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INTRODUCTION TO OPERATIONS RESEARCH

Ninth Edition

FREDERICK S. HILLIER Stanford University

GERALD j . LIEBERMAN Late of Stanford University

Boston Burr Ridge, IL Dubuque, IA Madison, Wl New York San Francisco St. Louis Bangkok Bogota Caracas Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto

TABLE OF CONTENTS

PREFACE

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CHAPTER 1 Introduction

1.1 The Origins of Operations Research 1 1.2 The Nature of Operations Research 2 1.3 The Impact of Operations Research 3 1.4 Algorithms and OR Courseware 5 Selected References 7 Problems 7 CHAPTER 2 Overview of the Operations Research Modeling Approach 2.1 Defining the Problem and Gathering Data 2.2 Formulating a Mathematical Model 1 1 2.3-Deriving Solutions from the Model 13 2.4 Testing the Model 16 2.5 Preparing to Apply the Model 1 7 2.6 Implementation 18 2.7 Conclusions 19 Selected References 19 Problems 20 CHAPTER 3 Introduction to Linear Programming 8

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3.1 Prototype Example 24 3.2 The Linear Programming Model 30 3.3 Assumptions of Linear Programming 36 3.4 Additional Examples 42 3.5 Formulating and Solving Linear Programming Models on a Spreadsheet 3.6 Formulating Very Large Linear Programming Models 68 3.7 Conclusions 75 Selected References 75 Learning Aids for This Chapter on Our Website 76 Problems 77 Case 3.1 Auto Assembly 86 Previews of Added Cases on Our Website 88 Case 3.2 Cutting Cafeteria Costs 88 Case 3.3 Staffing a Call Center 88 Case 3.4 Promoting a Breakfast Cereal 88

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CONTENTS CHAPTER 4 Solving Linear Programming Problems: The Simplex Method

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4.1 The Essence of the Simplex Method 89 4.2 Setting Up the Simplex Method 94 4.3 The Algebra of the Simplex Method 97 4.4 The Simplex Method in Tabular Form 103 4.5 Tie Breaking in the Simplex Method 108 4.6 Adapting to Other Model Forms 1 1 1 4.7 Postoptimality Analysis 129 4.8 Computer Implementation 137 4.9 The Interior-Point Approach to Solving Linear Programming Problems 4.10 Conclusions 145 Appendix 4.1 An Introduction to Using LINDO and LINGO 145 Selected References 149 Learning Aids for This Chapter on Our Website 149 Problems 150 Case 4.1 Fabrics and Fall Fashions 158 Previews of Added Cases on Our Website 160 Case 4.2 New Frontiers 160 Case 4.3 Assigning Students to Schools 160 CHAPTER 5 The Theory of the Simplex Method

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5.1 Foundations of the Simplex Method 161 5.2 The Simplex Method in Matrix Form 172 5.3 A Fundamental Insight 181 5.4 The Revised Simplex Method 184 5.5 Conclusions 187 Selected References 187 Learning Aids for This Chapter on Our Website Problems 188 CHAPTER 6 Duality Theory and Sensitivity Analysis

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6.1 The Essence of Duality Theory 196 6.2 Economic Interpretation of Duality 203 6.3 Primal-Dual Relationships 206 6.4 Adapting to Other Primal Forms 21 1 6.5 The Role of Duality Theory in Sensitivity Analysis 215 6.6 The Essence of Sensitivity Analysis 217 6.7 Applying Sensitivity Analysis 225 6.8 Performing Sensitivity Analysis on a Spreadsheet 245 6.9 Conclusions 259 Selected References 260 Learning Aids for This Chapter on Our Website 260 Problems 261 Case 6.1 Controlling Air Pollution 274 Previews of Added Cases on Our Website 275 Case 6.2 Farm Management 275 Case 6.3 Assigning Students to Schools, Revisited 275 Case 6.4 Writing a Nontechnical Memo 275

CONTENTS CHAPTER 7 Other Algorithms for Linear Programming 7.1 The Dual Simplex Method 276 7.2 Parametric Linear Programming 280 7.3 The Upper Bound Technique 285 7.4 An Interior-Point Algorithm 287 7.5 Conclusions 298 Selected References 299 Learning Aids for This Chapter on Our Website Problems 300

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CHAPTER 8 The Transportation and Assignment Problems

