Operations Research (Optimization Problem)

Operations Research (Optimization Problem)

Research into operations

Operations Research (Optimization Problem)

Research into operations Allocating limited resources (funds, manpower, time, raw material) among competing activities in the best possible manner.

Operations Research (Optimization Problem)

Research into operations Allocating limited resources (funds, manpower, time, raw material) among competing activities in the best possible manner. Search of optimal solution strategy in a given situation.

Operations Research (Optimization Problem)

Research into operations Allocating limited resources (funds, manpower, time, raw material) among competing activities in the best possible manner. Search of optimal solution strategy in a given situation. Applicable to business operations
Operations Research at Taco Bell Operational Cost Control at Kellogg

Optimization Problem

Optimization Problem

What is an Optimization Problem all about??

Optimization Problem

What is an Optimization Problem all about?? Minimizing or Maximizing some Objective subject to certain restrictions.

Optimization Problem

What is an Optimization Problem all about?? Minimizing or Maximizing some Objective subject to certain restrictions. Why is an Optimization Problem required??

Optimization Problem

What is an Optimization Problem all about?? Minimizing or Maximizing some Objective subject to certain restrictions. Why is an Optimization Problem required?? All problems seek to maximize or minimize some quantity (the objective function).

Optimization Problem

What is an Optimization Problem all about?? Minimizing or Maximizing some Objective subject to certain restrictions. Why is an Optimization Problem required?? All problems seek to maximize or minimize some quantity (the objective function). The presence of restrictions or constraints, limits the degree to which we can pursue our objective.

Optimization Problem

What is an Optimization Problem all about?? Minimizing or Maximizing some Objective subject to certain restrictions. Why is an Optimization Problem required?? All problems seek to maximize or minimize some quantity (the objective function). The presence of restrictions or constraints, limits the degree to which we can pursue our objective. There must be alternative courses of action to choose from.

Optimization Problem:(Mathematically)

Optimization Problem:(Mathematically) Return function: F (X ), X Rn Constraint functions: gi (X ), i = 1, 2, . . . , n

Optimization Problem:(Mathematically) Return function: F (X ), X Rn Constraint functions: gi (X ), i = 1, 2, . . . , n Linear Program:

Optimization Problem:(Mathematically) Return function: F (X ), X Rn Constraint functions: gi (X ), i = 1, 2, . . . , n Linear Program: All functions are linear = linear relationship

Optimization Problem:(Mathematically) Return function: F (X ), X Rn Constraint functions: gi (X ), i = 1, 2, . . . , n Linear Program: All functions are linear = linear relationship What do we mean by linear?

Optimization Problem:(Mathematically) Return function: F (X ), X Rn Constraint functions: gi (X ), i = 1, 2, . . . , n Linear Program: All functions are linear = linear relationship What do we mean by linear? Linear: Things are proportional Double the production: Prot gets doubled Raw material consumption is doubled

Example

Two Products (A and B)

Example

Two Products (A and B) Each requires two raw materials (P and Q)

One ton of A needs 2 tons of P, 4 tons of Q One ton of B needs 3 tons of P, 2 tons of Q

Example

Two Products (A and B) Each requires two raw materials (P and Q)

One ton of A needs 2 tons of P, 4 tons of Q One ton of B needs 3 tons of P, 2 tons of Q

Raw material availability is limited 6 tons of P, 9 tons of Q

Example

Two Products (A and B) Each requires two raw materials (P and Q)

One ton of A needs 2 tons of P, 4 tons of Q One ton of B needs 3 tons of P, 2 tons of Q

Raw material availability is limited 6 tons of P, 9 tons of Q Each product yields dierent prot/ton
A: Rs. 400 per ton B: Rs. 500 per ton

Example

Two Products (A and B) Each requires two raw materials (P and Q)

One ton of A needs 2 tons of P, 4 tons of Q One ton of B needs 3 tons of P, 2 tons of Q

Raw material availability is limited 6 tons of P, 9 tons of Q Each product yields dierent prot/ton
A: Rs. 400 per ton B: Rs. 500 per ton ?

