Linear Programming: Computer

Analysis, Sensitivity Analysis and

Application in Business
 Linear Programming: Computer Solution

The graphical method of linear programming can provide insights on

the topic in general. However, it is only limited to two decision
variables which restricts its usefulness as a general solution
technique.
Computer solution can be used as a substitute to the simplex method
of linear programming. It can be easily used by managers for
quantitative analysis and decision making.
Linear Programming: Sensitivity Analysis

Managers show relevant data when they use quantitative analysis in

making business decisions.
When managers change the relevant data or parameters used in the
analysis because of anticipated uncertainties. The analysis of
parameter changes and their effects on the model solution is known
as sensitivity analysis.
 Linear Programming: Application in Business

Linear programming is used to allocate scarce resources to operations and

find the optimal mix to maximize profit or minimize costs.
LP may be applied in the following areas:
1. Personnel management
2. Inventory management
3. Marketing management
4. Financial management
5. Blending problem
 Linear Programming: Application in Business

Personnel Management
LP techniques enables the personnel manager to solve problems
related to recruitment, selection, training and deployment of
manpower to different departments of the firm. It is also used to
determine the minimum number of employees required in various
shifts to meet production schedule within time schedule.
 Linear Programming: Application in Business

Inventory Management
A firm is faced with the problem of inventory management of raw
materials and finished products. The objective function in inventory
management is to minimize inventory costs and the constraints are
space and demand for the product .
 Linear Programming: Application in Business

Marketing Management
LP techniques enables the marketing manager in analyzing the
audience coverage of advertising based on the available media,
given the advertising budget as a constraint. It also helps the sales
manager in finding the shortest route for his tour. The marketing
manager determines the optimal distribution schedule for transporting
the product from different warehouses to various locations in such a
manner that the total transport cost is the minimum.
 Linear Programming: Application in Business

Financial Management
The financial manager of a financial institution uses LP techniques for
the selection of investment portfolio of shares, bonds etc. so as to
maximize return on investments.
Financial managers also use LP techniques to allocate corporate
funds to projects that yield the highest rate of investment.
 Linear Programming: Application in Business

Production Management
The production manager uses LP techniques to determine the
schedule of production and the production plan for a particular time
period. LP techniques are used in determining the optimal use of
materials that are placed into production.
 Linear Programming: Application in Business

Blending Problem
LP technique is also applicable to blending problem when a final
product is produced by mixing a variety of raw materials. The
blending problems arise in animal feed, diet problems, petroleum
products, chemical products etc. In all such cases, raw materials and
other inputs as constraints , the objective function is to minimize the
cost of the final product.
 Linear Programming: Application in Business

Linear programming techniques can also be used in the following

business activities of certain firms:
1. Airline scheduling
2. Car loans
3. Bike sharing programs
4. Advertisements in online marketing
 Linear Programming: Application in Business

Airline Scheduling
Managers in airline companies use LP techniques to schedule their
aircrafts for flights on various routes and schedule crews to the
flights. Processing the schedule of aircrafts and the flight crews can
be expressed as a model the minimizes costs such as fuel.
Airline scheduling also face constraints such as the number of flights
allowed, mandatory hours of work for the flight crew, number of crew
members etc.
 Linear Programming: Application in Business

Car Loans
LP techniques can be used as part of the process to determine the
characteristics of the loan offer. LP techniques seeks to maximize the
profitability of its portfolio of loans. The constraints are the risk of
customer default and losing a customer due to unfavorable loan
terms.
 Linear Programming: Application in Business

Bike Share Programs

LP techniques help determine the best routes and methods for
redistributing bicycles to the desired stations once the desire
distributions have been determined. The objective function is to
minimize transport costs and the constraint of having sufficient
bicycles at various stations to meet demand.
 Linear Programming: Application in Business

Advertisements in Online Marketing

LP techniques can be used to assign ads and batches of people to
view the ads. The objective function is to maximize advertising
response of the viewers. The constraints are the restrictions in the
advertising budget.