Optimization Models With Integer Variables

Chapter 6
Optimization Models with Integer Variables

Introduction
• In this chapter, we show how many complex
problems can be modeled using 0–1 variables and
other variables that are constrained to have integer
values.
• A 0–1 variable is a decision variable that must
equal 0 or 1. Usually a 0–1 variable corresponds
to an activity that either is or is not undertaken.
• If the 0–1 variable corresponding to the activity
equals 1, the activity is undertaken; if it equals 0,
the activity is not undertaken. A 0–1 variable is
also called a binary variable.
Winston/Albright Practical Management Science, 5e South-Western/Cengage Learning
Thomson/South-Western © 2016
2007 ©
Introduction continued
• Optimization models in which some or all of the
variables must be integers are known as integer
programming (IP) models.
• In this chapter, we illustrate many of the modeling
techniques that are needed to formulate IP models
of complex situations.
• You should be aware that any optimization
software, including Excel’s Solver, typically has a
much harder time solving an IP problem than an
LP problem.
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Overview of optimization with
integer variables
• When Excel’s Solver solves a linear model without
integer constraints, it uses a very efficient algorithm,
the simplex method, to perform the optimization.
– The simplex method is efficient because it typically
examines only a very small fraction of the hundreds,
thousands, or even millions of possible corner points
before determining the best corner point.
• The main difference between LP and IP models is that
LP models allow fractional values, such as 0.137 and
5.3246, in the changing cells, whereas IP models allow
only integer values in integer-constrained changing
cells.
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Overview of optimization with
integer variables continued
• Although several solution methods have been
suggested by researchers - and new methods for
specialized problems are still being developed -
the solution procedure used by Solver is called
branch and bound.

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Branch and bound algorithm
• Consider a model with 100 changing cells, all
constrained to be binary. Because there are only two
values for each binary variable - 0 and 1 - there are
potentially 2100 feasible solutions, although many of
these might not satisfy all of the constraints.
• Unfortunately, 2100 is an extremely large number, so it
would take even a very fast computer a long time to
check each one of them. Therefore, the naive method
of complete enumeration of all possible solutions -
look at each solution and select the best - is usually
impractical.
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continued
• However, implicit enumeration is often very
practical. This approach examines only a fraction
of all 2100 potential solutions and guarantees that
solutions not examined have no chance of being
optimal.
• A general idea is the essence of the branch and
bound method used by Solver in IP models.
– The branching part means that the algorithm
systematically searches through the set of all feasible
integer solutions, creating branches, or subsets, of
solutions as it goes.
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continued
– The key, however, is the bounding part of the algorithm.
Every time the best feasible solution is found, it is called
the incumbent solution – the best so far. It is the easy
part of the bounding procedure, and the solution
represents a lower bound on the optimal solution (for a
maximize objective).
– The upper bound is more difficult to find, and the
procedures used to find upper bounds are beyond the
level of this book.

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Solver Tolerance setting
• The Solver Options dialog
box contains a Tolerance
setting, which is relevant for
integer-constrained models.
• Excel’s default tolerance is
5%. In Excel 2010, this
setting, listed as Integer
Optimality (%), is found
under Solver Options in the
dialog box shown here.
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continued
• To explain the Tolerance option, we must first
define the LP relaxation of an IP model.
• This is the same model as the IP model, except
that all integer constraints are omitted.
– In particular, cells that are originally constrained to be
binary are allowed under the LP relaxation to have any
fractional values between 0 and 1 (including 0 and 1).
• The LP relaxation is typically easy to solve (using
the simplex method), and it provides a bound for
the IP model.

