Example 2: Production Planning Problem

• There is a company ‘XYZ’ that produces a single

type of product
• The forecasted demand for the product for the
next four months are 1000, 800, 1200 and 900
respectively
• The company has a regular capacity of
producing 800 units per month and an over time
capacity of producing 200 units per month
• The cost of regular time production is Rs. 20 per
unit and the cost of overtime production is Rs.
25 per unit
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Example 2: Production Planning Problem

• The company can produce more than the

demand and can carry inventory to the next
month to meet the consecutive month demand
• The holding cost or carrying cost or inventory
cost is Rs. 3 per unit per month
• The demand has to be met for every month
• Formulate a linear programming problem for this
situation

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Example 2: Production Planning Problem
Xj: quantity produced using regular time
production D
Yj: quantity produced using over time production V
Ij: quantity carried at the end of month ‘j’ to the ’s
next month

4 4
Production Cost: z = 20 𝑗=1 Xj + 25 𝑗=1 Yj +
3 3𝑗=1 Ij
Objective Function
4 4 3
Minimize z =20 𝑗=1 Xj + 25 𝑗=1 Yj +3 𝑗=1 Ij

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Example 2: Production Planning Problem

St. X1 + Y1 = 1000 + I1
I1 + X2 + Y2 = 800 + I2
I2 + X3 + Y3 = 1200 + I3
I3 + X4 + Y4 = 900 Constraints
Xj ≤ 800 for all ‘j’
Yj ≤ 200 for all ‘j’
Xj, Yj, Ij ≥ 0

In this problem we have 11 DV’s and 12

constraints
Mathematical Form
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Example 2: Production Planning Problem

Second Way of Formulation

• We can eliminate the inventory variable
St. X1 + Y1 ≥ 1000
(X1 + Y1 -1000) + X2 + Y2 ≥ 800
(X1 + Y1 + X2 + Y2 – 1800) + X3 + Y3 ≥ 1200
(X1 + Y1 + X2 + Y2 + X3 + Y3 – 3000) + X4 + Y4 ≥
900
Xj ≤ 800 for all ‘j’
Yj ≤ 200 for all ‘j’
Xj, Yj, ≥ 0
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Example 2: Production Planning Problem

• We can eliminate the inventory variable

4 4
Minimize z = 20 + 25 +3 𝑗=1 Xj 𝑗=1 Yj
(X1 + Y1 – 1000) + 3 (X1 + Y1 + X2 + Y2 –
1800) + 3 (X1 + Y1 + X2 + Y2 + X3 + Y3 –
3000) + 3 (X1 + Y1 + X2 + Y2 + X3 + Y3 + X4 +
Y4 – 3900)
Note: It will not be present in the objective function if the
production and carrying inventory is exactly equal to the
demand of the fourth month, which is avoided to remain
consistent with the other constraints
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Example 2: Production Planning Problem

• This formulation has fewer number of variables

i.e. 8 decision variables in comparison of 11
DV’s (first formulation) and has 12 constraints
(same number of constraints)

• A formulation is superior if it has fewer number

of decision variables or constraints

• Also, constraints of inequalities type i.e. ‘≥’, ‘≤’ is

preferred over ‘=‘ equality
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Example 2: Production Planning Problem
Third Way of Formulation
• We can define decision variable ‘Xijk’
• Xijk: quantity produced in month ‘i’ to meet the
demand of month ‘j’ using production type ‘k’
i = 1, 2, 3, 4; j = 1, 2, 3, 4 and k = 1 and 2
St. X111 + X112 = 1000
X121 + X122 + X221 + X222 = 800
X131 + X132 + X231 + X232 + X331 + X332 = 1200
X141 + X142 + X241 + X242+ X341 + X342+ X441 +
X442 = 900
Demand Constraints
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Example 2: Production Planning Problem
Capacity Constraints: Regular time/ Over time

X111 + X121 + X131 + X141 ≤ 800 (quantity

produced in the first month to meet the demand
of four months using regular time production
type)
Regular time production
X221 + X231 + X241 ≤ 800 in second, third and
fourth month
X331 + X341 ≤ 800
X441 ≤ 800

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Example 2: Production Planning Problem
Capacity Constraints: Regular time/ Over time

