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C3-LP Applications 2021-2022
C3-LP Applications 2021-2022
Outline
1. Introduction
2. Marketing Applications
3. Manufacturing Applications
4. Employee Scheduling Applications
5. Transportation Applications
6. Transshipment Applications
7. Ingredient Blending Applications
8. Financial Applications
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Introduction
Marketing Applications
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Marketing Applications
Marketing Applications
Coefficients of Coefficients of
obj. function Constraints
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Marketing Research
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Marketing Research
§ Management Sciences Associates (MSA) is a marketing research
firm
§ MSA determines that it must fulfill several requirements in order
to draw statistically valid conclusions
– Survey at least 2,300 U.S. households
– Survey at least 1,000 households whose heads are 30 years of age
or younger
– Survey at least 600 households whose heads are between 31 and 50
years of age
– Ensure that at least 15% of those surveyed live in a state that
borders on Mexico
– Ensure that no more than 20% of those surveyed who are 51 years
of age or over live in a state that borders on Mexico
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Marketing Research
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Marketing Research
Marketing Research
Objective function
Minimize total
interview costs = $7.50X1 + $6.80X2 + $5.50X3
+ $6.90X4 + $7.25X5 + $6.10X6
subject to
X1 + X2 + X3 + X4 + X5 + X6 ≥ 2,300 (total households)
Marketing Research
n HW: Using Excel Solver and Lingo to solve this problem again!
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Manufacturing Applications
§ Production Mix
– LP can be used to plan the optimal mix of
products to manufacture
– Company must meet a myriad of constraints,
ranging from financial concerns to sales demand
to material contracts to union labor demands
– Its primary goal is to generate the largest profit
possible
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Manufacturing Applications
Constraints of materials
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Manufacturing Applications
Manufacturing Applications
§ The complete Fifth Avenue Industries model
Objective function
Maximize profit = $4.08X1 + $3.07X2 + $3.56X3 + $4.00X4
Subject to 0.125X1 ≤ 800 (yds of silk)
0.08X2 + 0.05X3 + 0.03X4 ≤ 3,000 (yds of polyester)
0.05X3 + 0.07X4 ≤ 1,600 (yds of cotton)
X1 ≥ 6,000 (contract min for silk)
X1 ≤ 7,000 (contract max)
X2 ≥ 10,000 (contract min for all polyester)
X2 ≤ 14,000 (contract max)
X3 ≥ 13,000 (contract min for blend 1)
X3 ≤ 16,000 (contract max)
X4 ≥ 6,000 (contract min for blend 2)
X4 ≤ 8,500 (contract max)
X1, X2, X3, X4 ≥ 0
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Manufacturing Applications
§ Solution for Fifth Avenue Industries LP model
n HW: Using Excel Solver and Lingo to solve this problem again!
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Manufacturing Applications
§ Production Scheduling
– Setting a low-cost production schedule over a
period of weeks or months is a difficult and
important management task
– Important factors include labor capacity, inventory
and storage costs, space limitations, product
demand, and labor relations
– When more than one product is produced, the
scheduling process can be quite complex
– The problem resembles the product mix model for
each time period in the future
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Manufacturing Applications
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Manufacturing Applications
– Warehouse limitations
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Manufacturing Applications
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Manufacturing Applications
§ We can use the same approach to create the portion
of the objective function dealing with inventory
carrying costs
IA,i = Level of on-hand inventory for GM3A motors at the
end of month i (i = 1, 2, 3, 4 for January – April)
IB,i = Level of on-hand inventory for GM3B motors at the
end of month i
n The carrying cost for GM3A motors is $0.18 per month and
the GM3B costs $0.13 per month
n Monthly ending inventory levels are used for the average
inventory level
Cost of carrying inventory = $0.18IA1 + $0.18IA2 + $0.18IA3 + 0.18IA4
+ $0.13IB1 + $0.13IB2 + $0.13IB3 + $0.13IB4
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Manufacturing Applications
Inventory Inventory
Current Sales to
at the end at the end
of this = of last + month’s – Drexel this
production month
month month
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Manufacturing Applications
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Manufacturing Applications
IA4 = 450
IB4 = 300
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Manufacturing Applications
Manufacturing Applications
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Manufacturing Applications
n HW: Using Excel Solver and Lingo to solve this problem again!
