OPTIMISATION TECHNIQUES

Group Assignment

Members

 Deepthi
 A.S.Balaji
 Thenkavi
 Rajalakshmi
 Sowrirajan
Problem statement
Introduction to the Problem
Analysis the Problem
Formulation
Solving using Excel solver
Results
 PROBLEM: 1
A manufacturing firm produces three products A, B & C, using the same limited resources,
which is raw material, labour and processing time on the packaging machine. Product A requires
2 kgs raw material, 3 labour hours and 4 machine hours. Similarly Product B requires 5 kgs raw
material, 5 labour hours, 5 machine hours and Product C requires 4 kgs raw material, 6 labour
hours and 2 machine hours. The availability of raw material is capped at 90 kgs, labour hours at
130 hours and packaging machine hours at 150 kgs. The profits of product A, B & C are ` 25, ` 50
and ` 30 respectively.

Answer the following questions

1. What is the optimal output of products A, B & C to maximise the profits?
2. What is the capacity utilisation of labour hours?
3. At what profit will the Product C be viable for manufacturing?
4. Over what range of the constraints will the shadow price remain the same for the
packaging machine?
5. If the 1 kgs of raw material is short, what will be the new output for Product A, B & C?

Introduction:
 This is a maximisation problem.
 The objective is to maximise profits of a manufacturing firm and finding the optimal
product mix which satisfies the given constraints in Raw materials, labor hours and
packaging machine hours.
 Each product requires different quantity of resources.

Analysis of the problem:

 Three products: A, B and C
 The resources required for each unit of these products is as below
UOM A B C
Raw material Kg 2 5 4
Labour hours Hours 3 5 6
Packaging m/c hours Hours 4 5 2

 The profits per product is given as

UOM A B C
Profit Rs/Unit 25 50 30

 The maximum available resources in hand are as follows

Raw material available - 90kg
Labour hours available – 130 hours
Packaging machine hours – 150 hours
 Formulation :
Maximise Profit = 25 x1 + 50 x2 + 30 x3 (Objective)
Subject to below constraints

2x1 + 5x2 + 4x3 <= 90

3x1 + 5x2 + 6x3 <= 130
4x1 + 5x2 + 2x3 <= 150
where,
x1 –Quantity of A to be produced
x2 – Quantity of B to be produced
x3 – Quantity of C to be produced

The above problem is solved using Excel solver with simplex -method to find the optimal
values of x1, x2 and x3.

Solving using Excel – Solver :

a) Before solving using simplex

For producing 1 unit of each product A,B,C

 Total of 11 kg (1*2+1*5+1*5) of RM is required
 Total of 14 (1*3+1*5+1*6) labours hours is required
 Total of 11 (1*3+1*5+1*6) Machine hours is required
 Profit of 1 unit each is 105( 25*1+50*1+30*1)
 The maximum cap or available resources for producing all the 3 products that the
company has is 90 kg Of RM,130 labour hours and 150 Machine. Using the limit the
company has to produce the optimum units for each product which will maximize the
profit.
b) After using simplex solver method :
To identify the no of units to be produced in each product to maximize the profit:

Excel Solver parameters:

Excel solver method :

(i) Selecting the objective cell which is the Profit
(ii) Selecting the Max since it is a maximization problem
(iii) Adding constraints & solving through simplex LP method.

Results
1) What is optimal output of products A, B & C to maximise the profits?
Optimal outputs of products to be produced for maximising profits are
A – 30 , B – 6 , C – 0 and the maximum profit will be Rs.1050
This means Product C need not to be produced and 30 units of product A and 6
units of product B needs to be produced to get the maximised profit.
For producing 30 units of A and 6 units of B and by not producing any unit in C a total
of 90 kg of Raw materials , 120 labours hours and 150 machine hours is required in-
order to maximize the profit
 2) What is the capacity utilization of labour hours?
Capacity utilization is the ratio of utilised labour hours to available labour hours at the point of
optimal conditions
Capacity utilization = 120/130
Capacity utilization = 92.3%

120 is the labour hours utilized for producing 30 unit of A and 6 units of B with 90kg of RM and 150
machine hours. The extra labour hours that the company has is 10 hours.

