LINEAR

PROGRAMMING
(LP) GROUP MEMBERS:
SARTHAK BANSAL
SHANU
INTERPRETING SHIVAM GUPTA
VANITA GOYAL

RESULTS AND
VANSHIKA MITTAL
VIVEK AGRAHARI

SENSITIVITY
ANALYSIS
 • Linear programming is a mathematical
modeling technique used to determine a level of

LINEAR operational activity in order to achieve an

objective.

PROGRAMMING • Mathematical programming is used to find the

(LP) best or optimal solution to a problem that

requires a decision or set of decisions about
how best to use a set of limited resources to
achieve a state goal of objectives.
Steps involved in mathematical programming

Conversion of stated problem into a mathematical model that abstracts all the essential
elements of the problem.

• Exploration of different solutions of the problem.

• Find out the most suitable or optimum solution.

Linear programming requires that all the mathematical functions in the model be linear
functions. 
 The process to formulate a
Linear Programming Problem

Explicitly state
Identify the Write the
Mention the the non-
decision objective
constraints negativity
variables function
restriction

For a problem to be a linear programming problem, the decision variables, objective

function and constraints all have to be linear functions.
If all the three conditions are satisfied, it is called a Linear Programming Problem.

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 APPLICATIONS IN
VARIOUS INDUSTRIES/BUSINESSES

Hospital Diet Finance Food &

Manufacturing Advertising
management management (investment) Agriculture

Shelf space Delivery Machine Transportation Energy

Engineering
optimization Routes Learning Optimization Industry

Private & Paint and

The Indian Airlines in Hindustan
Public Sector chemical Steel Plant
Railways India Lever
oil refineries industries
 Sensitivity analysis is an analysis method
that is used to identify how much variations
in the input values for a given variable will
SENSITIVITY impact the results for a mathematical model.

Sensitivity analysis is an investigation that is

ANALYSIS driven by data. It determines how
independent variable of a business can have
an impact on the dependent variables. This
ultimately leads to change in the output and
profitability of the business. This concept is
employed to evaluate the overall risk and
identify critical factors of the business. By
doing so, the business tries to find alternative
solutions for different problems.
 How Sensitivity Analysis is used?

Return on Scientific
Climate Model Engineering
Investment Research

A company can use Sensitivity analysis The disciplines of It is standard practice

sensitivity analysis to can be used to physics and chemistry in engineering to use
identify the best data improve such models often employ computer models to
to be collected for by analyzing how sensitivity analysis to test the design of
future analyses to various systematic evaluate results and structures before they
evaluate basic sampling methods, conclusions. The are built. Sensitivity
assumptions inputs, and model importance of various analysis helps to
regarding investment parameters affect the inputs and the effects create more reliable,
and return on accuracy of results or of variance in the robust designs by
investment (ROI), or conclusions obtained inputs on model assessing points of
to optimize the from the computer outcomes can be uncertainty in
allocation models. analyzed. possible inputs and
of assets and their corresponding
resources. effects on the viability
of the model.
Importance of Sensitivity Analysis
• The key application of sensitivity analysis is to
indicate the sensitivity of simulation to
uncertainties in the input values of the model. • Analyses if the dependency in turn

• They help in decision making Sensitivity helps in assessing the risk

analysis is a method for predicting the outcome associated.

of a decision if a situation turns out to be • Helps in taking informed and

different compared to the key predictions. It appropriate decisions
helps in assessing the riskiness of a strategy.
• Aids searching for errors in the
• Helps in identifying how dependent the output
model
is on a particular input value.
SENSITIVITY
ANALYSIS IN All the content needed for the decision model can be

DECISION fully utilized only through the repeated application of

sensitivity analysis. It helps decision analysts to
understand the uncertainties, pros and cons with the
MAKING limitations and scope of a decision model.
Mostly, all decisions are made under uncertainty. It is
the optimal solution in decision making for various
parameters that are approximations. One approach to
come to conclusion is by replacing all the uncertain
parameters with expected values and then carry out
sensitivity analysis. It would be a breather for a decision
maker if he/she has some indication as to how sensitive
will the choices be with changes in one or more inputs.
 How to interpret Sensitivity Analysis?

Create It is important to create an experimental design of the business model and find what parameters can affect it
Experimental the most. By assigning different values to different variables ranging from minimum to maximum, one can
Design know the immediate and long-term effect of various parameters on business. Find the best suitable
combination and apply it in the business model.

What are the To correctly interpret the results, the parameters selected should be right. The parameters can be different
Parameters for different models of business. However, the common parameters may include technical parameters,
number of activities involved in business, number of bottlenecks, risk, and effect of bottlenecks on
business, etc. Selection of right parameters will help in arriving at a right interpretation of the analysis.

Once the analysis is done with different parameters and combinations, the next step is observation.
Observation is important as it determines which strategy must be followed by the business for higher growth
Observe and profit maximization. The observation may involve; the outcome of analysis based on different decision
variables, the impact of different variables and parameters on the strategy of the business, any ratifications
to be made in the strategy, etc.
 EXAMPLE
Suppose an organization is making mobile cases and
covers. Every month many new mobile releases and many
older mobiles go out of the market. In the given case, the
business has two options i.e. either to wait for the new
launch of mobiles every month or keep producing the
cases for older mobiles.

If the business keeps waiting for the launch of new

phones, the number of cases that it could have sold will Hence, a number of cases to be

not contribute to the profits. Therefore, the business will produced are dependent variable

have to determine how many cases need to be produced. here.

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 There are various advantages and disadvantages of
sensitivity analysis and it provides a solution to
different problems of business under different
situations. It helps the decision makers of business to
learn about the different parameters that drive a
business. Along with that, the business knows how each

CONCLUSION parameter affects its functioning and profitability. This

analysis evaluates the best business model after
considering the different bottlenecks and variables. The
aim of sensitivity analysis is to arrive at such business
model that results in higher EPS. To sum up, every
business must conduct sensitivity analysis to stay ahead
of its competitors and for higher growth as well as
sustainability. 12