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continued
• A tolerance setting of 5% means that Solver stops
as soon as it finds a feasible (integer) solution to
the IP model that is within 5% of the current upper
bound.
• Initially, the optimal objective value of the LP
relaxation serves as the upper bound. As Solver
proceeds to find solutions that satisfy the integer
constraints, it keeps updating the upper bound.
• The important point is that when Solver stops, it
guarantees an integer solution that is within at
least 5% of the optimal integer solution.
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continued
• The implication is that if you set the tolerance to
0%, Solver will (in theory) run until it finds the
optimal integer solution. So why isn’t a tolerance
setting of 0% always used?
• The reason is that for many IP models, especially
large models, it can take Solver a long time to find
the optimal solution (or guarantee that the best
solution found so far is optimal).
• On the other hand, a solution that is close to
optimal - within 5%, say - can often be found
quickly.
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Solver messages
• When you run Solver on some of the difficult
problems in this chapter, you might get different
messages, shown below.
• You have two options:

1. Change the options in Solver settings
2. Click on Continue to let Solver run longer. We
recommend the second option.
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Capital budgeting models
• Perhaps the simplest binary IP model is the
following capital budgeting example, which
illustrates the go/no-go nature of many IP models.
• Example 6.1 demonstrates a typical capital
budgeting model.

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Fixed-cost models
• In many situations, a cost is incurred if an activity is
undertaken at any positive level. This cost is independent of
the level of the activity and is known as a fixed cost (or
fixed charge).
• Here are three examples of fixed costs:
– The construction of a warehouse incurs a fixed cost that is
the same whether the warehouse is built with a low- or a high-
capacity level.
– A cash withdrawal from a bank incurs a fixed cost,
independent of the size of the withdrawal.
– A machine that is used to produce several products must be
set up for the production of each product. Regardless of the
batch size produced, the same fixed cost (lost production due
to the setup time) is incurred.
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Fixed-cost models continued
• In these examples, a fixed cost is incurred if an
activity is undertaken at any positive level,
whereas no fixed cost is incurred if the activity is
not undertaken at all.
• Although it might not be obvious, this feature
makes the problem inherently nonlinear, which
means that a straightforward application of LP is
not possible.
• However, a clever use of 0–1 variables can result
in a model with linear constraints and a linear
objective.
2007 ©
Fixed-cost models continued
• It is important to realize that you do not simply create
an LP model and then add integer constraints.
• Instead, you use 0-1 variable to model the logic.
• The logic in this section is that if a certain activity is
done on any positive level, a fixed cost is incurred.
• No fixed cost is incurred if the activity is not done at all.
• Solver is able to handle linear models with binary
variables, so this is the approach you should take
whenever possible.
• Example 6.2 is used to demonstrate this type of model.

2007 ©
A model with IF functions
• In case you are still not convinced that the binary
variable approach is required, and you think IF
functions could be used instead, take a look at the
finished version of the file.
• The resulting model looks the same, but it
incorporates the following changes:
– We no longer use the binary range as part of the changing
cells range. Instead, we enter the formula =IF(B16>0,1,0)
in cell B14 and copy it across to cell F14.
– We model the effective capacities in row 18 with IF
functions. Specifically, we enter the formula
=IF(B16>0,MIN($D$22/B5,$D$23/B6),0) in cell B18 and
copy it across to cell F18.
2007 ©
continued
– We change the Solver dialog box so that it appears as
shown below. The Rent_equipment range is not part of
the changing cells range, and there is no binary
constraint.

2007 ©
continued
• When we ran Solver on this modified model, we found
inconsistent results, depending on the initial production
quantities entered in row 16.
• However, when we entered initial production quantities all
equal to 100, Solver found the correct optimal solution.
• The moral is that the IF-function approach is not the way to
go. Its success depends strongly on the initial values we
enter in the changing cells, and this requires us to make
very good guesses. The binary approach ensures that we
get the correct solution.