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n Assignment Problems
n Involve determining the most efficient way to assign
resources to tasks
n Objective may be to minimize travel times or maximize
assignment effectiveness
n Assignment problems are unique because they have a
coefficient of 0 or 1 associated with each variable in the
LP constraints and the right-hand side of each
constraint is always equal to 1
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n The LP formulation is
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Employee Scheduling Applications
n Solving Ivan and Ivan’s assignment scheduling LP problem
CLIENT’S CASE
CORPORATE
LAWYER DIVORCE MERGER EMBEZZLEMENT EXHIBITIONISM
Adams 6 2 8 5
Brooks 9 3 5 8
Carter 4 8 3 4
Darwin 6 7 6 4
CLIENT’S CASE
CORPORATE
LAWYER DIVORCE MERGER EMBEZZLEMENT EXHIBITIONISM
Adams X
Brooks X
Carter X
Darwin X
n HW: Using Excel Solver and Lingo to solve this problem again!
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n Labor Planning
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and Industry
TIME PERIOD NUMBER OF TELLERS REQUIRED
9 am – 10 am 10
10 am – 11 am 12
11 am – Noon 14
Noon – 1 pm 16
1 pm – 2 pm 18
2 pm – 3 pm 17
3 pm – 4 pm 15
4 pm – 5 pm 10
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costs
profitable to do so
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n We let
F = full-time tellers
P1 = part-timers starting at 9 am (leaving at 1 pm)
P2 = part-timers starting at 10 am (leaving at 2 pm)
P3 = part-timers starting at 11 am (leaving at 3 pm)
P4 = part-timers starting at noon (leaving at 4 pm)
P5 = part-timers starting at 1 pm (leaving at 5 pm)
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n F = 10, P2 = 2, P3 = 7, P4 = 5, P1, P5 = 0
n F = 10, P1 = 6, P2 = 1, P3 = 2, P4 = 5, P5 = 0
n HW: Using Excel Solver and Lingo to solve this problem again!
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Transportation Applications
§ Shipping Problem
– The transportation or shipping problem involves
determining the amount of goods or items to be
transported from a number of origins to a number
of destinations
– The objective usually is to minimize total shipping
costs or distances
– This is a specific case of LP and a special
algorithm has been developed to solve it
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Transportation Applications
§ The Top Speed Bicycle Co. manufactures and markets a line of
10-speed bicycles
§ The firm has final assembly plants in two cities where labor
costs are low
§ It has three major warehouses near large markets
§ The sales requirements for the next year are
– New York – 10,000 bicycles
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Transportation Applications
TO
FROM NEW YORK CHICAGO LOS ANGELES
New Orleans $2 $3 $5
Omaha $3 $1 $4
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Transportation Applications
§ So
X11 = number of bicycles shipped from New Orleans to New York
X12 = number of bicycles shipped from New Orleans to Chicago
X13 = number of bicycles shipped from New Orleans to Los Angeles
X21 = number of bicycles shipped from Omaha to New York
X22 = number of bicycles shipped from Omaha to Chicago
X23 = number of bicycles shipped from Omaha to Los Angeles
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Transportation Applications
§ Objective function
Minimize
total
shipping = 2X11 + 3X12 + 5X13 + 3X21 + 1X22 + 4X23
costs
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Transportation Applications
n Top Speed Bicycle solution
TO
FROM NEW YORK CHICAGO LOS ANGELES
New Orleans 10,000 0 8,000
Omaha 0 8,000 7,000
n HW: Using Excel Solver and Lingo to solve this problem again!
