Linear Programming (LP)

LP is a mathematical technique concerned with the allocation of scarce resources. It is a tool often
used by management for solving problems of rationing limited resources among alternative uses
to maximize profit, contribution or opportunities etc. or minimize cost, time, loss, wastage etc.
Features of problems solvable by LP
TO solve a problem by LP it should conform to the following:
1) The problem must be capable of being stated in numerical terms
2) All factors involved in the problem must have linear relationship.
3) The problem must permit a choice between alternative courses of action
4) There must be one or more restrictions on the factors involved e.g. labour, material etc.
Expressing LP problems
Before considering the detailed methods of solving LP problems, it is necessary to be able to
express a problem in a standardized manner so as to ensure that no important element of the
problem is overlooked while calculating the required solution. The two factors to be considered
are:
1. Objective function; and
2. Limitations or constraints
Objective function
The first step in LP is to decide what result is required i.e the objective. This may be to maximize
profit or contribution, or minimize cost, time, loss etc. Having determined the objective, the
elements involved in achieving it is then stated mathematically. Thus objective function is a
mathematical expression of the elements involved in achieving the optimal value of some
objectives
Example
Jang factory can produce two products A and B. The profit that can be derived from these products
are:
A; N100 profit per unit
B; N50 profit per unit
Required: Maximize profit
The objective function for the factory can be expressed as:
MAXIMIZE: 100x1 + 60x2
Where X1 = number of units of A produced
X2= number of units of B produced.
X1 and X2 are referred to as decision variable. The number of decision variables can vary from 2
to hundred.
Limitations or Constraints
Before an objective can be achieved, certain factors need to exist. These factors are known as
limitations or constraints. The limitation in any given problem must be clearly identified,
quantified and expressed mathematically. To be able to use LP, they must of course be linear.
Example
Rolex factory can produce four products and wishes to maximize contribution. It has an objective
function as follows:
MAXIMIZE 5X1 + 2X2 + 6X3 + 4X4.

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Where X1, X2, X3 and X4 are the number of units of ABC and D produced respectively and the
coefficient of the objective function (i.e 5, 2, 6 and 4) are the contribution per unit of the products.
The factory employs 200 skilled workers and 150 unskilled workers who works a 40 hours week.
The times to produce 1 unit of each product by the two types of labour are given as:
Products
A B C D
Skilled hours 5 3 1 8
Unskilled hours 5 7 4 11
The limitations as regards to labour can be stated as follows:

Skilled: 5X1 + 3X2 + 1X3 + 8X4 ≤ 8,000

Unskilled; 5X1 + 7X2 + 4X3 + 11X4 ≤ 6,000

In addition a general limitations applicable to all maximizing problems is that it is not possible to
make negative quantities of a product i.e.
X1 ≥0, X2 ≥ 0, X3 ≥ 0, X44 ≥ 0
Minimization problem
Minimization problems are normally concerned with minimizing the cost of fulfilling some
objectives, subject to limitations. The limitations are generally of the greater than or equal to type
for the logical reason that the best way to minimize costs would be to produce nothing therefore
the limitations must be set so as to produce the minimum possible that fulfills certain requirements.
Solution procedure
a) Decide upon the objective
b) Calculate the contribution per unit for maximizing or the cost per unit for minimizing (ignoring
fixed costs in both circumstances)
c) State the objective function noting how many unknowns or decisions variables appear
d) Consider what factors limit or constraint the inequalities to be produced or purchased.
e) State these factors mathematically taking care to ensure that the inequalities are of the correct
type
f) Before attempting to solve the problem ensure that all the relationships established are linear
or can be reasonably approximated by a linear function.
g) If only one resource is in short supply, the simple approach is to produce the product with the
largest contribution margin per unit of the limiting factors as priority.
h) Where there are two or more limiting factors and a decision has to be taken to combine the
production of just two products in such a way as to maximize profit or minimize cost, then the
graphical approach can be used.
i) Where there are two or more constraints, and a decision has to be taken to combine the
production of more than two products in such a way as to maximize profit or minimize cost,
then an iterative approach called simplex method can be used.

