Simplex Method

• Real life Management decisions are much

more complicated than the simple 2 variable
cases
• Simplex method: Developed in 1947 by
George Dant is iterative in nature with
successive solutions developed in a
systematic pattern until best solution is
achieved
 Components of an LP model
• Decision Variables
– Quantities which are under control of Management, ie
units/raw materials used in production and or units of
the finished product
• The Objective Function
– Mathematical statement of the objective or goal to be
achieved
• Constraints
– Mathematical statements (linear equations and/or
inequalities) which represent the restrictions, resource
limitations etc. NOT controlled by management
• An objective to be achieved
• Resources that are in limited supply
• Interaction between variables leading to
alternative courses of action
• Linearity among the variables (ie can be
stated mathematically)
• Each new solution will yield a value of the
objective function as large as or larger than
the previous solution
• Each iteration moves closer to the optimum
and the SM will indicate when the optimum
solution is reached
• SM uses an iterative algebraic solution
procedure that begins at the origin and
examines successive adjacent points until an
optimum solution is found
• Efficient Solution Mechanism
• Easy to program on a computer
• A large number of packages are available,
some with extensive sensitivity analysis
• X1 = Gold filled Pendants 8 Euro profit/Pendant
• X2 = Gold filled Pins 10 Euro profit/Pin
• Three Production Constraints
• Each pendant requires 4.5 grams of gold, 3 grams
silver and 4 grams base metal
• Each Pin requires 2 grams of gold, 5 grams silver
and 4 grams base
 metal
• Output limited by quantities of material available:
36 grams of gold, 45 grams silver and 40 grams
base metal.
 Simplex Method (Example)
• Objective function = Max 8X1 +10X2
• Subject to Constraints:
• 4.5X1 + 2X2 ≤ 36
• 3X1 + 5 X2 ≤ 45
• 4X1 + 4X2 ≤ 40
• X1, X2,  0
 Simplex Method (Example)
Draw Graph!
• Objective function = Max 8X1 +10X2
• Now, add in slacks to make inequalities into
equations
• Subject to Constraints:
• 4.5X1 + 2X2 + S1 = 36
• 3X1 + 5 X2 + S2 = 45
• 4X1 + 4X2 + S3 = 40
• X1, X2, S1, S2, S3  0
• Extreme points occur on
– An Axis
– The intersection of 2 or more constraints
• In the example there are 5 variables
– 2 decision variables & 3 slack variables
– S1 is the slack variable associated with constraint
1, S2 is associated with constraint 2 etc.
• and only 3 equations
• n denotes the number of variables
• m denotes the number of constraints
• In Example n = 5 & m = 3
• Begin by setting n-m of the variables = 0
• In example, X1 & X2 variables must be set =
0
• Constraint equations become
• S1 = 36
• S2 = 45
• S3 = 40
• The choice of these variables is arbitrary.
• If (0,0) point E is selected as the starting point
the decision variables X1 & X2 are set = 0. At
E no products are being produced => no
resources are being used => slack variables
are = the original resource quantities
• Objective function = Max 8X1 +10X2 + S1
+ S2 +S3
• Subject to Constraints:
• 4.5X1 + 2X2 +1S1 = 36
• 3X1 + 5 X2 + 1S2 = 45
• 4X1 + 4X2 +1S3 = 40
• X1,X2, S1, S2, S3 ≥ 0
X1 X2 S1 S2 S3
4.5 2 1 0 0 36
3 5 0 1 0 45
4 4 0 0 1 40
 SM Procedure
• Initial Simplex Tableau corresponds to the
graphical point at the origin
• To select variable entering tableau examine the
Cj-Zj Row (Net Improvement in Profit indicator)
– Variable yielding largest improvement per unit is
selected
– To determine Zj. Take the contribution value of each
basic variable & multiply it by units of each resource
required to produce a unit of a decision variable &
then add results
Cj Basic 8 10 RHS
Variable X1 X2 S1 S2 S3
0 S1 4.5 2 1 0 0 36
0 S2 3 5 0 1 0 45
0 S3 4 4 0 0 1 40
Profit Zj 0 0
forgone
Net Cj-Zj 8 10
Improvement
Value
Highest value of Cj-Zj most promising
X2 enters as a basic variable
 – e.g. Zj for X1
• VAR Cj X1 Profit Forgone
• S1 0 x 4.5 0
• S2 0 x 3 0
• S3 0 x 4 0
Zj 0

• Cj for X1 = 8
• (X1) Cj - Zj = 8 - 0 = 8
• In example, Largest improvement in Profit
is £10 and the corresponding entering
variable is X2
• Column associated with the entering
variable is the Pivot Column
 Pivot Colum

Cj Basic 8 10
Variable X1 X2 S1 S2 S3
0 S1 4.5 2 1 0 0 36
0 S2 3 5 0 1 0 45
0 S3 4 4 0 0 1 40
Zj 0 0
Cj-Zj 8 10
• Determine the variable which will exit the tableau
• Slack resources are being used now to make a
product => more units of product and fewer units
of resources
• Each additional unit produced adds to profit
contribution, resources continuously used to make
units of products until one resource is used up
– 36 Units of Res 1 & each unit of X2 requires 2 units of
this resource
X2 RHS RHS/X2
2 36 18
5 45 9
4 40 10
• We need a combination of resources to
make X2 => Take the minimum
• => 9 units of x2 are produced & all
available units of resource 2 exhausted
• Substitute units of product X2 for units of
resource 2 until S2 becomes zero
• X2 enters tableau S2 leaves tableau
• Row that limits/constrains the entering
variable is the Pivot Row
• This resource is also said to be binding
upon the solution value ie it limits the value
the solution can take
 Pivot Element

