Mathematical

Modeling and Analysis

(6)
Ronald Sukwadi, Ph.D.

Industrial Engineering Department

Outline
 Introduction
 What is a mathematical model?
 Why do we build a mathematical model?
 Mathematical Model:

[Empirical Model & Theoretical Model]

 Classification of Mathematical Models
 Example: Mathematical Model For LOD
Case

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Introduction
 We use the OR/MS Methodology
 To capture the relationships between various
elements of the relevant system in a
mathematical model and explore its solution.

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 F ig u r e 5 -1 : O R /M S m e t h o d o lo g y

F 1 F O R W A R D L IN K A G E S
S u m m a r iz in g
O
p r o b le m
R
s itu a tio n
M
U Id e n tify in g 2
L p r o b le m fo r
A a n a ly s is
T 3
D e c r ib in g
I
r e le v a n t P R O J E C T P R O P O S A L
O
s y s te m
N
B u ild in g a 4
m a th e m a tic a l
m o d1 e l
M F in d in g 5
O p re fe rre d
D s o lu tio n
E 6
L V a lid a tio n &
I p e rfo rm a n c e
N te s tin g
G 7
A n a ly z in g
s e n s itiv ity P R O J E C T R E P O R T
o f s o lu tio n
P la n n in g 8
I Im p le m e n ta tio
M n
P
9
L E s ta b lis h in g
E c o n tro l o v e r
M s o lu tio n
E 1 0
N Im p le m e n tin g D O C U M E N T A T IO N &
T s o lu tio n U S E R 'S M A N U A L
A
1 1
T
F o llo w in g u p
O S O L U T IO N A U D IT
s o lu tio n u s e
N

B A C K W A R D L IN K A G E S
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What is a mathematical model?
 A mathematical model: Express, in
quantitative term, the relationships
between various components, as
defined in the relevant system for the
problem (e.g. using Influence Diagram).
 Terminology:
 Decision variables or the alternative
courses of action (controllable inputs)
 Performance measure (how well the
objectives are achieved)
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What is a mathematical model?
 Terminology:
 Objective function (the performance
measure is expressed as a function of decision
variables)
 Uncontrollable inputs: parameters,
coefficients, or constants
 Constraints –limit the range of the decision
variables

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Mathematical Model Building
Idealisasi
Dunia Nyata Model Nyata

Aproksimasi

Perbandingan Abstraksi
representasi simbolik

Konklusi Model
Prediksi Matematika
Teori-teori
Matematika dan
teknik-teknik
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Relationship Between
Input-System-Output

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Why build mathematical models?
 Real-life tests are not possible
Disruptive
Risky
Expensive

 Math Models are easy to manipulate

Quick exploration of the effect of changes in
the inputs on the objective functions

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Properties of
Good mathematical models
 Simple –simple models are more easily
understood by the problem owner
 Complete –should include all significant
aspect of the problem situation affecting the
measure of effectiveness
 Easy to manipulate –possible to obtain
answer from the model
 Adaptive –changes in the structure of the
problem situation

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Properties of
Good mathematical models
 Easy to communicate with –easy to prepare,
update, and change the inputs and get answer
quickly
 Appropriate for the situation studied –produces
the relevant outputs at the lowest possible cost
and in the time frame required
 Produce information that is relevant and
appropriate for decision making –has to be
useful for decision making

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The Art of Modeling
 A scientific process
 More akin to art than science
 A few guidelines
 Ockham’s Razor:
 “Things should not be multiplied without
good reason”.
 The modeler has to be selective in
including aspects into a model

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The Art of Modeling
 An iterative process of enhancements
–begin with a very simple model and
move in an evolutionary fashion toward
more elaborate models
 Working out a numerical example –
observe how variables of interest behave
 Diagram and Graphs –to see things in
the form of graphs or other drawings
expressing relationships and patterns.

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Mathematical Model
A mathematical model of a system
 A symbolic representation involving a abstract
mathematical formulation
A mathematical formulation
 composed of symbols, and makes no sense
outside mathematics
 not a model by itself
 it is only by relating the mathematical
formulation to a system characterization (i.e.
variables and relationships)
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Empirical vs Theoretical
 Empirical Model
 The characterization is based on no theory or
knowledge.
 The system is viewed as a black box
 The mathematical formulation to serve as a dummy
- must be selected on an ad-hoc basis
 Models called empirical models
 Theoretical Model
 The characterization is done using well established
theory
 Models called theoretical models

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Classification of Mathematical Models
 Four categories based on mathematical
structure of the underlying formulation
 A: Formulations suitable for modeling
deterministic static systems
 B: Formulations suitable for modeling
deterministic dynamic systems
 C: Formulation suitable for modeling
probabilistic static systems
 D: Formulations suitable for modeling
stochastic dynamic systems