Problem: How much of each product should be produced so that Total Prot is maximized

Elements of a Linear Programming Model

Elements of a Linear Programming Model

Decision Variables Quantities whose values the management wants to decide

Elements of a Linear Programming Model

Decision Variables Quantities whose values the management wants to decide x1 : tons of product A to produce x2 : tons of product B to produce

Elements of a Linear Programming Model

Decision Variables Quantities whose values the management wants to decide x1 : tons of product A to produce x2 : tons of product B to produce Parameters (Problem Data) Quantities that cannot be changed by management

Elements of a Linear Programming Model

Decision Variables Quantities whose values the management wants to decide x1 : tons of product A to produce x2 : tons of product B to produce Parameters (Problem Data) Quantities that cannot be changed by management Quantity of raw material needed per unit of product Raw Material availability Prot per unit

Objective Function A mathematical function of decision variables, whose value the management wishes to minimize or maximize (by controlling the values of decision variables )

Objective Function A mathematical function of decision variables, whose value the management wishes to minimize or maximize (by controlling the values of decision variables ) Maximize Z = 400x1 + 500x2

Objective Function A mathematical function of decision variables, whose value the management wishes to minimize or maximize (by controlling the values of decision variables ) Maximize Z = 400x1 + 500x2 Constraints Restrictions under which the decision must be taken

Objective Function A mathematical function of decision variables, whose value the management wishes to minimize or maximize (by controlling the values of decision variables ) Maximize Z = 400x1 + 500x2 Constraints Restrictions under which the decision must be taken Requirement Availability 2x1 + 3x2 6 (availability of P) 4x1 + 2x2 9 (availability of Q)

Objective Function A mathematical function of decision variables, whose value the management wishes to minimize or maximize (by controlling the values of decision variables ) Maximize Z = 400x1 + 500x2 Constraints Restrictions under which the decision must be taken Requirement Availability 2x1 + 3x2 6 (availability of P) 4x1 + 2x2 9 (availability of Q) Produced quantities can not be negative x1 , x2 0 (Non-negativity)

Complete Model

Maximize 400x1 + 500x2 Subject to 2x1 + 3x2 6 4x1 + 2x2 9 x1 , x2 0 The above is a mathematical formulation of the problem (LPP).

Complete Model

Maximize 400x1 + 500x2 Subject to 2x1 + 3x2 6 4x1 + 2x2 9 x1 , x2 0 The above is a mathematical formulation of the problem (LPP). Study and Explore the mathematical structure.

Complete Model

Maximize 400x1 + 500x2 Subject to 2x1 + 3x2 6 4x1 + 2x2 9 x1 , x2 0 The above is a mathematical formulation of the problem (LPP). Study and Explore the mathematical structure. Learn how to formulate real life problems as LPs

Complete Model

Maximize 400x1 + 500x2 Subject to 2x1 + 3x2 6 4x1 + 2x2 9 x1 , x2 0 The above is a mathematical formulation of the problem (LPP). Study and Explore the mathematical structure. Learn how to formulate real life problems as LPs Learn techniques for solving it.

Linear Programming Assumptions

Linear Programming Assumptions

Problem data is known exactly (deterministic)

Linear Programming Assumptions

Problem data is known exactly (deterministic) All variables can assume any real value (continuous variables)

Linear Programming Assumptions

Problem data is known exactly (deterministic) All variables can assume any real value (continuous variables) All variables are non-negative

Linear Programming Assumptions

Problem data is known exactly (deterministic) All variables can assume any real value (continuous variables) All variables are non-negative All relationship between variables are linear:

Linear Programming Assumptions

Problem data is known exactly (deterministic) All variables can assume any real value (continuous variables) All variables are non-negative All relationship between variables are linear: Programming?? Not to be confused with computer programming!!!

Linear Programming Assumptions

Problem data is known exactly (deterministic) All variables can assume any real value (continuous variables) All variables are non-negative All relationship between variables are linear: Programming?? Not to be confused with computer programming!!! It is the systematic Planning of activities.

Linear Programming Assumptions

Problem data is known exactly (deterministic) All variables can assume any real value (continuous variables) All variables are non-negative All relationship between variables are linear: Programming?? Not to be confused with computer programming!!! It is the systematic Planning of activities. Linear Programming: The problem of planning the activities to optimize a linear objective function subject to linear constraints.

