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Nonlinear Optimization Models

This document discusses non-linear optimization including examples of non-linear models in inventory management and portfolio theory. It covers key concepts such as local optimization points, using Solver for non-linear models, and applying the economic order quantity formula to minimize total costs.

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Phúc Lê
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37 views10 pages

Nonlinear Optimization Models

This document discusses non-linear optimization including examples of non-linear models in inventory management and portfolio theory. It covers key concepts such as local optimization points, using Solver for non-linear models, and applying the economic order quantity formula to minimize total costs.

Uploaded by

Phúc Lê
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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CHAPTER

1
After finish this chapter, student could understand:
 Overview Non linear Optimization, the difference
between linear and non linear

 Example about non linear optimization model

 Applying non linear optimization in financial


situation: model of inventory and portfolio model

 Applying excel in portfolio theory

2
 Model of non linear optimization

 Using Solver for model of non linear optimization

 Model of inventory management

3
 There are some real relationships are not
linear relationship, but it is non linear
 Features
◦ The existent of relationship is not as ratio
◦ The existent of relationship is not additional
◦ The effective and in-effective follow size

4
 Any value of X which makes the partial derivative = 0
then we call that is stop point

 At local optimization (min or max), all of partial


derivative must be 0. The maximum or minimum
point are always stop point

 The setting of first partial derivatives = 0 in the


function having n variable will create n function.

 The second sufficient condition is complex, they ask


to determine the matrix of second level partial
derivative.

5
Linear Optimization

The local optimize point and general


optimize point are different 6
 Average inventory volume Q  0 Q

2 2
 Cost of inventory Q
xC
2
S
 The number of orders
Q
S
 Total of order cost
xO
Q
Q S
TC  x C  x O + PxS
 Total of cost 2 Q

* 2SO
Q 
C 7
Example P.129
 Steco Co. sells average volume of 5,000 units (or 60,000
units/year).
 Assume that order cost unit is 25$.
 Inventory cost: 1.Opportunity cost is 20% of buying price and
2.Inventory cost is 4%. Buying price: 8$/unit. Inventory cost:
24% x 8,00$ = 1,92$.

 Objective 60.000 Q
TC  x 25 $  x 1,92$  Min
Q 2

 Constraint Q >= 1

8
 Transfer that model to excel

 Using Solver and comparing the formula 2SO


*
Q 
C
 Practice with EOQ model which is discounted as the quantity
of ordering

9
Thank you

10

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