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Mathematical Formulations
 Deterministic static Formulations
 e.g. Linear Programming
 Deterministic dynamic Formulations
 e.g. Dynamic Programming
 Probabilistic static Formulations
 e.g. Regression Analysis; Design of experiment
 Stochastic dynamic Formulations
 e.g. Markov Process

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Mathematical Formulations
 The math. Formulations suited for
modeling deterministic systems
 Static Formulations
 involve either algebraic equations or function
optimization
 Dynamic Formulations
 involve two types of variables -dependent variables
and independent variables, e.g. X(t)

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Analysis of Mathematical
Formulations
 Step 1:
 Discard the association so that only the math.
formulation is retained.
 Step 2:
 Carry out an analysis of the formulation using
appropriate math techniques
 Step 3:
 Re-introduce the discarded association so that the
analysis can be interpreted in term of physical variables
of the system characterization to yield model behavior

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Types of Analysis
 Qualitative Analysis
 deals with the study of qualitative aspects of a
given mathematical formulation without
explicitly solving it
 Quantitative Analysis
 concerned with finding the explicit solution
which satisfies the given math formulation.
 Analytical methods (the solution can be exact or
approximate)
 Computational methods (the solution is only
approximate and depends on the method used)
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Case Study 1:
LOD
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Widest System: [LOD]
 The widest system: the company as a
whole
 The refinery: one of its subsystem
 The LOD: a subsystem of the refinery
system
 Within LOD system:
 the production/inventory control operation
form one of its major subsystem (i.e. the
narrow system of interest)

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The Narrow System:[LOD]
 A system for the replenishment and stock
control of packaged finished goods which
keeps the total operating costs for the
LOD as low as possible while maintaining
the current level of customer service

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High-level system structure diagram
for LOD

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Math. Model For The LOD Problem
 Simplification
 Constraints (Warehouse space & mixing and
filling capacities)
 Two decision variables (cutoff point, L and
order size,Q)

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Math. Model – LOD
[First Approximation]
 First Approximation
 Ignore the constraints
 Involve only one decision variable, Q
 Performance measure
 TC=Annual stock holding cost+Annual set
up cost+Annual handling cost+Annual
product values

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Which can be ignored??

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Circle 6
Annual number of stock replenishment:

 Annual demand met from stock/size of

stock replenishment
 D1/Q

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Circle 12
Annual setup cost for replenishment stock

 Setup cost per batch x Annual number of

stock replenishment
 s x (D1/Q)

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Circle 8
Avg stock investment:

 Avg stock level x Unit product value

 0.5Qv

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Circle 13
Annual stock holding cost:

 Avg stock investment x Holding cost

 0.5Qvr

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Circle 11
Annual handling cost small cust.:

 Product handling cost per unit x Annual

volume met from stock
 h1D1

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Circle 14
Annual product value:

 Unit product value x Annual volume of

demand
 vD1

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Components of total cost
 Annual stock holding cost
 (Average stock level x Unit product value) x Holding
cost/$/year
 Annual set up cost
 Setup cost per batch x Annual number of stock
replenishments
 Annual handling cost
 Product handling cost per unit x annual volume met
from stock
 Annual product values
 Unit product value x Annual volume of demand
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Math. Model For The LOD Problem
[First Approximation]

T (Q)  [0.5Qvr ]  [ sD1 / Q]  [h1 D1 ]  [vD1 ]

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Exploring the solution for T(Q)
 We now apply the model to one of the
high volume products carried by the LOD,
product Y.
 The demand data for product Y are
summarized in the frequency table of
Table 6-1.
 Assume that special production run cutoff
point of L=12

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Customer demand data

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Result
The graph shows that minimum relevant
cost occurs where the annual holding cost
is equal to the annual setup cost.

 0.5Qvr = sD1/Q
 Q = 50.87 (51)
 T(Q) = $ 2,930

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Math. Model – LOD
[Second Approximation]
 Two decision variables, L and Q.
 Two additional costs
 The annual set up cost for special production run
 The annual handling cost for big order
 Total cost =
The annual set up cost for special production run +
The annual handling cost for big order +
Associated annual EOQ cost given L +
The annual handling cost for small order.

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Circle 9
The annual handling cost for big order

 Annual volume by special prod.runs x

Product handling cost per unit
 D2h2

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Circle 10
The annual set up cost for special
production run
 Production setup per batch x Annual

number of special prod.runs

 sN

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Math. Model For The LOD Problem
[Second Approximation]

T (Q)  [0.5Qvr ]  [ sD1 / Q]  [h1 D1 ]  [vD1 ]

T (Q, L)  [ sN ]  [h2 D2 ]  [0.5Qvr  sD1 / Q]  [h1 D1 ]

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Result
The lowest cost is obtained for the
combination of :
L = 20
Q = 61.8 (60)
T(L,Q) = $11,494

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