COURSE: PRODUCTION & OPERATION MANAGEMENT

COURSE CODE: BUAD 802

QUESTION
(A) Briefly describe the decision variable, objective function, constraints and non-
negativity restriction in Linear Programming
The Decision Variables: The variables in a linear program are a set of quantities
that need to be determined in order to solve the problem i.e. the problem is solved
when the best values of the variables have been identified. The variables are
sometimes called decision variables because the problem is to decide what value
each variable should take. The variables represent the amount of a resource to use
or the level of some activity. For example, a variable might represent the number of
acres to cut from a particular part of the forest during a given period. Defining the
variables of the problem is one of the hardest or most crucial steps in formulating a
problem as a linear program. Sometimes creative variable definition can be used to
dramatically reduce the size of the problem or make an otherwise non-linear
problem linear. A variety of symbols, with subscripts and superscripts as needed
can be used to represent the variables of an LP. It is better to use variable names
that help you remember what the variable represents in the real world e.g using X
& Y as decision variables.
The Objective Function: The objective of a linear programming problem will be to
maximize or to minimize some numerical value. This value may be the expected
net present value of a project or a forest property or it may be the cost of a project,
it could also be the amount of wood produced, the expected number of visitor-days
at a park, the number of endangered species that will be saved, or the amount of a
particular type of habitat to be maintained. Linear programming is an extremely
general technique, and its applications are limited mainly by our imaginations and
our ingenuity. The objective function indicates how each variable contributes to the
value to be optimized in solving the problem.
The Constraints: Constraints define the possible values that the variables of a linear
programming problem may take. They typically represent resource constraints, or
the minimum or maximum level of some activity or condition.
The Non-negativity Constraints: the variables of linear programs must always take
non-negative values (i.e. they must be greater than or equal to zero). For example,
the variables might represent the levels of a set of activities or the amounts of some
resource used; this non-negativity requirement will be reasonable even necessary.
For all linear programs, the decision variables should always take non-negative
values i.e the values for decision variables should be greater than or equal to 0.
(B) Discuss the general steps in the forecasting process.
What is forecasting?
Forecasting may be defined as the process of assessing the future normally using
calculations and projections that take account of the past performance, current
trends, and anticipated changes in the foreseeable period ahead.
Forecasting is the process of estimating the relevant events of future, based on the
analysis of their past and present behaviour.
Forecasting refers to predicting what will happen in the future by taking into
consideration the events in the past and present. It is a decision-making tool that
helps businesses cope with the impact of the future’s uncertainty by
using historical data and trends. It is as much a planning tool that enables
businesses to plan their next moves and create budgets that will offset whatever
uncertainties that may occur.
The five basic steps in forecasting are:
(1) Problem definition: Defining the problem carefully requires an understanding
of the way the forecasts will be used, who requires the forecasts, and how the
forecasting function fits within the organisation. A forecaster needs to spend time
talking to everyone who will be involved in collecting data, maintaining
databases and using the forecasts for future planning.
(2) Gathering information: There are always at least two kinds of information
required: (a) statistical data, and (b) the accumulated expertise of the people who
collect the data and use the forecasts. Often, it will be difficult to obtain enough
historical data to be able to fit a good statistical model. Occasionally, old data
will be less useful due to structural changes in the system being forecast then
recent data may be used. However, the good statistical models will handle
evolutionary changes in the system.
(3)Select forecast models: The best model to use depends on the availability of
historical data, the strength of relationships between the forecast variable and
any explanatory variables, and the way in which the forecasts are to be used. It is
common to compare two or three potential models. Each model is itself an
artificial construct that is based on a set of assumptions (explicit and implicit)
and usually involves one or more parameters which must be estimated.
(4) Prepare forecast: apply the model using data collected and calculate the value
of the forecast.
(5) Using and evaluating a forecasting model: Once a model has been selected and
its parameters estimated, the model is used to make forecasts. The performance
of the model can only be properly evaluated after the data for the forecast period
have become available. A number of methods have been developed to help in
assessing the accuracy of forecasts.
References
Dantzig, George B. (George Bernard), 1914-2005. (©1997-2003). Linear
programming. Thapa, Mukund Narain. New York: Springer.
Alexander Schrijver (1998). Theory of Linear and Integer Programming. John
Wiley & Sons. pp. 221–222
Leonid Khachiyan (1979). "A Polynomial Algorithm for Linear
Programming". Doklady Akademii Nauk SSSR. 224 (5): 1093–1096.