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Transportation Applications
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Transportation Applications
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Transportation Applications
n Objective function
Transportation Applications
n HW: Using Excel Solver and Lingo to solve this problem again!
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Transportation Applications
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Transshipment Applications
transshipment problem
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Transshipment Applications
§ Distribution Centers
– Frosty Machines manufactures snowblowers in Toronto and
Detroit
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Transshipment Applications
Toronto Chicago
Philadelphia
Detroit Buffalo
St Louis
Figure 8.1
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Transshipment Applications
Detroit $5 $7 — — — 700
Chicago — — $6 $4 $5 —
Buffalo — — $2 $3 $4 —
Transshipment Applications
§ A description of the problem would be to minimize cost subject to
1. The number of units shipped from Toronto is not more than 800
2. The number of units shipped from Detroit is not more than 700
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Transshipment Applications
§ The decision variables should represent the number of units
shipped from each source to the transshipment points and from
there to the final destinations
Transshipment Applications
subject to
T1 + T2 ≤ 800 (supply at Toronto)
D1 + D2 ≤ 700 (supply at Detroit)
C1 + B1 = 450 (demand at New York)
C2 + B2 = 350 (demand at Philadelphia)
C3 + B3 = 300 (demand at St Louis)
T1 + D 1 = C1 + C2 + C3 (shipping through Chicago)
T2 + D 2 = B1 + B2 + B3 (shipping through Buffalo)
T1, T2, D1, D2, C1, C2, C3, B1, B2, B3 ≥ 0 (nonnegativity)
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Transshipment Applications
§ The solution:
TO
FROM CHICAGO BUFFALO NEW YORK CITY PHILADELPHIA ST LOUIS SUPPLY
Toronto 650 150 — — — 800
Detroit 0 300 — — — 700
Chicago — — 0 350 300 —
Buffalo — — 450 0 0 —
Demand — — 450 350 300
Source Transshipment Destination
Point
New York City
450
650
Toronto Chicago
350
150 Philadelphia
n HW: Using Excel Solver and Lingo to solve this problem again!
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§ Diet Problems
– One of the earliest LP applications
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NUTRIENT USRDA
Protein 3 units
Riboflavin 2 units
Phosphorus 1 unit
Magnesium 0.425 units
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§ We let
XA =pounds of grain A in one 2-ounce serving of cereal
XB =pounds of grain B in one 2-ounce serving of cereal
XC = pounds of grain C in one 2-ounce serving of cereal
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So
0.35X1 + 0.60X3 ≥ 0.45X1 + 0.45X3
or
– 0.10X1 + 0.15X3 ≥ 0 (ingredient A in regular constraint)
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§ Problem formulation
Minimize cost = 30X1 + 30X2 + 34.80X3 + 34.80X4
subject to X1 + X3 ≥ 25,000
X2 + X4 ≥ 32,000
– 0.10X1 + 0.15X3 ≥0
0.05X2 – 0.25X4 ≤ 0
X1, X2, X3, X4 ≥ 0
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n HW: Using Excel Solver and Lingo to solve this problem again!
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Financial Applications
§ Portfolio Selection
– Bank, investment funds, and insurance
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Financial Applications
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Financial Applications
Financial Applications
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Financial Applications
§ Objective function
Maximize
dollars of = 0.07X1 + 0.11X2 + 0.19X3 + 0.15X4
interest earned
subject to X1 ≤ 1,000,000
X2 ≤ 2,500,000
X3 ≤ 1,500,000
X4 ≤ 1,800,000
X3 + X4 ≥ 0.55(X1 + X2 + X3 + X4)
X1 ≥ 0.15(X1 + X2 + X3 + X4)
X1 + X2 + X3 + X4 ≤ 5,000,000
X1, X2, X3, X4 ≥ 0
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Financial Applications
n HW: Using Excel Solver and Lingo to solve this problem again!
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Homeworks
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