Introduction to Quantitative Analysis
Introduction to Quantitative Analysis
Introduction to Quantitative
Analysis
Learning Objectives
After completing this chapter, students will be able to:
1. Describe the quantitative analysis approach
2. Understand the application of quantitative analysis
in a real situation
3. Describe the use of modeling in quantitative analysis
4. Discuss possible problems in using quantitative
analysis
5. Perform a break-even analysis
1-2
Chapter Outline
1.1 Introduction
1.2 What Is Quantitative Analysis?
1.3 The Quantitative Analysis Approach
1.4 How to Develop a Quantitative Analysis Model
1.5 Possible Problems in the Quantitative Analysis
Approach
1.6 Implementation
1-3
Introduction
1-4
Examples of Quantitative Analyses
• In the mid 1990s, Taco Bell saved over $150 million
using forecasting and scheduling quantitative analysis
models.
• NBC Television increased revenues by over $200
million between 1996 and 2000 by using quantitative
analysis to develop better sales plans.
• Continental Airlines saved over $40 million in 2001
using quantitative analysis models to quickly recover
from weather delays and other disruptions.
• for further understanding visit
www.scienceofbetter.org
1-5
What is Quantitative Analysis?
Quantitative analysis is a scientific approach to managerial
decision making in which raw data are processed and
manipulated to produce meaningful information.
• uses a scientific approach to decision making
• Whim, emotions, and guesswork are not part of
the quantitative analysis approach
Quantitative Meaningful
Raw Data Analysis Information
1-6
What is Quantitative Analysis?
Developing a Model
Developing a Solution
1-9
Developing a Model
Quantitative analysis models are realistic, solvable,
and understandable mathematical representations
of a situation.
b + b 1X
Y=
$ Sales
$ Advertising
There are different types of models:
1-10
Developing a Model
1-11
Acquiring Input Data
Garbage In
Process
Garbage Out
Data may come from a variety of sources such as company reports, company
documents, interviews, on-site direct measurement, or statistical sampling.
1-12
Developing a Solution
The best (optimal) solution to a problem is found
by manipulating the model variables until a
solution is found that is practical and can be
implemented.
Common techniques are
– Solving equations.
– Trial and error – trying various approaches and
picking the best result.
– Complete enumeration – trying all possible values.
– Using an algorithm – a series of repeating steps to
reach a solution.
1-13
Testing the Solution
1-14
Analyzing the Results
Determine the implications of the solution:
– Implementing results often requires change in an
organization.
– The impact of actions or changes needs to be studied
and understood before implementation.
1-15
Implementing the Results
Implementation incorporates the solution into the
company.
– Implementation can be very difficult.
– People may be resistant to changes.
– Many quantitative analysis efforts have failed
because a good, workable solution was not properly
implemented.
1-17
How To Develop a Quantitative Analysis Model
1-18
How To Develop a Quantitative Analysis Model
Expenses can be represented as the sum of fixed and variable costs.
Variable costs are the product of unit costs times the number of units.
Profit = sX – [f + vX]
Profit = sX – f – vX
where
s = selling price per unit v = variable cost per unit
f = fixed cost X = number of units sold
1-19
How To Develop a Quantitative Analysis Model
Expenses can be represented as the sum of fixed and variable costs and variable
costs are the product of unit costs times the number of units
The parameters of this model are f, v, and s as
these are the inputs inherent in the model
The decision variable of interest is X
Profit = Revenue – (Fixed cost + Variable cost)
Profit = (Selling price per unit)(number of units sold) – [Fixed cost +
(Variable costs per unit)(Number of units sold)]
Profit = sX – [f + vX]
Profit = sX – f – vX
where
s = selling price per unit v = variable cost per unit
f = fixed cost X = number of units sold
1-20
Example
The company buys, sells, and repairs old clocks. Rebuilt springs sell for $10 per
unit. Fixed cost of equipment to build springs is $1,000. Variable cost for spring
material is $5 per unit.
s = 10 f = 1,000 v=5
Number of spring sets sold = X
Profits = sX – f – vX
0 = sX – f – vX, or 0 = (s – v)X – f
Solving for X, we have
f = (s – v)X
f
X= s–v
Fixed cost
BEP =
(Selling price per unit) – (Variable cost per unit)
1-22
Example
Companies are often interested in their break-even point (BEP). The BEP is the
number of units sold that will result in $0 profit.
BEP for this example
f
X= s–v
Fixed cost
BEP =
(Selling price per unit) – (Variable cost per unit)
1-23
Advantages of Mathematical Modeling
1-28
Implementation –
Not Just the Final Step
1-29
Discussion Questions
• Define quantitative analysis. What are some
of the organizations that support the use of
the scientific approach?
• How can quantitative analysis techniques
inform and support decision making within
organizations?
• Briefly describe and discuss your
understanding of the phrase garbage in,
garbage out.
Chapter 2
2.1 Introduction
2.2 Requirements of a Linear Programming Problem
2.3 Formulating LP Problems
2.4 Graphical Solution to an LP Problem
2.5 Solving ABC Furniture’s LP Problem using QM in
Excel
2.6 Solving Minimization Problems
2.7 Four Special Cases in LP
2.8 Sensitivity Analysis
2-33
Introduction
2-34
Requirements of a Linear Programming
Problem
2-37
Formulating LP Problems
• Formulating a linear program involves developing a
mathematical model to represent the managerial problem.
• The steps in formulating a linear program are:
1. Completely understand the managerial problem being
faced.
2. Identify the objective and the constraints.
3. Define the decision variables.
4. Use the decision variables to write mathematical
expressions for the objective function and the
constraints.
2-38
Formulating LP Problems
• One of the most common LP applications is the
product mix problem.
• Two or more products are produced using limited
resources such as personnel, machines, and raw
materials.