3) At what profit will the Product C be viable for manufacturing?

This can be found out by doing sensitivity analysis of the above solution.
Variable Cells
    Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$D$5 CHANGE CELLS A 30 0 25 5 5
$E$5 CHANGE CELLS B 6 0 50 12.5 4.166666667
$F$5 CHANGE CELLS C 0 -5 30 5 1E+30
           
Constraints            
    Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$G$7 Raw Materials 90 7.5 90 20 15
Resource consumed
$G$8 Labour Hrs Resource 120 0 130 1E+30 10
consumed
$G$9 Machine Hrs Resource 150 2.5 150 20 60
consumed
$G$7 Raw Materials 90 0 0 90 1E+30
Resource consumed
$G$8 Labour Hrs Resource 120 0 0 120 1E+30
consumed
$G$9 Machine Hrs Resource 150 0 0 150 1E+30
consumed

 As mentioned in the highlighted cell, the values will not change until the coefficient of
product C is increased by 5 units. After exceeding 5 units, product C will impact the
profit and in turn viable for manufacturing.
  Hence Product C is viable for manufacturing at profit 36 and profit will be Rs.1047.

4) Over what range of the constraints will the shadow price remain the same
for the packaging machine?
As per sensitivity analysis, the shadow price for packaging machine will remain constant in
the range between 90 to 170.

5) If the 1 kgs of raw material is short, what will be the new output for
Product A, B & C?

The new outputs will be A – 30, B – 5 and C – 1 and profit will be Rs.1030.
 PROBLEM: 2
An electronics company is engaged in the manufacture of two components C 1 & C2 used in
telecom tower sets. Each unit of C 1 cost the company ` 6 in wages and ` 7 in materials, while
each unit of C2 costs the company ` 26 in wages and ` 17 in materials. The company sells both
the products on two-period credit terms but the company’s labour & material expenses must be
paid in cash. The selling price of C 1 is ` 40 per unit and of C 2 is ` 90. Because of the strong
monopoly of the company for these components it is assumed that the company can sell at the
prevailing prices as many units as it produces. The company’s production capacity is limited by
two considerations. First at the beginning of the period 1, the company has an initial balance of
` 18,000/- . Second the company has an available 2500 hours of machine time and 1800 hours
of assembly time. The production of each C 1 requires 4 hours of machine time and 2 hours of
assembly time, wherase the production of each unit of C 2 requires 3 hours of machine time and
4 hours of assembly time.

Formulate & solve the above problem as a LP problem.

Introduction:
 This is a maximisation problem.
 The objective is to maximise the sales of an electronics company producing two different
components C1 & C2 whose sales price per unit are different and need different cost of
wages and materials. The processing time of machining and assembly time are different
and each of these machines have time constraint.

Analysis of the problem:

 Two products : C1 & C2
 The selling prices of components are
C1 – Rs.40 /unit C2 – Rs.90 /unit

Component/Resource UOM C1 C2
Cost of wages Rupees 6 26
Cost of materials Rupees 7 17
Machining time per component Hours 4 3
Assembly time per component Hours 2 4

a. Total available amount – Rs. 18000 for materials and wages

b. The total available time in machining is 2500 hrs
c. The total available time for assembly is 1800 hrs
Formulation of problem:

Maximise Sales = 40 x1 + 90 x2 (Objective function) Subject to

13 x1 + 43 x2 <= 18000
4 x1 + 3 x2 <= 2500
2x1 + 4 x2 <= 1800

Where,
X1 = Quantity to be sold in Component C1
X2 = Quantity to be sold in Component C2

Solving using solver :

Results
To be produced:
Component C1 – 160
Component C2 – 370
Maximum sales possible – 39700 rupees