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Management Science
Dr Bangdong Zhi
Lecturer in Operations Management and Analytics
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Objectives of Today’s Lecture
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Binary Integer Linear Programming
• As special case of an integer variable is one that can only take the values of
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Example of BILP Problem: Capital
Budgeting
The Ice Cold Refrigerator Company is considering a variety of projects with varying capital
requirements over the next four years. Faced with limited capital resources, the company must
select the most profitable projects for the capital expenditures. All relevant data is given in the
table below. Find the expenditure strategy that maximises net present value (NPV).
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BILP Formulation
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Example of BILP Problem: Fixed Costs
GC Clothing is capable of manufacturing three types of clothing: shirts, shorts and trousers. To
manufacture each type of clothing requires GC Clothing to have available the appropriate type of
machinery. The rental cost (per week) of each type of machine is given in table. Each type of
clothing requires a certain number of employee hours and cloth. These figures are given in table
in addition to unit variable profit per item. Formulate the problem of finding GC Clothing’s
maximum weekly profit.
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Formulation: Decision Variables
Clearly, we have decision variables for the number of each type of clothing produced:
But we also have decisions on whether or not to rent the appropriate machinery:
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Formulation: Objective Function and
Explicit Constraints
Also there are restrictions on the amount of cloth and hours available
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Formulation: Implicit Constraints for Fixed
Costs
• There is a relationship between 𝑌1 and 𝑋1 (and the other pairs of 𝑌 and 𝑋 too)
• If we rent the machine (𝑌1 = 1) then we can manufacture shirts (𝑋1 ≥ 0);
• If we don’t rent the machine (𝑌1 = 0) then we can’t manufacture shirts (𝑋1 = 0)
𝑋1 ≤ 𝑀1 𝑌1
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Formulation: How to find 𝑴𝟏
To find the maximum value of 𝑋1 , we consider what would happen if all available
resources were diverted into the production of this product. If all 150 work hours were
spent on shirts (which require 3 hours each), then the maximum number of shirts we
could produce is
150 / 3 = 50
Similarly, If all cloth was used on shirts, the maximum number we could produce is
160 / 4 = 40
So, if all resources were devoted to shirts, the largest value for 𝑋1 would be 40, because
we require both constraints to hold at the same time.
𝑋1 ≤ 40𝑌1
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Formulation: Final Stages
We clearly need:
𝑋2 ≤ 𝑀2 𝑌2
𝑋3 ≤ 𝑀3 𝑌3
Show that:
𝑀2 = 53
𝑀3 = 25
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Example of BILP Problem: Facility Location
• Ohio Trust Company is considering expanding its
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Solution Approach
• Bank has to decide whether or not to place a PPB in each county (YES or
NO).
➢Placing a PPB in this county or any of its adjacent counties would allow business
in that county;
➢At least one of the variables representing that set of counties needs to be 1.
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Formulation of Facility Location Problem
𝑀𝑖𝑛𝑖𝑚𝑖𝑧𝑒 𝑧 = 𝑋1 + 𝑋2 + 𝑋3 + ⋯ + 𝑋20
𝑋1 + 𝑋2 + 𝑋3 + 𝑋12 ≥ 1 Lake
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EFIM20005:
Management Science
Dr Bangdong Zhi
Lecturer in Operations Management and Analytics
1
Objectives of Today’s Lecture
➢Choice constraints;
➢Conditional constraints;
➢Either … or constraints.
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Choice Constraints
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Example
Suppose we have a situation where we have a set of four projects available from
which we have to make selections:
➢𝑋1 = 1 if project 1 selected; 0 otherwise;
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Conditional and Corequsite Constraints
A conditional constraint applies when we have a situation where we must
have done an action first before we can do, or at least have a choice of doing, a
second action.
➢For example, in a problem of selecting modules from a programme, we can only to
study Advanced Corporate Finance if we have completed the study of Basic
Corporate Finance
A variant is a corequisite constraint. This means either both actions are done
or neither can be done.
➢For example, to install certain software on a PC, you either need to do a memory
upgrade and a storage capacity upgrade, otherwise you’d buy a new PC and not
bother to do either.
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Example
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Either .. Or Constraints
Either ..Or
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General Approach
Suppose we have two constraints where either the first or the second is active in the
formulation:
𝑓 𝑥1 , 𝑥2 , … , 𝑥𝑛 ≤ 0
𝑔 𝑥1 , 𝑥2 , … , 𝑥𝑛 ≤ 0
𝑔 𝑥1 , 𝑥2 , … , 𝑥𝑛 ≤ 𝑀2 𝑦
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Example (Cryptocurrency from Slide 7)
Let:
• Either 𝑋1 + 𝑋3 ≤ 20000
• Or 𝑋2 + 𝑋4 ≤ 25000
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Example (cont.)
➢Or 𝑋2 + 𝑋4 − 25000 ≤ 0
➢𝑌 = 1 if the first constraint applies to the problem and the second one doesn’t;
➢𝑌 = 0 if the second constraint applies to the problem and the first one doesn’t.
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Example (cont.)
• 𝑋1 + 𝑋3 − 20000 ≤ 𝑀1 (1 − 𝑌)
• 𝑋2 + 𝑋4 − 25000 ≤ 𝑀2 𝑌
𝑋2 + 𝑋4 ≤ 𝑀2 + 25000
• If 𝑀2 is, say, bigger than the available budget, then even though the
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Refinement on 𝑴
𝑋1 + 𝑋3 − 20000 ≤ 𝑀1 (1 − 𝑌) (1)
𝑋2 + 𝑋4 − 25000 ≤ 𝑀2 𝑌 (2)
• Question: Examine the LHS of (1) and (2). If the budget is £100000 what is the
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Example (cont.)