X112 + X122 + X132 + X142 ≤ 200 (quantity

produced in the first month to meet the demand
of four months using over time production type)
X222 + X232 + X242 ≤ 200 Over time production in
second, third and fourth
X332+ X342 ≤ 200 month
X442 ≤ 200

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Example 2: Production Planning Problem
Objective Function: Minimize Production Cost
Minimize z = 20 (X111 + X121 + X131 + X141 + X221 +
X231 + X241 + X331 + X341 + X441) + 25 (X112 + X122 +
X132 + X142 + X222 + X232 + X242 + X332+ X342 + X442) +
3 (X121 + X122 + X231 + X232 + X341 + X342) + 6 (X131 + X132
+ X241 + X242) + 9 (X141 + X142 )

Non-negativity
Xijk ≥ 0 restrictions
• In this formulation, we have 32 decision variables
(20 active and 12 inactive) and 12 constraints

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Example 3: Problem Description
• The WYNDOR GLASS CO. produces high-quality
glass products, including windows and glass doors.
• It has three plants.
• Aluminum frames and hardware are made in Plant 1,
wood frames are made in Plant 2, and Plant 3 produces
the glass and assembles the products.
• Because of declining earnings, top management has
decided to revamp the company’s product line.
• Unprofitable products are being discontinued, releasing
production capacity to launch two new products having
large sales potential:
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Example 3: Wyndor Glass Problem

• Company introducing two new products

– Product 1: 8 ft. glass door with aluminum
frame
– Product 2: 4 x 6 ft. double-hung, wood-framed
window
• What mix of products would be most profitable?
– Assuming company could sell as much of
either product as could be produced

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Example 3: Wyndor Glass Problem

• Product 1 requires some of the production

capacity in Plants 1 and 3, but none in Plant 2.

• Product 2 needs only Plants 2 and 3.

• The marketing division has concluded that the

company could sell as much of either product as
could be produced by these plants.

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Example 3: Wyndor Glass Problem

• However, because both products would be

competing for the same production capacity in
Plant 3, it is not clear which mix of the two
products would be most profitable.

• Therefore, an OR team has been formed to study

this problem

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Example 3: Wyndor Glass Problem

• Determine what the production rates should be for

the two products in order to maximize their total
profit, subject to the restrictions imposed by the
limited production capacities available in the
three plants. (Each product will be produced in
batches of 20, so the production rate is defined as
the number of batches produced per week.) Any
combination of production rates that satisfies
these restrictions is permitted, including
producing none of one product and as much as
possible of the other.
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Example 3: Wyndor Glass Problem

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Example 3: Wyndor Glass Problem

• Formulating the model

x1 = number of batches of product 1 produced
per week
x2 = number of batches of product 2 produced
per week
Z = total profit per week (thousands of dollars)
from producing these two products
• From bottom row of table
𝑍 = 3 𝑥1 + 5𝑥2

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Example 3: Wyndor Glass Problem

• Constraints
𝑥1 ≤ 4
2𝑥2 ≤ 12
3𝑥1 + 2𝑥2 ≤ 18
𝑥1 ≥ 0
𝑥2 ≥ 0
• Classic example of resource-allocation
problem
– Most common type of linear programming
problem
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Example 3: Solution using Excel solver

• The optimal solution is x1 is 2, x2 is 6, with Z 36.

• This solution indicates that the Wyndor Glass Co.
should produce products 1 and 2 at the rate of 2
batches per week and 6 batches per week,
respectively, with a resulting total profit of
$36,000 per week.
• No other mix of the two products would be so
profitable— according to the model.

© 2015 McGraw-Hill Education. All rights reserved. 22

Solving Linear Programming Models on a
Spreadsheet (Excel)
• Excel and its Solver add-in
– Popular tools for solving small linear
programming problems

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Solving Linear Programming Models on a
Spreadsheet (Excel)
• The Wyndor example
– Data entered into a spreadsheet

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Solving Linear Programming Models on a
Spreadsheet (Excel)
• Changing cells
– Cells containing the decisions to be made
– C12 and D12 in the Wyndor example below

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Solving Linear Programming Models on a
Spreadsheet (Excel)

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Solving Linear Programming Models on a
Spreadsheet (Excel)

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