Formulation of a Linear Program

Translating a verbal description of the problem into an equivalent mathematical description

Formulation of a Linear Program

Translating a verbal description of the problem into an equivalent mathematical description

1 2 3

Identify Decision variables Identify objective function Identify constraints

Formulation of a Linear Program

Translating a verbal description of the problem into an equivalent mathematical description

1 2 3

Identify Decision variables Identify objective function Identify constraints

More of an Art than a Science. Takes practice and experience to formulate correctly and eciently.

New Venture Finance

Need to raise 50 lakhs

New Venture Finance

Need to raise 50 lakhs Upto 20 lakhs in bonds @12%

New Venture Finance

Need to raise 50 lakhs Upto 20 lakhs in bonds @12% Fin. Corp. A: 30 lakhs @18% Condition: Bond debt + loan from B loan from A

New Venture Finance

Need to raise 50 lakhs Upto 20 lakhs in bonds @12% Fin. Corp. A: 30 lakhs @18% Condition: Bond debt + loan from B loan from A Fin. Corp. B: (@16%) Condition: loan amt. not to exceed the loan from A

New Venture Finance

Need to raise 50 lakhs Upto 20 lakhs in bonds @12% Fin. Corp. A: 30 lakhs @18% Condition: Bond debt + loan from B loan from A Fin. Corp. B: (@16%) Condition: loan amt. not to exceed the loan from A Decision variables: x1 : bond debt, x2 : loan from A, x3 : loan from B

New Venture Finance

Need to raise 50 lakhs Upto 20 lakhs in bonds @12% Fin. Corp. A: 30 lakhs @18% Condition: Bond debt + loan from B loan from A Fin. Corp. B: (@16%) Condition: loan amt. not to exceed the loan from A Decision variables: x1 : bond debt, x2 : loan from A, x3 : loan from B Objective: Minimize 12x1 + 18x2 + 16x3

New Venture Finance

Need to raise 50 lakhs Upto 20 lakhs in bonds @12% Fin. Corp. A: 30 lakhs @18% Condition: Bond debt + loan from B loan from A Fin. Corp. B: (@16%) Condition: loan amt. not to exceed the loan from A Decision variables: x1 : bond debt, x2 : loan from A, x3 : loan from B Objective: Minimize 12x1 + 18x2 + 16x3 Constraints: x1 + x2 + x3 50 (Required Amount)

New Venture Finance

Need to raise 50 lakhs Upto 20 lakhs in bonds @12% Fin. Corp. A: 30 lakhs @18% Condition: Bond debt + loan from B loan from A Fin. Corp. B: (@16%) Condition: loan amt. not to exceed the loan from A Decision variables: x1 : bond debt, x2 : loan from A, x3 : loan from B Objective: Minimize 12x1 + 18x2 + 16x3 Constraints: x1 + x2 + x3 x1 50 20 (Required Amount) (Bond Debt)

New Venture Finance

Need to raise 50 lakhs Upto 20 lakhs in bonds @12% Fin. Corp. A: 30 lakhs @18% Condition: Bond debt + loan from B loan from A Fin. Corp. B: (@16%) Condition: loan amt. not to exceed the loan from A Decision variables: x1 : bond debt, x2 : loan from A, x3 : loan from B Objective: Minimize 12x1 + 18x2 + 16x3 Constraints: x1 + x2 + x3 x1 x2 50 20 30 (Required Amount) (Bond Debt) (Loan from A)

New Venture Finance

Need to raise 50 lakhs Upto 20 lakhs in bonds @12% Fin. Corp. A: 30 lakhs @18% Condition: Bond debt + loan from B loan from A Fin. Corp. B: (@16%) Condition: loan amt. not to exceed the loan from A Decision variables: x1 : bond debt, x2 : loan from A, x3 : loan from B Objective: Minimize 12x1 + 18x2 + 16x3 Constraints: x1 + x2 + x3 x1 x2 x1 + x3 50 20 30 x2 (Required Amount) (Bond Debt) (Loan from A) (Condition of Fin. Inst. A)

New Venture Finance

Need to raise 50 lakhs Upto 20 lakhs in bonds @12% Fin. Corp. A: 30 lakhs @18% Condition: Bond debt + loan from B loan from A Fin. Corp. B: (@16%) Condition: loan amt. not to exceed the loan from A Decision variables: x1 : bond debt, x2 : loan from A, x3 : loan from B Objective: Minimize 12x1 + 18x2 + 16x3 Constraints: x1 + x2 + x3 x1 x2 x1 + x3 x3 50 20 30 x2 x2 (Required Amount) (Bond Debt) (Loan from A) (Condition of Fin. Inst. A) (Loan from B)

