DIIIO06 -Lecture 1

About the class

Welcome!!!
1.Class organization (Syllabus
discussion)
2.About the class
1. Class
organization
(Syllabus
discussion)
Teaching staff

Instructor: Diego A. Morán R. T.A.: TBD

Office: 537C e-mail: XYZ@alumnos.uai.cl
Office hours: by appointment
e-mail: diego.moran@uai.cl
 Some questions for us
What have you heard about an optimization course in general?

What is your professional background? What are your professional interests?

What are your career plans and how do you think this course can fit into them?

Do you have any specific expectations/concerns related to our course or this

semester?

As we begin our course, is there anything else would you like me to know about you?
 Some of my answers
What have you heard about an optimization course in general?
- Optimization is a crucial component of Prescriptive Analytics (that is, using the data to make intelligent
decisions)
- It has very cool applications in every business, industry and topic that you could imagine!
- Not so easy: optimization modeling is an art, lots of theory to learn it and understand the algorithms

What are your career plans and how do you think this course can fit into them?
My fourth time teaching this course: lots of fun and always learn something new that I can use to improve
my teaching (not only for this course!) and my research (my papers!).

Do you have any specific expectations/concerns related to our course or this semester?
Hopefully, we will all learn as much as possible while having some fun as well (and not too much suffering).

I will make you work very very hard, so do not hesitate to ask me your questions!
What is your professional background? What
are your professional interests?
Assistant Professor in the School of Business (since 2016)
Research interests:
• Theoretical aspects of mixed-integer programming.
• Applications of optimization to production planning, logistics and other relevant real-
world business and engineering problems.

Ph.D. in Operations Research, ISyE, Georgia Institute of Technology.

Master in Operations Management, DII, Universidad de Chile.

Mathematical engineer, DIM, Universidad de Chile.

8
Not to be confused with

Salsa singer and musician,

“El estandarte de la
salsa colombiana”

9
As we begin our course, is there anything else
would you like me to know about you?
Learning how to play
the trumpet 🎺🎶

My awesome
dog Karabash
She is the best!
🐶❤️
Finally, recently I
learned that I have
Graves disease 💊
 Some questions for us
What have you heard about an optimization course in general?

What is your professional background? What are your professional interests?

What are your career plans and how do you think this course can fit into them?

Do you have any specific expectations/concerns related to our course or this semester?

As we begin our course, is there anything else would you like me to know about you?

Please give me your answers by the end of today via the Google
form: https://forms.gle/HbTDDW2DCyTh6Z2v7
Official OLA2023 music playlist

Send your suggestions through:

https://docs.google.com/spreadsheets/d/10_K_cp32MOOn05Cz8tOV5rjRrOaGtQIrxyHrUKFVbF8/edit?usp=sharing
Examinations

Homework 40%
Midterm 1 30%
Midterm 2 30%
(No quizzes or exams!!!)
Homeworks

• 6 in total
• Based on previous lectures and the textbooks
• Questions can be theoretical or computational
• Homework grade is the average of the 6 grades in
the trimester
Regarding group work

• The homeworks could be done individually or in groups.

• This will depend on the particular activity and will be indicated
in the corresponding instructions.
• Different groups/individuals are encouraged to discuss the
assignments and their solution with everyone in the class, but
every group/individual must submit their own solution. And
appropriate credit must be given.
Midterms
• Midterm 1: in class (70 minutes), after first 3
homeworks
• Midterm 2: on the exam date, end of the semester

• Based on (= identical or slightly different):

• All previous homework assignments
• List of problems given as exercises
Feedback
Please ask questions.

If my writing is not legible or my voice is not loud

enough, let me know.

At any time of the course, if there is any feedback you

would like to give me, please let me know.
Finally, do not forget to read the syllabus!!!
2. About
this course
 Analytics
The Institute for Operations Research and the Management Sciences
(INFORMS) defines Analytics as:

The scientific process of transforming data into insights for

making better decisions.
 Descriptive/Predictive Analytics

Data Science techniques: allow the extraction of

useful information and knowledge from large
volumes of data.
 Prescriptive Analytics

Operation Research techniques: allow us to use what

we have learned from the data to make better
decisions.
 The class

• Linear optimization, one of the most

important tools in Prescriptive analytics

We will present the fundamental principles and concepts

and some examples, with emphasis in business
applications. Some extensions will also be studied.
Predictive analytics: we can use
the data to describe a situation
and make predictions.
But then what?
Prescriptive analytics
 million
4.7 packages
per week

2,600+ facilities
Multicommodity network flow problem

Origin Capacity
Cost
Origin

Demand Destination Destination

Demand
One main decision

Decide if a truck uses a path segment (“arc”) or

not.

If there are 100 path segments, then

~2 100 possible assignments!!!

(although not all are Origin-Destination paths)
Age of
the <2 40
universe
seconds
 Comments

• The problem cannot be solved by trying all possible

solutions…not even if you start at the beginning of times.

