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Chapter 6

Linear Programming: Formulation and

Applications

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 Super Grain Corp. Advertising-Mix
Problem
Goal: Design the promotional campaign for Crunchy Start.
The three most effective advertising media for this product are
• Television commercials on Saturday morning programs for children.
• Advertisements on various social media outlets.
• Advertisements in Sunday supplements of major newspapers.

The limited resources in the problem are

• Advertising budget ($4 million).
• Planning budget ($1 million).
• TV commercial spots available (5).

The objective will be measured in terms of the expected number of exposures.

Question: At what level should they advertise Crunchy Start in each of the three
media?

© McGraw Hill, LLC 2

 Cost and Exposure Data

Costs
Each TV Each Social Each Sunday
Cost Category Commercial Media Ad Ad
Ad budget $300,000 $150,000 $100,000
Planning budget 90,000 30,000 40,000
Expected number of 1,300,000 600,000 500,000
exposures

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 Spreadsheet Formulation 1

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 Algebraic Formulation 1

Let TV = Number of commercials for separate spots on television

SM = Number of advertisements on social media
SS = Number of advertisements in Sunday supplements
Maximize Exposure = 1,300TV + 600SM + 500SS
subject to

Ad Spending: 300TV + 150SM + 100SS ≤ 4,000 ($thousand)

Planning Cost: 90TV + 30SM + 30SS ≤ 1,000 ($thousand)
Number of TV Spots: TV ≤ 5

and
TV  0, SM  0, SS  0.

© McGraw Hill, LLC 5

 The TBA Airlines Problem
• TBA Airlines is a small regional company that specializes in
short flights in small airplanes.
• The company has been doing well and has decided to
expand its operations.
• The basic issue facing management is whether to
purchase more small airplanes to add some new short
flights, start moving into the national market by purchasing
some large airplanes, or both.

Question: How many airplanes of each type should be

purchased to maximize their total net annual profit?

© McGraw Hill, LLC 6

 Data for the TBA Airlines Problem

Small Airplane Large Airplane Capital Available

Net annual profit $14 million $44 million
per airplane
Purchase price $50 million $150 million $500 million
per airplane
Maximum 5 No maximum
purchase quantity

© McGraw Hill, LLC 7

 Violates Divisibility Assumption of LP
• Divisibility Assumption of Linear Programming: Decision
variables in a linear programming model are allowed to
have any values, including fractional values, that satisfy
the functional and nonnegativity constraints. Thus, these
variables are not restricted to just integer values.
• Since the number of airplanes purchased by TBA must
have an integer value, the divisibility assumption is
violated.

© McGraw Hill, LLC 8

 Spreadsheet Model

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 Integer Programming Formulation
Let S = Number of small airplanes to purchase
L = Number of large airplanes to purchase
Maximize Profit = 7S + 22L ($millions)
subject to
Capital Available: 25S + 75L ≤ 250 ($millions)
Max Small Planes: S ≤ 5

and

S ≥ 0, L ≥ 0
S, L are integers.

© McGraw Hill, LLC 10

 Think-Big Capital Budgeting Problem
Think-Big Development Co. is a major investor in commercial real-estate
development projects.
They are considering three large construction projects
• Construct a high-rise office building.
• Construct a hotel.
• Construct a shopping center.

Each project requires each partner to make four investments: a down

payment now, and additional capital after one, two, and three years.

Question: At what fraction should Think-Big invest in each of the three

projects?

© McGraw Hill, LLC 11

 Financial Data for the Projects
Investment Capital Requirements
Year Office Building Hotel Shopping Center
0 $40 million $80 million $90 million
1 60 million 80 million 50 million
2 90 million 80 million 20 million
3 10 million 70 million 60 million
Not present value $45 million $70 million $50 million

Cumulative Investment Capital Required for an Entire Project

Office Shopping Amount of
Resource Building Hotel Center Resource Available
1 (Now) $ 40 million $ 80 million $ 90 million $25 million
2 (End of year 1) 100 million 160 million 140 million 45 million

3 (End of year 2) 190 million 240 million 160 million 65 million

4 (End of year 3) 200 million 310 million 220 million 80 million

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 Spreadsheet Formulation 2

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 Algebraic Formulation 2

Let OB = Participation share in the office building,

H = Participation share in the hotel,
SC = Participation share in the shopping center.
Maximize NPV = 45OB + 70H + 50SC
subject to
Total invested now: 40OB + 80H + 90SC ≤ 25 ($million)
Total invested within 1 year: 100O B + 160H + 140SC ≤ 45 ($million)
Total invested within 2 years:190O B + 240H + 160SC ≤ 65 ($million)
Total invested within 3 years: 200O B + 310H + 220SC ≤ 80 ($million)
and

OB ≥ 0, H ≥ 0, SC ≥ 0.