New Venture Finance

Need to raise 50 lakhs Upto 20 lakhs in bonds @12% Fin. Corp. A: 30 lakhs @18% Condition: Bond debt + loan from B loan from A Fin. Corp. B: (@16%) Condition: loan amt. not to exceed the loan from A Decision variables: x1 : bond debt, x2 : loan from A, x3 : loan from B Objective: Minimize 12x1 + 18x2 + 16x3 Constraints: x1 + x2 + x3 x1 x2 x1 + x3 x3 x1 , x2 , x3 50 20 30 x2 x2 0 (Required Amount) (Bond Debt) (Loan from A) (Condition of Fin. Inst. A) (Loan from B) (Non-negativity constraints)

A Job-Training Problem
Trained Machinist:
Work a machine Teach Stay idle

A Job-Training Problem
Trained Machinist:
Work a machine Teach Stay idle

Decision variables: x1 : trained machinist x2 : trained machinist x3 : trained machinist x4 : trained machinist x5 : trained machinist x6 : trained machinist

teaching in January idle in January teaching in February idle in February teaching in March idle in March

A Job-Training Problem
Trained Machinist:
Work a machine Teach Stay idle

Decision variables: x1 : trained machinist x2 : trained machinist x3 : trained machinist x4 : trained machinist x5 : trained machinist x6 : trained machinist

teaching in January idle in January teaching in February idle in February teaching in March idle in March

Machining + Teaching + Idle = Trained machinists available

A Job-Training Problem
Constraints: 100 + x1 + x2 150 + x3 + x4 200 + x5 + x6 130 + 7x1 + 7x3 + 7x5 = 130 = 130 + 7x1 = 130 + 7x1 + 7x3 = 250 (Jan) (Feb) (Mar) (Apr)

A Job-Training Problem
Constraints: 100 + x1 + x2 150 + x3 + x4 200 + x5 + x6 130 + 7x1 + 7x3 + 7x5 = 130 = 130 + 7x1 = 130 + 7x1 + 7x3 = 250 (Jan) (Feb) (Mar) (Apr)

Objective: Minimize 400(10x1 + 10x3 + 10x5 ) + 700(x1 + x3 + x5 ) +500(x2 + x4 + x6 )

A Job-Training Problem
Constraints: 100 + x1 + x2 150 + x3 + x4 200 + x5 + x6 130 + 7x1 + 7x3 + 7x5 = 130 = 130 + 7x1 = 130 + 7x1 + 7x3 = 250 (Jan) (Feb) (Mar) (Apr)

Objective: Minimize 400(10x1 + 10x3 + 10x5 ) + 700(x1 + x3 + x5 ) +500(x2 + x4 + x6 ) +700(100 + 150 + 200)

A Job-Training Problem
Constraints: 100 + x1 + x2 150 + x3 + x4 200 + x5 + x6 130 + 7x1 + 7x3 + 7x5 = 130 = 130 + 7x1 = 130 + 7x1 + 7x3 = 250 (Jan) (Feb) (Mar) (Apr)

Objective: Minimize 400(10x1 + 10x3 + 10x5 ) + 700(x1 + x3 + x5 ) +500(x2 + x4 + x6 ) +700(100 + 150 + 200) Non-Negativity: x1 , x2 , x3 , x4 , x5 , x6 0

Investment Planning
Scheme Scheme Scheme Scheme A: x1 x4 B: x5 x7 C: x8 D: x9

Investment Planning
Scheme Scheme Scheme Scheme A: x1 x4 B: x5 x7 C: x8 D: x9

Objective: Maximize 1.4x4 + 1.7x7 + 1.9x8 + 1.3x9

Investment Planning
Scheme Scheme Scheme Scheme A: x1 x4 B: x5 x7 C: x8 D: x9

Objective: Maximize 1.4x4 + 1.7x7 + 1.9x8 + 1.3x9 Constraints:

x1 + x5 60000 Year 1

Investment Planning
Scheme Scheme Scheme Scheme A: x1 x4 B: x5 x7 C: x8 D: x9

Objective: Maximize 1.4x4 + 1.7x7 + 1.9x8 + 1.3x9 Constraints:

x1 + x5 60000 x2 + x6 + x8 60000 (x1 + x5 ) Year 1 Year 2

Investment Planning
Scheme Scheme Scheme Scheme A: x1 x4 B: x5 x7 C: x8 D: x9

Objective: Maximize 1.4x4 + 1.7x7 + 1.9x8 + 1.3x9 Constraints:

x1 + x5 60000 x2 + x6 + x8 60000 (x1 + x5 ) x3 + x7 60000 (x1 + x5 + x2 + x6 + x8 ) + 1.4x1 Year 1 Year 2 Year 3

Investment Planning
Scheme Scheme Scheme Scheme A: x1 x4 B: x5 x7 C: x8 D: x9

Objective: Maximize 1.4x4 + 1.7x7 + 1.9x8 + 1.3x9 Constraints:

x1 + x5 x2 + x6 + x8 x3 + x7 x4 60000 60000 (x1 + x5 ) 60000 (x1 + x5 + x2 + x6 + x8 ) + 1.4x1 60000 (x1 + x5 + x2 + x6 + x8 + x3 + x7 ) +1.4x1 + 1.4x2 + 1.7x5 Year 1 Year 2 Year 3 Year 4

Investment Planning
Scheme Scheme Scheme Scheme A: x1 x4 B: x5 x7 C: x8 D: x9

Objective: Maximize 1.4x4 + 1.7x7 + 1.9x8 + 1.3x9 Constraints:

x1 + x5 x2 + x6 + x8 x3 + x7 x4 60000 60000 (x1 + x5 ) 60000 (x1 + x5 + x2 + x6 + x8 ) + 1.4x1 60000 (x1 + x5 + x2 + x6 + x8 + x3 + x7 ) +1.4x1 + 1.4x2 + 1.7x5 x9 60000 (x1 + x5 + x2 + x6 + x8 + x3 + x7 + x4 ) +1.4x1 + 1.4x2 + 1.4x3 + 1.7x5 + 1.7x6 x1 . . . x9 0 Year 1 Year 2 Year 3 Year 4 Year 5

Roster Planning
Decision variables: xij The number of workers start working on day i(i = 1, . . . , 7) in shift j (j = 1, 2, 3)

Roster Planning
Decision variables: xij The number of workers start working on day i(i = 1, . . . , 7) in shift j (j = 1, 2, 3)
Constraints:
7 3

xij
i=1 j =1

60

(No of Workers)

Roster Planning
Decision variables: xij The number of workers start working on day i(i = 1, . . . , 7) in shift j (j = 1, 2, 3)
Constraints:
7 3

xij
i=1 j =1

60 D1j j = 1 , 2, 3

(No of Workers) (Monday)

x1j + x7j + x6j + x5j

Roster Planning
Decision variables: xij The number of workers start working on day i(i = 1, . . . , 7) in shift j (j = 1, 2, 3)
Constraints:
7 3

xij
i=1 j =1

60 D1j D2j j = 1 , 2, 3 j = 1 , 2, 3

(No of Workers) (Monday) (Tuesday)

x1j + x7j + x6j + x5j x2j + x1j + x7j + x6j

Roster Planning
Decision variables: xij The number of workers start working on day i(i = 1, . . . , 7) in shift j (j = 1, 2, 3)
Constraints:
7 3

xij
i=1 j =1

60 D1j D2j D3j D4j D5j D6j D7j 0 j j j j j j j = 1 , 2, 3 = 1 , 2, 3 = 1 , 2, 3 = 1 , 2, 3 = 1 , 2, 3 = 1 , 2, 3 = 1 , 2, 3

(No of Workers) (Monday) (Tuesday) (Wednesday) (Thursday) (Friday) (Saturday) (Sunday)

x1j x2j x3j x4j x5j x6j x7j

+ x7j + x1j + x2j + x3j + x4j + x5j + x6j

+ x 6j + x 7j + x 1j + x 2j + x 3j + x 4j + x 5j

+ x5j + x6j + x7j + x1j + x2j + x3j + x4j xij

Dij is the number of workers required on day i and shift period j

7 3

Objective Function: Minimize

i=1 j =1

xij