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Ms10....LP Applications - Part 1

The document outlines the process of linear programming (LP) modeling, which includes defining decision variables, formulating objective functions, and establishing constraints. It presents various applications of LP in marketing, manufacturing, employee scheduling, and finance, with specific examples such as media selection and investment portfolio problems. Additionally, it details the decision variables, objective functions, and constraints for each example, emphasizing the goal of maximizing customer reach and investment returns.

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dilaraarslan2003
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2 views

Ms10....LP Applications - Part 1

The document outlines the process of linear programming (LP) modeling, which includes defining decision variables, formulating objective functions, and establishing constraints. It presents various applications of LP in marketing, manufacturing, employee scheduling, and finance, with specific examples such as media selection and investment portfolio problems. Additionally, it details the decision variables, objective functions, and constraints for each example, emphasizing the goal of maximizing customer reach and investment returns.

Uploaded by

dilaraarslan2003
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Introduction to Management

Science
Linear Programming Applications
3 steps in LP modeling

1. Define the decision variables


2. Write out the linear equations for the
objective function
3. Write out the linear equations for the
constraints
Areas of Applications
• Many different types of applications and
problems.
• Marketing applications (e.g. media selection
problem and marketing research problem)
• Manufacturing applications (e.g. product mix
problem)
• Employee scheduling applications (e.g. labor
planning problem)
• Financial applications (e.g. Portfolio selection
problem
Areas of Applications
• Many different types of applications and
problems.
• Transportation applications (e.g. truck-loading
problem)
• Ingredient blending applications (e.g. diet
problem and ingredient mix/blending problem)
• Multiperiod applications (e.g. product scheduling
problem and sinking fund problem)
A media selection problem
• ŞANŞÖHRET company
Television
Daytime Prime-time Radio Magazine
Cost per commercial (TL) 40,000 75,000 30,000 15,000
# of customers reached 400,000 900,000 500,000 200,000
# of women customers reached 300,000 400,000 200,000 100,000
A media selection problem
• ŞANŞÖHRET company
Television
Daytime Prime-time Radio Magazine
Cost per commercial (TL) 40,000 75,000 30,000 15,000
# of customers reached 400,000 900,000 500,000 200,000
# of women customers reached 300,000 400,000 200,000 100,000

• No more than 800,000TL on advertising


• At least 2,000,000 exposures in women
• Advertising on television is limited to 500,000 TL
• At least 3 commercials on daytime television and 2 commercials on
prime-time
• Commercials on radio and magazine should each be between 5 and 10
A media selection problem
• ŞANŞÖHRET company
Television
Daytime Prime-time Radio Magazine
Cost per commercial (TL) 40,000 75,000 30,000 15,000
# of customers reached 400,000 900,000 500,000 200,000
# of women customers reached 300,000 400,000 200,000 100,000

• No more than 800,000TL on advertising


• At least 2,000,000 exposures in women
• Advertising on television is limited to 500,000 TL
• At least 3 commercials on daytime television and 2 commercials on
prime-time
• Commercials on radio and magazine should each be between 5 and 10
• Maximize the number of customers reached
A media selection problem
• Decision variables are
• D=Amount(number,time) of commercials on daytime TV
• P=Amount(number,time) of commercials on prime-time TV
• R=Amount(number,time) of commercials on radio
• M=Amount(number,time) of commercials on magazine
• Objective function
• Maximize number of customers reached

• Do not forget that units are assumed to be


divisible, otherwise we need to model as
an integer program.
Max 400D + 900P + 500R + 200M
s.t. 40D + 75P + 30R + 15M < 800
300D + 400P + 200R + 100M > 2000
40D + 75P < 500
D>3
P>2
R>5
R < 10
M>5
M < 10
D, P , R , M > 0
An investment portfolio problem
• Paragöz Yatırım will invest at most 250,000 TL for a
client
• Client requests
• At least 20% will be government bonds
• At least 40% will be placed in a combination of electronic
firms, aerospace firms and nursing home stock
• No more than 50% of the amount invested in government
bonds should be placed in the high-risk nursing home stock

Investment Projected Rate of Return


Government bonds 5.3%
Telli Electronics 6.8%
Ulaştır Aerospace 4.9%
Pekgüzel Drugs 8.4%
Hazırcı Nursing Homes 11.8%
An investment portfolio problem
• Decision variables are
• G = TL invested in government bonds
• T = TL invested in Telli Electronics
• U = TL invested in Ulaştır Aerospace
• P = TL invested in Pekgüzel Drugs
• H = TL invested in Hazırcı Nursing Homes

• Objective function
Maximize return on investment
• Objective function
Max 0.053G + 0.068T + 0.049U + 0.084P + 0.118H

• Money to invest is 250,000


G + T + U + P + H < 250,000
• At least 20% will be G
G > 0.2 (G + T + U + P + H)
or
G > 0.2G + 0.2T + 0.2U + 0.2P + 0.2H
or
0.8G - 0.2T - 0.2U - 0.2P - 0.2H > 0
• At least 40% will be invested on T, U, H
T + U + H > 0.4 (G + T + U + P + H)
or
-0.4G + 0.6T + 0.6U - 0.4P + 0.6H > 0

• No more than 50% of G will be invested in H


H < 0.5 G
or
-0.5G + H < 0

• Nonnegativity constraint
Max 0.053G + 0.068T + 0.049U + 0.084P + 0.118H
s.t.
G + T + U + P + H < 250,000
0.8G - 0.2T - 0.2U - 0.2P - 0.2H > 0
-0.4G + 0.6T + 0.6U - 0.4P + 0.6H > 0
-0.5G + H < 0

G, T, U, P, H > 0
Employee Scheduling Problem
• Li Mu Bai Chinese Restaurant hires part-time waiters and
is open 24 hours a day (6 shifts)
• Each waiter works for 2 consecutive shifts (8 hours) a day
and can start work in the following hours

Shift Shift time Number of waiters needed


1 3 AM – 7 AM 3
2 7 AM – 11 AM 12
3 11 AM – 3 PM 16
4 3 PM – 7 PM 9
5 7 PM – 11 PM 11
6 11 PM – 3 AM 4
Employee Scheduling Problem
• Define the decision variables
xi = Number of workers starting at shift i
where i=1,2,3,4,5,6

• What is the objective?


• Minimize the number of part-time workers
Min x1 + x2 + x3 + x4 + x5 + x6
s.t.
Shift 1 x1 + x6 > 3
Shift 2 x1 + x2 > 12
Shift 3 x2 + x3 > 16
Shift 4 x3 + x4 > 9
Shift 5 x4 + x5 > 11
Shift 6 x5 + x6 > 4
all xi > 0

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