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 Template for Resource-Allocation
Problems

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 Summary of Formulation Procedure for
Resource-Allocation Problems
1. Identify the activities for the problem at hand.
2. Identify an appropriate overall measure of performance (commonly profit).
3. For each activity, estimate the contribution per unit of the activity to the overall
measure of performance.
4. Identify the resources that must be allocated.
5. For each resource, identify the amount available and then the amount used
per unit of each activity.
6. Enter the data in steps 3 and 5 into data cells.
7. Designate changing cells for displaying the decisions.
8. In the row for each resource, use SUMPRODUCT to calculate the total
amount used. Enter <= and the amount available in two adjacent cells.
9. Designate an objective cell. Use SUMPRODUCT to calculate this measure of
performance.

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 Union Airways Personnel Scheduling
Union Airways is adding more flights to and from its hub airport
and so needs to hire additional customer service agents.
The five authorized eight-hour shifts are
• Shift 1: 6:00 AM to 2:00 PM.
• Shift 2: 8:00 AM to 4:00 PM.
• Shift 3: Noon to 8:00 PM.
• Shift 4: 4:00 PM to midnight.
• Shift 5: 10:00 PM to 6:00 AM.
Question: How many agents should be assigned to each shift?

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 Schedule Data
Time Periods Covered by Shift

Time Period 1 2 3 4 5 Minimum Number of Agents Needed

6:00 AM to 8:00 AM  48

8:00 AM to 10:00 AM   79

10:00 AM to noon  
In the following table, read ‘’ as Check mark. 65

Noon to 2:00 PM    87

2:00 PM to 4:00 PM   64

4:00 PM to 6:00 PM   73

6:00 PM to 8:00 PM   82

8:00 PM to 10:00 PM  43

10:00 PM to midnight   52

Midnight to 6:00 AM  15

Daily cost per agent $170 $160 $175 $180 $195

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 Spreadsheet Formulation 3

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 Algebraic Formulation 3

Let Si = Number working shift i (for i = 1 to 5),

Minimize Cost  $170S1  $160S2  $175S3  $180S4  $195S5
subject to
Total agents 6AM–8AM: S1  48
Total agents 8AM–10AM: S1  S 2  79
Total agents 10AM–12PM: S1  S 2  65
Total agents 12PM–2PM: S1  S 2  S3  87
Total agents 2PM–4PM: S 2  S3  64
Total agents 4PM–6PM: S3  S4  73
Total agents 6PM–8PM: S3  S 4  82
Total agents 8PM–10PM: S 4  43
Total agents 10PM–12AM: S 4  S5  52
Total agents 12AM–6AM: S5  15
and Si ≥ 0 (for i = 1 to 5)

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 Template for Cost-Benefit Trade off
Problems

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 Summary of Formulation Procedure for Cost-
Benefit-Tradeoff Problems
1. Identify the activities for the problem at hand.
2. Identify an appropriate overall measure of performance (commonly cost).
3. For each activity, estimate the contribution per unit of the activity to the overall
measure of performance.
4. Identify the benefits that must be achieved.
5. For each benefit, identify the minimum acceptable level and then the
contribution of each activity to that benefit.
6. Enter the data in steps 3 and 5 into data cells.
7. Designate changing cells for displaying the decisions.
8. In the row for each benefit, use SUMPRODUCT to calculate the level
achieved. Enter >= and the minimum acceptable level in two adjacent cells.
9. Designate an objective cell. Use SUMPRODUCT to calculate this measure of
performance.

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 Types of Functional Constraints
Typical
Type Form Interpretation: Main Usage
Resource L HS ≤ RH S For some resource. Resource-allocation
constraint Amount used ≤ problems and mixed
Amount available problems
Benefit L HS ≥ RH S For some benefit. Cost—benefit—trade-
constraint Level achieved ≥ off problems and
Minimum acceptable mixed problems
level
Fixed- L HS = R H S For some quantity. Fixed-requirements
requirement Amount provided = problems and mixed
Constraint Required amount problems

© McGraw Hill, LLC 23

 Continuing the Super Grain Case Study
David and Claire conclude that the spreadsheet model needs to be
expanded to incorporate some additional considerations.
In particular, they feel that two audiences should be targeted — young
children and parents of young children.
Two new goals
• The advertising should be seen by at least five million young children.
• The advertising should be seen by at least five million parents of
young children.