304 319

8.1 The Transportation Problem 305 8.2 A Streamlined Simplex Method for the Transportation Problem 8.3 The Assignment Problem 334 8.4 A Special Algorithm for the Assignment Problem 342 8.5 Conclusions 346 Selected References 347 Learning Aids for This Chapter on Our Website 347 Problems 348 Case 8.1 Shipping Wood to Market 356 Previews of Added Cases on Our Website 357 Case 8.2 Continuation of the Texago Case Study 357 Case 8.3 Project Pickings 357 CHAPTER 9 Network Optimization Models

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9.1 Prototype Example 359 9.2 The Terminology of Networks 360 9.3 The Shortest-Path Problem 363 9.4 The Minimum Spanning Tree Problem 368 9.5 The Maximum Flow Problem 373 9.6 The Minimum Cost Flow Problem 380 9.7 The Network Simplex Method 389 9.8 A Network Model for Optimizing a Project's Time-Cost Trade-Off 9.9 Conclusions 410 Selected References 41 1 Learning Aids for This Chapter on Our Website 41 1 Problems 412 Case 9.1 Money in Motion 420 Previews of Added Cases on Our Website 423 Case 9.2 Aiding Allies 423 Case 9.3 Steps to Success 423 CHAPTER 10 Dynamic Programming

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10.1 A Prototype Example for Dynamic Programming 424 10.2 Characteristics of Dynamic Programming Problems 429 10.3 Deterministic Dynamic Programming 431

CONTENTS 10.4 Probabilistic Dynamic Programming 451 10.5 Conclusions 457 Selected References 457 Learning Aids for This Chapter on Our Website Problems 458 CHAPTER 11 Integer Programming

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11.1 Prototype Example 465 1 1.2 Some BIP Applications 468 11.3 Innovative Uses of Binary Variables in Model Formulation 473 1 1.4 Some Formulation Examples 479 11.5 Some Perspectives on Solving Integer Programming Problems 487 1 1.6 The Branch-and-Bound Technique and Its Application to Binary Integer Programming 491 1 1.7 A Branch-and-Bound Algorithm for Mixed Integer Programming 503 1 1.8 The Branch-and-Cut Approach to Solving BIP Problems 509 11.9 The Incorporation of Constraint Programming 515 11.10 Conclusions 521 Selected References 522 Learning Aids for This Chapter on Our Website 523 Problems 524 Case 11.1 Capacity Concerns 533 Previews of Added Cases on Our Website 535 Case 11.2 Assigning Art 535 Case 11.3 Stocking Sets 535 Case 1 1.4 Assigning Students to Schools, Revisited Again 536 CHAPTER 12 Nonlinear Programming

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12.1 Sample Applications 538 12.2 Graphical Illustration of Nonlinear Programming Problems 542 12.3 Types of Nonlinear Programming Problems 546 12.4 One-Variable Unconstrained Optimization 552 12.5 Multivariable Unconstrained Optimization 557 12.6 The Karush-Kuhn-Tucker (KKT) Conditions for Constrained Optimization 12.7 Quadratic Programming 567 12.8 Separable Programming 573 12.9 Convex Programming 580 12.10 Nonconvex Programming (with Spreadsheets) 588 12.1 1 Conclusions 592 Selected References 593 Learning Aids for This Chapter on Our Website 593 Problems 594 Case 12.1 Savvy Stock Selection 605 Previews of Added Cases on Our Website 606 Case 12.2 International Investments 606 Case 12.3 Promoting a Breakfast Cereal, Revisited 606

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CONTENTS CHAPTER 13 Metaheuristics

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13.1 The Nature of Metaheuristics 608 13.2 Tabu Search 615 13.3 Simulated Annealing 626 13.4 Genetic Algorithms 635 13.5 Conclusions 645 Selected References 646 Learning Aids for This Chapter on Our Website Problems 647 CHAPTER 14 Game Theory

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14.1 The Formulation of Two-Person, Zero-Sum Games 651 14.2 Solving Simple GamesA Prototype Example 653 14.3 Games with Mixed Strategies 658 14.4 Graphical Solution Procedure 660 14.5 Solving by Linear Programming 662 14.6 Extensions 666 14.7 Conclusions 667 Selected References 667 Learning Aids for This Chapter on Our Website 667 Problems 668 CHAPTER 15 Decision Analysis