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Either-or constraints
• The following example is similar to the Great Threads
example in that there is a fixed cost for any positive level
of production of a given product.
• However, an additional requirement states that if the
company produces any of a given product, then (possibly
because of economies of scale) it must produce at least
some minimal level such as 1000.
• This is a typical example of a problem with either-or
constraints: The company’s level of production must
either be 0 or at least 1000.
• In the next example, we show how the use of binary
variables allows you to model the either-or constraints in
a linear manner.
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Set-covering and location-
assignment models
• Many companies have geographically dispersed
customers that they must service in some way.
• To do this, they create service center facilities at
selected locations and then assign each customer
to one of the service centers.
• Various costs are incurred, including:
– Fixed costs of locating service centers in particular
locations;
– Operating costs, depending on the service centers’
locations; and
– Transportation costs, depending on the distances
between customers and their assigned service centers .
2007 ©
Set-covering and location-
assignment models continued
• We first examine a particular type of location model
called a set-covering model.
• In a set-covering model, each member of a given set (set
1) must be “covered” by an acceptable member of
another set (set 2).
• The usual objective in a set-covering problem is to
minimize the number of members in set 2 that are
needed to cover all the members in set 1.
• Set-covering models have been applied to areas as
diverse as airline crew scheduling, truck dispatching,
political redistricting, and capital investment. Example 6.4
presents a typical set-covering model.
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Cutting stock models
• The final model we discuss in this chapter has found many real-
world applications, especially in manufacturing.
• The model is relevant in situations where a product is produced
in a standard size, which must then be cut into one of several
patterns to satisfy customer orders.
• In contrast to the other models in this chapter, this cutting stock
model does not have binary variables, but it does have integer
variables. The problem is relatively easy to model, but it can be
very time-consuming for Solver to solve.
• IP models are inherently more difficult to solve than general LP
problems.
• The model in example 6.7 illustrates that this is definitely the
case.
2007 ©
• Until now, we have suggested setting the Solver tolerance
to 0%.
• This guarantees the optimal solution. However, this
example illustrates why the default tolerance setting is 5%.
• When we set the tolerance to 0% and click on Solve, the
Solver quickly got to a solution that requires 47 rolls, but
then ran and ran and ran.
• After some experimenting, we found that with the tolerance
set at 2% or above, the solution was obtained almost
instantaneously, but with the tolerance set at 1% or 0%, it
ran seemingly forever.

2007 ©
continued
• This behavior is not at all uncommon in IP models.
• The Solver often finds a very good or even optimal
solution very quickly, but it takes a long time to
verify that it is optimal.
• The moral is clear.
• If you set the tolerance to a low value and find that
the Solver is taking forever without getting
anywhere, press Ctrl-Break to get out. By that
time, you probably already have a very good or
even optimal solution.

2007 ©
Conclusion
• Three important points emerge from this chapter.
1. A wide variety of important problems can be
modeled as IP problems with binary variables.
These can generally be identified as problems
where at least some of the activities (such as
making a particular investment, opening a
particular plant, or supplying a customer from a
particular plant) must be done or not done; there
is no in-between.
– Regular LP models cannot handle these problems; IP
models with binary variables often can.
2007 ©
Conclusion continued
2. Some IP models are simply LP models with
integer constraints on the variables.
– These problems can often be solved by solving the
associated LP model and then rounding the solution to
integer values.
– Although there is no guarantee that the rounded
solution is optimal, it is often close enough.
– In contrast, most of the problems discussed in this
chapter introduce binary decision variables that specify
whether an activity is done or not. If you ignore the
binary constraints and only constrain these variables to
be between 0 and 1, it is generally impossible to find
the optimal solution by rounding.
2007 ©
Conclusion continued
• The solution approach required for IP problems,
especially those with 0-1 variables, is inherently
more difficult than the simplex method for LP
problems.
• Analysts typically employ heuristic methods on
these really difficult problems.

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Summary of key management
science terms

2007 ©
Summary of key Excel terms

2007 ©
End of Chapter 6

Optimization Models With Integer Variables

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Chapter 6

Optimization Models with Integer Variables

Winston/Albright Practical Management Science, 5e South-Western/Cengage Learning

Winston/Albright Practical Management Science, 5e South-Western/Cengage Learning

Winston/Albright Practical Management Science, 5e South-Western/Cengage Learning

• You have two options:

Winston/Albright Practical Management Science, 5e South-Western/Cengage Learning

Winston/Albright Practical Management Science, 5e South-Western/Cengage Learning

Winston/Albright Practical Management Science, 5e South-Western/Cengage Learning

Winston/Albright Practical Management Science, 5e South-Western/Cengage Learning

Winston/Albright Practical Management Science, 5e South-Western/Cengage Learning

Winston/Albright Practical Management Science, 5e South-Western/Cengage Learning

Winston/Albright Practical Management Science, 5e South-Western/Cengage Learning

Winston/Albright Practical Management Science, 5e South-Western/Cengage Learning

Winston/Albright Practical Management Science, 5e South-Western/Cengage Learning

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