• However, it can be solved in practice by using

optimization methods!

Savings: US$62 millions (2008-2010)

How can we solve
these difficult
decision
problems?
We can use optimization techniques!
• Linear optimization (64% of this class)
• Integer optimization (18% of this class)
• Nonlinear optimization (9% of this class)
• Stochastic optimization (9% of this class)
• Miscellaneous methods
Optimization

Methods to select the best alternative (with regard

to some criteria – min cost, max profit, etc.) from
some set of available alternatives.

• Deterministic optimization: all parameters are known.

• Stochastic optimization: some or all parameters are
uncertain.
An application of linear
optimization

Production planning in the salmon industry

Example: Production planning in Salmon
industry

35
 Production planning (in seawater)

36
37
38
A snapshot of the optimization model:

Xct=1 if center c is to be harvested

in period t, Xct=0 else. 39
A Healthcare
application
Group testing (Dorfman testing)
How to choose the groups? How many?

• Different risk/probability of being infected, tests are not perfect

• Cost of false negatives (FN): consequences of disease if not detected
• Cost of false positives (FP): retesting when not needed, hassle for individual, etc.
• Cost of testing (T)
Optimal risk-based group testing

Hrayer Aprahamian Douglas R. Bish Ebru K. Bish

Optimal
partitioning
Optimal risk-based group testing

Hrayer Aprahamian Douglas R. Bish Ebru K. Bish

Optimal
partitioning
Models (SM) and (BM)
System-
optimal
Model (SM)

Budget-
constrained
Model (BM)

Ω: partition of the population into different groups

Some results (SM)

Each point in the graph correspond to the results obtained in one of 3000 simulations of the population
(based on the risk/probability of each individual being infected)

BC is the Base Case

Many more applications: vehicle
routing, job assignment,
marketing, sport tournaments
scheduling, auctions, finance,
etc.
Tentative outline

I. Basic concepts and modeling

II. Mathematical foundations of linear
optimization
III. Solution methods
IV. Extensions: integer programming, conic
programming, stochastic optimization
I. Basic
concepts
and
modeling
“Linear programming is viewed as a
revolutionary development giving
man the ability to state general
objectives and to find, by means of
the simplex method, optimal policy
decisions for a broad class of
practical decision problems of great
complexity.”

George Dantzig, the father of LP,

1983.
A simple example
A less simple example
An already complicated example
In order to solve more
complicated linear
optimization problems
(with more variables
and constraints), we
first need to understand
what are the properties
of an LP!
II. Mathematical
foundations of
linear
optimization
Some relevant questions
• When does there exist some feasible
assignment for the variables (a solution)?
• When does there exist an optimal
solution?
• How to find an optimal solution?
• How to recognize an optimal solution?

Let's see some LP properties

Property 1
“If the feasible region has vertices and there exists an
optimal solution, then there exist a vertex optimal
solution.”
Property 2
“A vertex is optimal if and only if there is no
improvement direction.”
Property 3
“Linear optimization has a strong dual.”

Useful for:
• Understanding the LP
in a better way
• Optimality conditions
• Algorithmic
implications
• Sensitivity analysis
III. Solution
methods
We will see

• The simplex method

• Sensitivity analysis
• Decomposition methods;
large scale optimization
 The simplex method has two phases:
(Phase I)
Find initial BFS (vertex) or detect infeasibility (no BFS
exists).

(Phase II)
Move from current BFS (vertex) to a “better”
adjacent BFS (vertex) (until optimality or unboundness detection).
The Simplex method:
(Phase I)
1. Find an initial vertex.

(Phase II)
2. While(current vertex is not optimal)
{
Move to vertex with better objective function
value.
}
 The Simplex method:
(Phase I)
1. Find an initial vertex. How to find it?
(Phase II)
2. While(current vertex is not optimal) Optimality conditions
{
Move to vertex with better objective function value. How?
}
Other algorithmic ideas
• Sensitivity analysis
• What happens if the data of the problem changes?
• How is the optimal solution affected?

• Decomposition methods, large scale optimization

• Column generation (Dantzig-Wolfe, etc.)
• Constraint generation (Benders decomposition, etc.)
IV. Extensions
of linear
optimization
Integer programming

Motivation:
discreteness of
real-life problerms
(ex: yes or no
decisions, discrete
quantities)
Conic programming

Motivation: nonlinearity of real-life problems

 Motivation: data uncertainty
Stochastic programming of real-life problems

First-stage Scenario 1 Second-stage

decision: decide how decisions: decide how to use
much money to the remaining budget in the
allocate to buy a safe p1=30% uncertain stocks (revenues
stock (with known and prices may be
revenue r0). p2=70% uncertain).
“Here and now” “Wait and see” decisions.
decisions.
Scenario 2 (Many possible
(Data is known) scenarios for the data)

Time
Calendario
tentativo