Linear Programming

Chapter 13 Supplement
Pottery Example

Beaver Creek Pottery Company is located on a
Native American reservation. Each day, the
company has available 40 hours of labor and
120 pounds of clay. The firm makes two
products, bowls and mugs. A bowl requires 1
hour of labor and 4 pounds of clay. A mug
requires 2 hours of labor and 3 pounds of clay.
The firm's profit is $40 per bowl and $50 per
mug. The company wants to maximize profit.
Pottery Example
Business Objective: Determine
Number of bowls to make
Number of mugs to make
to maximize profit.
Decision variables:
x = number of bowls to make
y = number of mugs to make
Objective Function
Profit
$40 per bowl (x)
$50 per mug (y)
Maximize Z = 40x + 50y
Constraint Table
Constrained
Quantity
Bowls
x
Mugs
y
Type
Max. or
Minimum
Labor
1
4
2
3
<
<
40
120
Clay
Constraints: x + 2y < 40
4x + 3y < 120
Nonnegativity Constraints
We cannot make a negative amount of
either product
Add nonnegativity constraints
x > 0
y > 0
Problem Statement
Maximize Z = 40x + 50y
subject to
x + 2y < 40
4x + 3y < 120
x > 0
y > 0

Linear Programming Terminology
Feasible solution: Any solution which satisfies
all constraints.
Feasible region: Set of points which satisfy all
constraints.
Optimal solution(s): A point which
Satisfies all constraints
Maximizes or minimizes the value of the
objective function.
Solving a Linear Programming
Problem by the Graphical Method
(1) Set up the problem:
Decision variables and their definitions.
Write objective function and state whether it
should be maximized or minimized.
Write the constraints as mathematical
inequalities or equalities.
(2) Draw the feasible region.
Solving a Linear Programming
Problem by the Graphical Method(2)
(3) Determine which point(s) in the feasible
region give an optimal solution
Point(s) which maximize or minimize the
objective function.
Note: To use the graphical method, the
problem must have only 2 variables.
To Draw the Feasible Region
Convert each constraint into an equation.
Draw the corresponding line.
The set of points bounded by these lines
is the feasible region.
Problem Statement
Maximize Z = 40x + 50y
subject to
x + 2y < 40
4x + 3y < 120
x > 0
y > 0

Feasible Region for This Problem
This region is bounded by the lines
x + 2y = 40 (Labor)
4x + 3y = 120 (Clay)
x = 0
y = 0


Plot x + 2y = 40
x-intercept: Set y = 0.
x + 0 =40 ==> x = 40.
Point is (40,0)
y-intercept: Set x=0.
(0)+2y=40 ==> y = 20.
Point is (0,20)

Bowls (x)
10 20 30
10
20
30
40
Labor
M
u
g
s

(
y
)

Clay
Feasible
Region
Points in feasible
region satisfy
all constraints.
40
Iso-Profit Lines
A set of points on which the objective
function is constant
Example: The set of points satisfying
40x + 50y = 800
x-intercept: (20,0)
y-intercept: (0,16)


Bowls
10 20 30
10
20
30
40
Labor
M
u
g
s

Clay
40
Iso-profit Line

Bowls
10 20 30
10
20
30
40
Labor
M
u
g
s

Clay
40
Iso-profit Lines
for profits of
$800 and $1,000

Bowls
10 20 30
10
20
30
40
Labor
M
u
g
s

Clay
40
Iso-profit Lines
Optimal Point=(24,8)
Optimal Solution
Satisfies x + 2y = 40
and 4x + 3y = 120
Solution is (24,8): 24 bowls and 8 mugs
Verification:
24 + 2(8) = 40
4(24) + 3(8) = 120
Maximum Profit
Optimal solution is (24,8)
Objective function is
40x + 50y
$40(24) + $50(8) = $1,360
Maximum profit is $1,360
Fundamental Theorem of Linear
Programming
In a linear programming problem, the
optimal solution occurs at an extreme
point (vertex or corner point) of the
feasible region.
Objective of Linear Programming
Maximize the use of resources (or
minimize costs) to achieve competitive
priorities.
Optimum solution is a base case which
must be adjusted to reflect business
realities.
Ch 11 Supp - 2
1998 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 2/e
Linear Programming Model
Decision variables are mathematical
symbols representing activity levels.
Objective function is a mathematical,
linear function which represents the
organizations objectives.
Used to compare alternative courses of
action.
Ch 11 Supp - 2
1998 by Prentice-Hall Inc
Russell/Taylor Oper Mgt 2/e
Linear Programming Model (2)
Constraints are mathematical, linear
relationships representing restrictions on
decision making
Resource constraints.
Policy or legal constraints.
Sales constraints.
Constraints may be <, =, or >.
Linear programming maximizes or
minimizes the objective function
subject to constraints.
Uses of Linear Programming
Production Scheduling
Maximize profit
Minimize cost
Different objectives yield different schedules.
Determine product or service mix
Maximize profit
Maximize revenue
Minimize costs
Uses of Linear Programming (2)
Scheduling labor in services
Minimize cost
Production-location problem
Allocate products and customers to plants
to minimize total cost of production and
distribution
Uses of Linear Programming (3)
Distribution
Minimize cost
Facility location
Minimize transportation cost.
Emergency response systems
Minimize average response time.
Conditions to Use Linear
Programming
Objective function must be linear
Constraints must be linear inequalities or
linear equations
Methods for Solving LP Problems
Graphical method: limited to 2 variables
Any linear programming problem
Simplex method
Karmarkars algorithm
Transportation method:
Facility location problems
Production-location problem: minimize total
cost of production and shipment to
customers
Slack Variables
Slack = unused amount of any resource or
constrained quantity
S
1
= Amount of unused labor
= 40 - (x + 2y) = 40 - x - 2y = 40 - 24 - 8(2)
= 0. Optimum solution uses all labor.
S
2
= Amount of unused clay
= 120 - (4x + 3y) = 120 - 4x - 3y
= 120 - 4(24) - 3(8) = 0.
Optimum solution uses all clay.
Sensitivity Analysis (Ranging)
Dual value or shadow price
Incremental increase or decrease in the
objective function if one more unit of a
resource is added.
The amount we would pay to get one more
unit of a resource.
Valid only for resources which have no
slack.
Shadow Price for Labor
Dual value = shadow price = $16.
If labor hours increase from 40 to 41,
profit increases from $1360 to $1376.
Amount to buy
= upper bound - original value
= 80 hours - 40 hours = 40 hours

Bowls
10 20 30
10
20
30
40
Labor
M
u
g
s

Clay
40
80
New
Labor
Optimal point = (0,40). Profit = $2,000