• For (1), the largest value the LHS can take is:
• For (2), the largest value the LHS can take is:
• 𝑋1 + 𝑋3 + 80,000𝑌 ≤ 100000
• 𝑋2 + 𝑋4 − 75,000 𝑌 ≤ 25000
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Exercise
A bank wants to determine where its assets should be invested during the current year. £2 million
is available for investments of the following types (figures in brackets are the annual returns):
bonds (6%), home loans (8%), equities (17.5%), personal loans (19%). The following restrictions
have been imposed for policy reasons.
1. The amount invested in home loans cannot exceed the amount invested in bonds.
2. No more than 30% of the total amount invested may be in personal loans
4. Because of high brokers’ charges on small transactions, if any investments are to be made in
bonds, they must be at least £250,000.
5. Either the total invested in bonds and home loans must be at least £250,000 or the investment
in personal loans must not exceed £750,000.
Formulate the problem of deciding how much to invest in each category to maximise annual
return.
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Formulation
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MS Linear Programming Questions for Week 22 Tutorial
Question 1
Question 2
The following questions refer to a Capital Budgeting problem with six projects represented
by 0-1 variables 𝑋1 , 𝑋2 , 𝑋3 , 𝑋4 , 𝑋5 , 𝑋6 . Each constraint should be considered in
isolation.Produce a solution to this problem in Excel and report the solution in a form suitable
for the manager.
a) Write a constraint modelling a situation in which two of the projects 1, 3, 5 and 6 must
be undertaken
b) Write a constraint modelling a situation in which projects 3 and 5 must be undertaken
simultaneously
c) Write a constraint modelling a situation in which projects 1 or 4 must be undertaken
but not both
d) Write constraints modelling a situation where project 4 cannot be undertaken unless
projects 1 and 3 are also undertaken
e) Revise the requirement in part (d) to accommodate the case in which, when projects 1
and 3 are undertaken, project 4 also must be undertaken
Question 3
Snow Cinemas is considering four options for the seating capacity of a new cinema: 100, 150,
250 and 400 seats. Let
a) Let z = capacity of the cinema that Snow Cinemas decide to build. Write constraints
that will ensure that the capacity chosen will be 100, 150, 250 or 400.
b) Write constraints that will ensure that the capacity of the chosen cinema will be 100,
150, 250 or 400 if a cinema is built or 0 if the company does not build the new cinema.
Question 4
London is considering the relocation of several police substations to obtain better enforcement
in high crime areas. The locations under consideration together with the areas that can be
covered from these locations are given in the following table.
Formulate a model that could be used to find the minimum number of locations necessary to
provide coverage to all areas.
Question 5
The company wishes to produce 90,000 units per year at minimum total cost. How should it
do it? (Remember that if a plant produces zero, it incurs no fixed costs).
MS9 Tutorial Questions for Week 10 Solutions
Question 1
Input Data
Warehouse Test Market Advertising Research Purchase Available Funds
Year 1 3000 6000 2000 5000 1000 10500
Year 2 6000 4000 1500 1000 500 7000
Year 3 2000 5000 1800 4000 900 8750
Output Values
Constraints
Capital Used
Year 1 9000
Year 2 6000
Year 3 7700
To maximize Return the company should test market the new product, launch an advertising campaign
and purchase new equipment. This gives a return of 17500
(Exactly the same structure as the Capital Budget problem where formulation was
explained in Video 1 of Week 1 and solved in Video 2 of Week 9)
Question 2
(e) If we have either of the formulations in (d) in place we are dealing with
preventing X4 from being done if X1 and X3 are not done. What we need is to
add a constraint which means that if both are 1 then this forces X4 to be 1
(done) WITHOUT forcing X4 must be done under any other values of X1 and
X3
X4 ≥ X1 + X3
The clue is in looking at the “impact on X4” column. It’s value is 1 to big in the
second, third and fourth rows. So what if we subtract 1 from the RHS? That would
work for those cases, but for X1 = X3 = 0 we end up with X4 ≥ -1. But this is ok as it
allows X4 to take the value 0.
So X4 ≥ X1 + X3 – 1
This is an example of the type of logical deduction that modellers have to engage with
to create constraints that meet their specific requirement.
Question 3
(a)
Explanation: the objective function need to return the capacity of the cinema i.
100,150, 250, 400. The appropriate capacity will be added to Z is the corresponding
X variable is set to 1. However, we need a constraint that ensure that only one of the
capacities is chosen (as the cinema can’t simultaneously be different capacities)
X1 + X 2 + X 3 + X 4 = Y
Question 4
Minimize Z = A + B + C + D + E + F + G
E A+E+G >= 1
s.t. A + B + C + G ≥1 (Area 1 covered)
B + D ≥1 A+B+E+G>=1 (Area 2 covered)
A+ C + E ≥1 etc
D + E + F ≥1 B+D+E>=1
A + B + C + D + F + G ≥1 C+D+F>=1
E + F + G ≥1 D+E+F>=1
A + B + G ≥1 A+E+F+G>=1
Question 5
s.t.
X1 + X2 + X3 = 90000 (produce exactly 90000 units)
X1 ≤ 20000Y1 (capacity constraint on plant 1 production if Y1
= 1 otherwise the production is set at 0))
X2 ≤ 40000Y2 etc
X3 ≤ 75000Y3 etc
(Exactly the same structure as the Fixed Cost problem explained in the first video
lecture of Week 9)