Furthermore, exactly $1,490,000 should be allocated for cents-off

coupons.

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 Benefit and Fixed-Requirement Data
Number Reached in Target Category (in millions)
Each TV Each Social Minimum
Target Category Commercial Media Ad Each Sunday Ad Acceptable Level
Young children 1.2 0.1 0 5

Parents of young children 0.5 0.2 0.2 5

Contribution toward Required

EachAmount
TV Each Social Each Sunday Required
Requirement Spot Media Ad Ad Amount
Coupon redemption 0 $40,000 $120.000 $1,490,000

© McGraw Hill, LLC 25

 Spreadsheet Formulation 4

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 Algebraic Formulation 4

Let TV = Number of commercials for separate spots on television

SM = Number of advertisements on social media
SS = Number of advertisements in Sunday supplements
Maximize Exposure = 1,300TV + 600SM + 500SS
subject to
Ad Spending: 300TV + 150SM + 100SS ≤ 4,000 ($thousand)
Planning Cost 90TV + 30SM + 30SS ≤ 1,000 ($thousand)
Number of TV Spots: TV ≤ 5
Young children: 1.2TV + 0.1SM ≥ 5 (millions)
Parents: 0.5TV + 0.2SM + 0.2SS ≥ 5 (millions)
Coupons: 40SM + 120SS = 1,490 ($thousand)

and

TV ≥ 0, SM ≥ 0, SS ≥ 0.

© McGraw Hill, LLC 27

 Template for Mixed Problems

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 The Big M Transportation Problem
• The Big M Company produces a variety of heavy-duty
machinery at two factories. One of its products is a large turret
lathe.
• Orders have been received from three customers for the turret
lathe.
Question: How many lathes should be shipped from each factory
to each customer?

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 Some Data
Shipping Cost for Each Lathe
To Customer 1 Customer 2 Customer 3 Output
From
Factory 1 $700 $900 $300 12 lathes
Factory 2 800 900 700 15 lathes
Order size 10 lathes 8 lathes 9 lathes

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 The Distribution Network

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 Spreadsheet Formulation 5

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 Algebraic Formulation 5

Let Sij = Number of lathes to ship from i to j (i = F1, F2; j = C1, C2, C3).
Minimize Cost  $700S F1C1  $900SF1C2  $800SF1C3
 $800SF2C1  $900SF2C2  $700SF2C3
subject to

Factory 1: S F1 C1  S F1 C2  S F1 C3  12

Factory 2: S F2  C1  SF2  C2  SF2  C3  15
Customer 1: S F1 C1  S F2  C1  10
Customer 2: S F1  C2  SF2 C2  8
Customer 3: S F1 C3  SF2  C3  9

and

Sij  0 (i  F1, F2; j  C1, C2, C3).

© McGraw Hill, LLC 33

 Sellmore Company Assignment Problem
The marketing manager of Sellmore Company will be holding the company’s
annual sales conference soon.
He is hiring four temporary employees:
• Aliyah.
• Ian.
• Joan.
• Mihir.

Each will handle one of the following four tasks:

• Word processing of written presentations.
• Computer graphics for both oral and written presentations.
• Preparation of conference packets, including copying and organizing materials.
• Handling of advance and on-site registration for the conference.

Question: Which person should be assigned to which task?

© McGraw Hill, LLC 34

 Data for the Sellmore Problem
Required Time per Task (Hours)
Temporary Word Hourly
Employee Processing Graphics Packets Registrations Wage
Aliyah 35 41 27 40 $14
Ian 47 45 32 51 12
Joan 39 56 36 43 13
Mihir 32 51 25 46 15

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 Spreadsheet Formulation

© McGraw Hill, LLC 36

 The Model for Assignment Problems
Given a set of tasks to be performed and a set of assignees who are
available to perform these tasks, the problem is to determine which
assignee should be assigned to each task.
To fit the model for an assignment problem, the following assumptions
need to be satisfied:
1. The number of assignees and the number of tasks are the same.
2. Each assignee is to be assigned to exactly one task.
3. Each task is to be performed by exactly one assignee.
4. There is a cost associated with each combination of an assignee
performing a task.
5. The objective is to determine how all the assignments should be
made to minimize the total cost.

© McGraw Hill, LLC 37

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