Linear Programming

A. Basic Concepts
1. Linear programming is an optimization process with several characteristics a. Objective function: b. Decision variables: c. Constraints: d. Feasible region: e. Parameter: f. Certainty: g. Linearity: h. Nonnegativity: 2. Formulating a problem a. Step 1: Example E.1

b. Step 2:

c. Step 3:

3. Application E.1: Problem Formulation for Crandon Manufacturing The Crandon Manufacturing Company produces two principal product lines. One is a portable circular saw, and the other is a precision table saw. Two basic operations are crucial to the output of these saws: fabrication and assembly. The maximum fabrication capacity is 4000 hours per month; each circular saw requires 2 hours, and each table saw requires 1 hour. The maximum assembly capacity is 5000 hours per month; each circular saw requires 1 hour, and each table saw requires 2 hours. The marketing department estimates that the maximum market demand next year is 3500 saws per month for both products. The average contribution to profits and overhead is $900 for each circular saw and $600 for each table saw. Management wants to determine the best product mix for the next year so as to maximize contribution to profits and overhead. Also, it is interested in the payoff of expanding capacity or increasing market share. Definition of Decision Variables

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x1 = x2 =
Formulation Maximize: Subject to:

B. Graphic Analysis
1. What is the purpose of a graphic analysis? 2. Five basic steps a. Plot the constraints Example E.3

b. Identify the feasible region

c. Plot an objective function line Corner points Example E.4

Iso-profit and iso-cost lines

d. Find the visual solution

e. Find the algebraic solution

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Supplement E: Linear Programming 197

Application E.2: Steps a and b for Crandon Manufacturing Plot the constraints and shade the feasible region for Crandon Manufacturing.

Constraint 1 2 3 ( ( (

Point 1

Point 2

x1
, , ,

x2
) ) ) ( ( (

x1
, , ,

x2
) ) )

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Application E.3: Steps c and d for Crandon Manufacturing Plot one or more iso-profit lines. Let Z = $2,000,000 (arbitrary choice) Plot $900x1 + $600x2 = $2,000,000 Point 1 Profit $2,000,000 ( Point 2

x1
,

x2
) (

x1
,

x2
)

Identify the visual solution. Find the algebraic solution a. Step 1: b. Step 2: Application E.4: Step e for Crandon Manufacturing. Solve algebraically, with two equations and two unknowns 2 x1 + 1 x2 4000 (fabrication) 1 x1 + 2 x2 5000 (assembly)

x1 = ______ x2 = ______
Optimal Z: a. Binding constraint b. Slack variables c. Surplus variables Solving for slack and surplus variables $900 (____) + $600 (_____) = _________ 3. Slack and surplus variables

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Supplement E: Linear Programming 199

Application E.5: Slack Variables for Crandon Manufacturing.

Find the slack variables at the optimal solution. Slack in fabrication at (1000, 2000)

Slack in assembly at (1000, 2000)

Slack in demand at (1000, 2000)

C. Sensitivity Analysis
1. Rarely are the parameters in the objective function and constraints known with certainty. 2. Four basic types of sensitivity analysis Term Reduced cost Definition

Shadow price

Range of optimality

Range of feasibility

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D. Computer Solution
1. Simplex method 2. Computer Output a. Input Screen

b. Results Screen

c. Ranging Screen

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Supplement E: Linear Programming 201

E. The Transportation
1. Transportation method for location

a. Setting up the tableau

b. Dummy plants and warehouse

c. Finding a solution

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2. Transportation method for production planning

a. Application E.6: The Transportation Method of Production Planning

The Bull Grin Company makes an animal-feed supplement. Sales are seasonal, but Bull Grin's

customers refuse to stockpile the supplement during slack sales periods; they insist on shipments according to their schedules to stockpile the supplement during slack sales periods and wont accept backorders. The reactive alternatives that they use, in addition to workforce variation, are regular time, overtime, subcontracting, and anticipation inventory. Backorders are not allowed. Complete the tableau given below by entering the cost per pound produced with each production alternative to meet demand in each period. Bull Grin employs workers who produce 1,000 pounds of supplement for $830 on regular time and $910 on over-time. Holding 1000 pounds of feed supplement in inventory per quarter costs $100. There is no cost for unused regular-time, overtime or subcontracting capacity.
Alternatives Beginning Inventory Regular Time Overtime Subcontract Regular Time Overtime Subcontract Regular Time Overtime Subcontract Regular Time Overtime Subcontract 1 $0 40 $830 90 $910 $1,000 $99,999 $99,999 20 $99,999 30 $99,999 460 $99,999 20 $99,999 30 $99,999 380 $99,999 20 $99,999 30 Demand 130 30 30 1870 20 380 2 Quarter 3 $100 $930 220 $1,010 $1,100 180 4 $200 $1,030 $1,110 20 $1,200 220 $300 0 $1,130 80 $1,210 $1,300 30 Unused Capacity Total Capacity

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Supplement E: Linear Programming 203

Now enter data for the capacity column of the tableau (final column to right). For simplicity, enter the data as thousands of pounds. The workforce plan being investigating now would provide regular-time capacities (in 000s pounds) of 390 in quarter 1, 400 in quarter 2, 460 in quarter 3, and 380 in quarter 4. Overtime is limited to production of a total of 20,000 pounds per quarter, and subcontractor capacity to only 30,000 pounds per quarter. The current inventory level is 40,000 pounds. Next enter the data for the demand row (last row in the tableau). The demand forecasts (in 000s pounds) are 130 in quarter 1, 400 in quarter 2, 800 in quarter 3, and 470 in quarter 4. Management wants 40,000 pounds available at the end the year. NOTE: Fourth-quarter demand should be increased in the demand row to allow for the desired ending inventory. What production levels, shipments, and anticipation inventories are called for by the optimal solution shown as bold numbers in the tableau above? Quarter 1 Production Regular-time Overtime Subcontract Total Supply Shipments Anticipation Inventory What is the total cost of the optimal solution, except for the cost of hiring and layoffs? Quarter 1: Quarter 2: Quarter 3: = $ 74,700 = $ 354,000 = $ 710,000 Quarter 2 Quarter 3 Quarter 4 Totals 1,630 80 90 1,800 1,800 810

Quarter 4:

= $ 454,000 Total = $1,592,700

F. Applications
Examples in operations management and other functional areas

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