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15.1 A Prototype Example 673 15.2 Decision Making without Experimentation 674 15.3 Decision Making with Experimentation 680 15.4 Decision Trees 686 15.5 Using Spreadsheets to Perform Sensitivity Analysis on Decision Trees 690 15.6 Utility Theory 700 15.7 The Practical Application of Decision Analysis 707 15.8 Conclusions 708 Selected References 709 Learning Aids for This Chapter on Our Website 709 Problems 710 Case 15.1 Brainy Business 720 Preview of Added Cases on Our Website 722 Case 15.2 Smart Steering Support 722 Case 15.3 Who Wants to be a Millionaire? 722 Case 15.4 University Toys and the Engineering Professor Action Figures 722 CHAPTER 16 Markov Chains

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16.1 Stochastic Processes 723 16.2 Markov Chains 725 16.3 Chapman-Kolmogorov Equations

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CONTENTS 16.4 Classification of States of a Markov Chain 735 16.5 Long-Run Properties of Markov Chains 737 16.6 First Passage Times 743 16.7 Absorbing States 745 16.8 Continuous Time Markov Chains 748 Selected References 753 Learning Aids for This Chapter on Our Website 753 Problems 754 CHAPTER 17 Queueing Theory

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17.1 Prototype Example 760 17.2 Basic Structure of Queueing Models 760 17.3 Examples of Real Queueing Systems 765 17.4 The Role of the Exponential Distribution 767 17.5 The Birth-and-Death Process 773 17.6 Queueing Models Based on the Birth-and-Death Process 777 17.7 Queueing Models Involving Nonexponential Distributions 790 17.8 Priority-Discipline Queueing Models 798 17.9 Queueing Networks 803 17.10 The Application of Queueing Theory 807 17.11 Conclusions 812 Selected References 812 Learning Aids for This Chapter on Our Website 813 Problems 814 Case 17.1 Reducing In-Process Inventory 826 Preview of an Added Case on Our Website 827 Case 17.2 Queueing Quandary 827 CHAPTER 18 Inventory Theory

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18.1 Examples 829 18.2 Components of Inventory Models 831 18.3 Deterministic Continuous-Review Models 833 18.4 A Deterministic Periodic-Review Model 843 18.5 Deterministic Multiechelon Inventory Models for Supply Chain Management 848 18.6 A Stochastic Continuous-Review Model 866 18.7 A Stochastic Single-Period Model for Perishable Products 18.8 Revenue Management 882 18.9 Conclusions 890 Selected References 890 Learning Aids for This Chapter on Our Website 891 Problems 892 Case 18.1 Brushing Up on Inventory Control 902 Previews of Added Cases on Our Website 904 Case 18.2 TNT: Tackling Newsboy's Teachings ,904 Case 18.3 Jettisoning Surplus Stock 904

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CONTENTS CHAPTER 19 Markov Decision Processes

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19.1 A Prototype Example 905 19.2 A Model for Markov Decision Processes 908 19.3 Linear Programming and Optimal Policies 91 1 19.4 Policy Improvement Algorithm for Finding Optimal Policies 19.5 Discounted Cost Criterion 920 19.6 Conclusions 928 Selected References 928 Learning Aids for This Chapter on Our Website 929 Problems 929

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CHAPTER 2 0 Simulation 934 20.1 The Essence of Simulation 934 20.2 Some Common Types of Applications of Simulation 946 20.3 Generation of Random Numbers 951 20.4 Generation of Random Observations from a Probability Distribution 20.5 Outline of a Major Simulation Study 959 20.6 Performing Simulations on Spreadsheets 963 20.7 Conclusions 979 Selected References 981 Learning Aids for This Chapter on Our Website 982 Problems 983 Case 20.1 Reducing In-Process Inventory, Revisited 989 Case 20.2 Action Adventures 989 Previews of Added Cases on Our Website 990 Case 20.3 Planning Planers 990 Case 20.4 Pricing under Pressure 990 APPENDIXES 1. Documentation for the OR Courseware 2. Convexity 993 3. Classical Optimization Methods 998 4. Matrices and Matrix Operations 1001 5. Table for a Normal Distribution 1006

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PARTIAL ANSWERS TO SELECTED PROBLEMS INDEXES Author Index Subject Index

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