Optimization

& Prescriptive
Analytics
TD 5

Sensitivity Analysis

The company 'Les Accessoires Autos' (AA) is preparing the launch of a new range of products for motorists.
This range includes 7 products A, B, C, D, E, F, and G, assembled on chains C1 and C2 from materials M1,
M2, and M3. AA has 500 kg of M1, 750 kg of M2, and 350 kg of M3. Chain C1 is available for 60 hours and
chain C2 for 80 hours. The table below shows the technical production data and the unit contributions of the
products to the profit.
Product A B C D E F G
Profit per unit in Euro 10 12 8 15 1 10 19
M1 * 0.1 0.4 0.2 0.1 0.2 0.1 0.2
M2 0.2 0.1 0.4 0.2 0.2 0.3 0.4
M3 0.2 0.1 0.1 0.2 0.1 0.2 0.3
C1 ** 0.02 0.03 0.01 0.04 0.01 0.02 0.04
C2 0.04 - 0.02 0.02 0.06 0.02 0.05
* Data in lines M1, M2 and M3 are in kg.
** Data in lines C1 and C2 are in hours.
The marketing manager requires a minimum of 300 units of A but does not want to produce more than 700
units of B. The production manager says that he cannot produce more than 400 units of E. The production
manager assures you that it would be impossible to produce more than 400 units of E.
As a consultant, you were responsible for developing a linear model to maximize the total profit associated
with these products. You accomplished your task by formulating and solving the following linear model:

Max z = 10 xA + 12 xB + 8 xC + 15 xD + 1 xE + 10 xF + 19 xG
subject to
0.1 xA + 0.4 xB + 0.2 xC + 0.1 xD + 0.2 xE + 0.1 xF + 0.2 xG  500
0.2 xA + 0.1 xB + 0.4 xC + 0.2 xD + 0.2 xE + 0.3 xF + 0.4 xG  750
0.2 xA + 0.1 xB + 0.1 xC + 0.2 xD + 0.1 xE + 0.2 xF + 0.3 xG  350
0.02 xA + 0.03 xB + 0.01 xC + 0.04 xD + 0.01 xE + 0.02 xF + 0.04 xG  60
0.04 xA + 0.02 xC + 0.02 xD + 0.06 xE + 0.02 xF + 0.05 xG  80
xA  300
xB  700
xE  400
xA, xB, xC, xD, xE, xF, xG  0

The table below reports the following information concerning the optimal solution: the basic variables (xC to
e8), their values (column Values), the value of the optimal solution (27 600), the non-basic variables (xE to e6),
the marginal costs (line MC) and the matrix B-1N (middle part).
 Basis xE xF xG e1 e3 e4 e6 Values
xC 1 1.4 1.5 2 13 -70 1.4 930
xB 0 -0.6 -0.5 2 -7 30 -0.6 530
e2 -0.2 -0.32 -0.35 -0.6 -4.9 21 -0.42 121
xD 0 0.6 1 -2 2 20 0.6 720
e5 0.04 -0.02 0 0 -0.3 1 0 35
xA 0 0 0 0 0 0 -1 300
e7 0 0.60 0.5 -2 7 -30 0.6 170
e8 1 0 0 0 0 0 0 400
MC -7 -3 -2 -10 -50 -100 -3 27 600

After solving the proposed model, you attend a meeting attended by the marketing manager, the production
manager, and the purchasing manager. Here are the questions they ask you in turn.

1) Disappointed that Product F is not in the proposed production plan, the marketing manager claims that
he could increase its selling price. How much at least would AA have to increase the selling price of
product F to make it profitable to include it among the products to be manufactured? And, at this
minimum price, how many units of F could be made?

2) Although he cannot get more M1 from the usual supplier, the purchasing manager says that he could
get it from a foreign supplier for €9 per kilogram. He asks if he should order it at that price. If so, he
would like to know how many kilograms to order.

3) The production manager could get 5 extra hours of use of the C1 line for a total cost of $450. He asks
you if it would be profitable to do this. In any case, he would like you to tell him the consequences of
such extra time on the production plan.

4) The marketing manager comes back to you claiming that the sales price of product B is too low. He
thinks that the unit profit for this product could be increased to €14. However, he says that the demand
for the product would not exceed 600 units in this case. He asks you if the short-term economic
consequences are worthwhile.

5) The marketing manager says that the customer asking for 300 units of product A has just increased his
order to 350 units. He asks you what the impact on the production plan would be if he accepts this
increase.