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Assumptions of LP
1) All relationships are linear (Linearity)
2) All constraints and coefficients are stated with certainty
3) Solution in fractional units are allowable, otherwise rounding up of figure is carried out
(divisibility)
4) Negative solutions are not permitted for the decision variables (non- negativity)
5) There is only one single objective at a time and this is either to maximize or minimize (single
or unitary objective).
6) The amount of each resource used must be proportional to the value of a decision variables
and this must be true for over the entire range of values for a decision variable.

Limitations of LP
1) It fails to consider the effect of risk
2) All relationships may not be linear at all times.
3) Products are assumed to be infinitely divisible, and that a fraction of a product may be
produced. This is not usually so in reality.
4) Products are assumed to be independent. This may not be true at all times.

Methods of solving Linear Programming

We have two methods of solving linear programming and they are:
I. Graphical Method
II. Simplex Method.
Graphical Method
Procedures for graphical solution to a Linear Programming
1) State the objective function
2) State the structural constraints
3) State the negativity constraints
4) From the structural constraints, turn inequalities to equalities and determine the number of
units that will be produced from the available resources if only one product will be produced
at a time
5) Represent the extreme assumptions of producing only one product at a time from the available
resources on the graph
6) Label the innermost interceptions to determine the point that will give the highest contribution
if maximizing and label the outermost interceptions if minimizing (the labeled portion of the
graph is known as the feasible region).
7) Arrive at a conclusion based on the evaluation done above. The point giving the highest
contribution/ cost will yield the highest contribution/cost.
8) Test to know if any of the constraints is binding at the optimal mix.

Simplex Method
The simplex method is an iterative approach that is used to solve linear programming problems
with two or more unknowns and can be used for very large problems indeed in solving thousands
of unknown and limitations. No advanced mathematics are required to use the simplex method.
All that is required is simple arithmetic and ability to follow a set of rules.

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Definition of simplex method
It is a step by step arithmetic method of solving LP problems whereby one moves progressively
from a position of say, zero production and therefore zero contribution until no further contribution
can be made. Each step produces a feasible solution and each step produces an answer better than
the one before i.e either greater contribution in maximizing problems or less cost in minimizing
problems. The mathematics behind the simplex method are complex.

Procedures for adopting the simplex method

a) State the problem in the standardized manner.
b) Convert all the inequalities into equations by adding an extra variable called SLACK
VARIABLE. The slack variable represent any unused capacity in the constraint. Each
constraint will have its own slack variable.
c) Set up the initial simplex tableau by arranging the objective function and equalized constraints
from step ‘b’ by creating the following columns:
1. Solution variable
2. Products - a letter to represent each of the product to be produced, mixed or blended.
3. Slack variables
4. Solution quantity.
d) Prepare rows for each of the structural constraints featuring only the coefficients. The last row
identified as Z represents the value of the objective function.
e) Identify the highest value in the Z row.
f) The figures in the solution quantity column are divided by the corresponding figures in the
column having the highest figure in the Z row.
g) From ‘F’ above, select the row that gives the lowest result while ignoring rows with zero
h) Asterik the figure in the identified row and column. This figure is called the PIVOT NUMBER.
i) The solution variable of the pivot figures is substituted with the letter representing the product
where the pivot number lies.
j) Turn the pivot figure into 1 by dividing the rows throughout by the pivot figure. This row is
now called the new pivot row.
k) Turn other figures in the pivot column into zero by multiplying the new pivot row with an
equivalent amount such that it will be possible to make addition or subtraction with other rows
to give zero in the pivot columns.
l) Repeat this procedure until none of the values in the Z row corresponding to each of the product
is positive.
m) When there are no positive values in the Z row, then the optimum solution is reached.
n) Extract the needed information from the tableau.