acceptance and hold up under close scrutiny over the long haul.How To Successfully Launch A New Investment Product Dana Dakin: Speech to the Investment Management Institute Introducing an investment product is a high-risk proposition. One important reason successful firms continue to gain market share is because each of their products bears this stamp of professional integrity. Is the Product a Natural Extension of Your Firm's Capabilities? In the investment business the best products. the most successful products. then. Too many firms say.

. you'll be asked to leave. Are You Willing to Stand Out From the Crowd? One of the most repeated phrases in our business is "We like to maintain a low profile around here. try for the sizzle. You can't establish credibility in today's marketplace without clarifying exactly what makes your product work and how it's different. What Makes Your Product Different? A lawyer's job is to make promises hard to pin down. work on the logic and make even the most complicated concepts absolutely clear. and hold the steak." I knew the tide was finally turning when a Swiss bank admitted it had been too low profile for too long. You need to emphasize content. this trait almost inevitably leads to one result: dwindling market share. The environment is definitely changing in a major way. You gain not only an invaluable "gut" sense of where buyer concerns lie. Unfortunately. And the burden is on your shoulders to educate them. they are intelligent people. I am not a proponent of "KISS. the firms who were able to describe their investment approach in the most simplistic terms won a great deal of business. this is the only way to acquire the honest understanding you need of how the marketplace perceives both your product and your capability to offer it. A marketer must do precisely the opposite: You need to dig as deep as you can to clearly explain what makes your product different. many good firms still use the desire to maintain a low profile as an excuse for not doing quality marketing. I recommend conducting qualitative market research during the early stages of a product's development to gain the views of key opinion-makers and prospective buyers. not home runs' one more time. That phase is behind us. With this understanding. When the interest in professional investment management was just heating up. This superficial approach simply doesn't work anymore. While the plan sponsor or investment committee making the decision may not be formally trained in investment theory. In these times. stupid" is that it's better to stay safely on the surface: throw in the buzzwords. In my experience." We are now operating in a much more sophisticated marketing environment." The premise of "Keep it simple. As one plan sponsor recently told the third finalist in a contest of four: "If I hear 'we believe in base hits.To do this. accurate information has become vital. it becomes possible to develop an unusually strong conceptual positioning for your product. for not moving ahead and presenting their products in a truly compelling way. Providing the investor with clear. but also the added bonus of uncovering what the market perceives as your strengths. one that is precisely targeted to allay buyer doubts and reinforce positive impressions.

Effective marketing is not a one-shot deal.in a variety of media . And they also require your ongoing interest and energy. "Well. always maintaining the muscle to hit it hard when the interest is there.is absolutely necessary to convince the buyer of a product's benefits. or a brochure.but the marketing effort is at ground zero. We're not quite ready. quality direct response campaigns. Slick materials waste a prospect's time. but in our business the right firms often fail to get the business because they pour all of their resources into developing sound products and little or none into developing equally sound marketing programs. This puts any product's success in certain jeopardy. In the highly competitive consumer product market it's a well-known fact that frequent repetition of a message . Are You In for the Long Haul? The marketplace has become a moving target that is changing more and more rapidly. This "buy-in" is vital. And you must have the flexibility to adjust your marketing relative to the prevailing level of market acceptance. or a quarterly report that's all dressed up with nothing to say. Quality packing rises above the noise and commands attention because it communicates who you are. which represents a major change for our business." Usually that means their new product is in its final stage of development . Quality brochures. you can then begin to develop a powerful marketing program. You must be able to sustain a long-term marketing effort. You cannot abdicate that responsibility. It's an ad. This means two things. Building on consensus. build on your strengths and clearly establish your identity. Effective marketing materials counter key concerns. product acceptance has become highly volatile. As a result. we don't want to move yet. The investment industry must now make this level of marketing commitment. even the best creative people will not be able to compensate for your lack of commitment to your own product. Your marketing . If you do. The first step in making a long-term marketing commitment is to achieve consensus within your organization. What Are You Waiting For? How often have you heard people say. This requires that key people in every function are given the opportunity to contribute their special expertise during the product development process and that they fully understand the firm's goals for the new offering. It rewards the buyer's time. It's a sad truth. The alternative to slick is quality packaging built around a core of strong ideas." Let's talk for a moment about what slick really means.I believe part of the reason many people in this industry are unwilling to stand out with their marketing material is because they are afraid of appearing "slick.it may in fact be ready to go . Slick is delivering a visual promise that far exceeds the depth of the content inside. quality advertising all cost money.

You can't brush them aside. and food storage items. You need to begin giving the communications process the same emphasis. Colleges and universities are a prime example. What Is a Product Mix? A product mix consists of the various product lines that are offered for sale by a particular seller. They know how to sell. Quality marketing takes time. while meats represent still another grouping of products. Fresh produce is one type of product line. in large measure. These types of institutions offer a variety of degree programs. that you now bring to managing money. While food products make up the core product lines in the product mix. the investment business is. It simply cannot be done on a "catch-up" basis. which are essentially product lines in the overall mixture of products offered. because they know how to market.team must be working immediately from a product's inception to achieve the momentum you need to gain recognition and acceptance. Frozen foods represent a third line of products. For a good firm to keep its market share and to make that share grow. while canned goods are another. Our industry is at a critical juncture. After all. a university achieves a broader product mix and thus is likely to attract a larger number of students. The field is being flooded with contenders drawn to investment management by the well-publicized opportunity to make big money. . cutlery. since stock the right product mix helps to ensure that the target market of consumers will be reached and sales will be generated. The goods offered in a supermarket are good examples of what goes into a viable product mix. other items help to make the store more appealing to customers. the supermarket is able to provide an added incentive for customers to buy more of what they need at the one location. individual courses serve as the products themselves that are necessary in order to obtain the degree. and the relevance of those products to the consumers who are presented with the opportunity to buy the products. By offering a wider range of degree programs. the number and type of products offered in each line. a communications business. Sometimes referred to as product assortment. Retailers are often very concerned with the range of products they offer. it is vital to step up business-generating efforts and professionalize all communications. Many of the product lines have to do with food. By including product lines like over the counter medications. Within those product lines. a true product mix has to do with the number of product lines offered. Businesses other the retailers also employ the concept of a product mix. and the same conviction.

For example. . thus increasing the potential for sales revenue by meeting more than one customer need. if a retailer sells two or three brands of mops. the overall mix is seen as being unified and thus more appealing to consumers.Developing a product mix is not simply a matter of selecting a random range of products and offering them for sale. Often. it is usually a good idea to also carry two or lines of products that can be used to mop floors. When products are sold alongside other products that can be used at the same time. retailers and other businesses will look closely at how the various product lines are associated with one another.

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