Pivot Colum

Cj Basic 8 10 RHS
Variable X1 X2 S1 S2 S3
0 S1 4.5 2 1 0 0 36 P
i
0 S2 3 5 0 1 0 45 v
o
0 S3 4 4 0 0 1 40 t

Zj 0 0
R
Cj-Zj 8 10 o
w
• Coefficient at the intersection of the pivot
column & the pivot row is the pivot element
• In example pivot element is 5
• Reorganise the tableau (S2 leaves, X2 enters)
– Replace S2 with X2
– Divide each element in pivot row by the pivot
element
– To calculate remaining tableau row values X2
column must be converted to a unit column
Remaining rows must be changed so X2 column
values are all zero
 Pivot Colum

Cj Basic 8 10 RHS
Variable X1 X2 S1 S2 S3
0 S1 4.5 2 1 0 0 36
10 X2 3/5 1 0 1/5 0 9
0 S3 4 4 0 0 1 40
Zj
Cj-Zj
 Rule for converting columns to
unit columns
S1 Intersection
Old Row - Value X New Pivot Row = New Row
4.5 - (2 X 3/5) = 33/10
2 - (2 X 1) =0
1 - (2 X 0) =1
0 - (2 X 1/5) = -2/5
0 - (2 X 0) =0
36 - (2 X 9) = 18
 Pivot Colum

Cj Basic 8 10 RHS
Variable X1 X2 S1 S2 S3
0 S1 33/10 0 1 -2.5 0 18
10 X2 3/5 1 0 1/5 0 9
0 S3
Zj
Cj-Zj
S3 Intersection
Old Row - Value X Pivot Row = New Row
4 - (4 X 3/5) = 8/5
4 - (4 X 1) =0
0 - (4 X 0) =0
0 - (4 X 1/5) = -4/5
1 - (4 X 0) =1
40 - (4 X 9) =4
 Again check is this the optimal solution?

Cj Basic 8 10 RHS
Variable X1 X2 S1 S2 S3
0 S1 33/10 0 1 -2.5 0 18
10 X2 3/5 1 0 1/5 0 9
0 S3 8/5 0 0 -4/5 1 4
Zj
Cj-Zj
 Not Optimal as Cj-Zj row still positive
Identify pivot colum (max Cj-Zj) , x1 enters next

Cj Basic 8 10 RHS
Variable X1 X2 S1 S2 S3
0 S1 33/10 0 1 -2.5 0 18
10 X2 3/5 1 0 1/5 0 9
0 S3 8/5 0 0 -4/5 1 4
Zj 6 10
Cj-Zj 2 0
• Divide RHS values by coefficients from X1
Column
• S1 18 divided by 33/10 = 60/11
• X2 9 divided by 3/5 = 15
• S3 4 divided by 8/5 = 5/2
• S3 row is the most constraining it yields the
smallest non-negative ratio S3 is new pivot
row
 S3 is new pivot row AND pivot element in red

Cj Basic 8 10 RHS
Variable X1 X2 S1 S2 S3
0 S1 33/10 0 1 -2.5 0 60/11
10 X2 3/5 1 0 1/5 0 15
0 S3 8/5 0 0 -4/5 1 5/2
Zj 6 10
Cj-Zj 2 0
 X1 enters

Cj Basic 8 10 RHS
Variable X1 X2 S1 S2 S3
0 S1 33/10 0 1 -2.5 0 60/11
10 X2 3/5 1 0 1/5 0 15
8 X1 1 0 0 -1/2 5/8 5/2
Zj
Cj-Zj
S1 Inter New
Old Value - Value X Pivot Row = New
Row
33/10 - (33/10 X 1) =0
0 - (33/10 X 0) =0
1 - (33/10 X 0) =1
-2/5 - (33/10 X -1/2) = 5/4
0 - (33/10 X 5/8) = -33/16
18 - (33/10 X 5/2) = 39/4
X2
3/5 - (3/5 X 1) =0
1 - (3/5 X 0) =1
0 - (3/5 X 0) =0
1/5 - (3/5 X -1/2) = 4/10
0 - (3/5 X 5/8) = -3/8
9 - (3/5 X 5/2) = 15/2
 Is this optimal? Check Cj-Zj row

Cj Basic 8 10 0 0 0 RHS
Variable X1 X2 S1 S2 S3
0 S1 0 0 1 33/20 -33/16 39/4
10 X2 0 1 0 ½ -3/8 15/2
8 X1 1 0 0 -1/2 5/8 5/2
Zj 8 10 0 0 10/8
Cj-Zj
 Is this optimal? Check Cj-Zj row Notice that all are
zero or negative so this is optimal solution

Cj Basic 8 10 0 0 0 RHS
Variable X1 X2 S1 S2 S3
0 S1 0 0 1 33/20 -33/16 39/4
10 X2 0 1 0 ½ -3/8 15/2
8 X1 1 0 0 -1/2 5/8 5/2
Zj 8 10 0 1 10/8 95
Cj-Zj 0 0 0 -1 -10/8
• 2.5 Units of X1 produced (Pins)
• 7.5 Units of X2 produced (Pendants)
• 9.75 units of S1 remain (gold)
• Objective Function = 95
• This suggests that you should reduce the
amount of gold by 9.75 grams/day