• The profit that the firm seeks to maximize is based on
the profit contribution per unit of each product.
• The company would like to determine how many units
of each product it should produce so as to maximize
overall profit given its limited resources.
2-39
ABC Furniture Company
The ABC Furniture Company produces inexpensive TABLES
and CHAIRS.
Processes are similar in that both require a certain amount of
hours of CARPENTRY WORK and in the PAINTING AND
VARNISHING DEPARTMENT.
Each TABLE takes 4 hours of carpentry and 2 hours of
painting and varnishing.
Each CHAIR requires 3 of carpentry and 1 hour of painting
and varnishing.
There are
240 hours of carpentry time and
100 hours of painting and varnishing time available.
Each TABLE yields a profit of $70 and each CHAIR a profit of
$50. 2-40
ABC Furniture Company Data
The company wants to determine the best
combination of tables and chairs to produce
to reach the maximum profit.
HOURS REQUIRED TO
PRODUCE 1 UNIT
(T) (C) AVAILABLE HOURS
DEPARTMENT TABLES CHAIRS THIS WEEK
Carpentry 4 3 240
2-41
ABC Furniture Company
The objective is to:
Maximize profit
The constraints are:
1. The hours of carpentry time used cannot
exceed 240 hours per week.
2. The hours of painting and varnishing time used
cannot exceed 100 hours per week.
The decision variables representing the actual
decisions we will make are:
T = number of tables to be produced per week.
C = number of chairs to be produced per week.
2-42
ABC Furniture Company
We create the LP objective function in terms of T and C:
Maximize profit = $70T + $50C
Develop mathematical relationships for the two
constraints:
For carpentry, total time used is:
(4 hours per table)(Number of tables produced)
+ (3 hours per chair)(Number of chairs
produced).
We know that:
Carpentry time used ≤ Carpentry time available.
4T + 3C ≤ 240 (hours of carpentry time)
2-43
ABC Furniture Company
Similarly,
2-44
ABC Furniture Company
The values for T and C must be nonnegative.
T ≥ 0 (number of tables produced is
greater than or equal to 0)
C ≥ 0 (number of chairs produced is
greater than or equal to 0)
The complete problem stated mathematically:
Maximize profit = $70T + $50C
4T + 3C ≤to
subject 240 (carpentry constraint)
2T + 1C ≤ 100 (painting and varnishing constraint)
T, C ≥ 0 (nonnegativity constraint)
2-45
Graphical Solution to an LP Problem
The easiest way to solve a small LP
problems is graphically.
The graphical method only works when
there are just two decision variables.
When there are more than two variables, a
more complex approach is needed as it is
not possible to plot the solution on a two-
dimensional graph.
The graphical method provides valuable
insight into how other approaches work.
2-46
Graphical Representation of a Constraint
100 –
– This Axis Represents the Constraint T ≥ 0
80 –
Number of Chairs
–
60 –
–
40 – This Axis Represents the
– Constraint C ≥ 0
20 –
–
|– | | | | | | | | | | |
0 20 40 60 80 100 T
Number of Tables
2-47
Graphical Representation of a Constraint
2-48
Graphical Representation of a Constraint
2-49
Graphical Representation of a Constraint
100 –
–
80 – (T = 0, C = 80)
Number of Chairs
–
60 –
–
40 –
–
(T = 60, C = 0)
20 –
–
|– | | | | | | | | | | |
0 20 40 60 80 100 T
Number of Tables 2-50
Graphical Representation of a Constraint
Region that Satisfies the Carpentry Constraint
C
Any point on or below the
100 – constraint plot will not
– violate the restriction.
Any point above the plot
80 –
Number of Chairs
–
will violate the restriction.
60 –
–
(30, 40) (70, 40)
40 –
–
20 –
– (30, 20)
|– | | | | | | | | | | |
0 20 40 60 80 100 T
Number of Tables
2-51
Graphical Representation of a Constraint
100 – (T = 0, C = 100)
–
80 –
Number of Chairs
–
60 –
–
40 –
–
(T = 50, C = 0)
20 –
–
|– | | | | | | | | | | |
0 20 40 60 80 100 T
Number of Tables 2-53
Graphical Representation of a Constraint
2-54
Graphical Representation of a Constraint
Feasible Solution Region for the ABC Furniture Company
Problem
C
100 –
–
80 – Painting/Varnishing Constraint
Number of Chairs
–
60 –
–
40 –
–
Carpentry Constraint
20 – Feasible
Region
–
|– | | | | | | | | | | |
0 20 40 60 80 100 T
Number of Tables
2-55
Graphical Representation of a Constraint
2-56
Graphical Representation of a Constraint
2-57
Isoprofit Line Solution Method
• Once the feasible region has been graphed, we need to
find the optimal solution from the many possible solutions.
• The speediest way to do this is to use the isoprofit line
method.
• Starting with a small but possible profit value, we graph the
objective function.
• We move the objective function line in the direction of
increasing profit while maintaining the slope.
• The last point it touches in the feasible region is the
optimal solution.
2-58
Isoprofit Line Solution Method
• For ABC Furniture, choose a profit of $2,100.
• The objective function is then
$2,100 = 70T + 50C
• Solving for the axis intercepts, we can draw the graph.
• This is obviously not the best possible solution.
• Further graphs can be created using larger profits.
• The further we move from the origin, the larger the profit
will be.
• The highest profit ($4,100) will be generated when the
isoprofit line passes through the point (30, 40).
2-59
Isoprofit Line Solution Method
Profit line of $2,100 Plotted for the ABC Furniture Company
100 –
–
80 –
Number of Chairs
–
60 –
–
(0, 42) $2,100 = $70T + $50C
40 –
–
(30, 0)
20 –
–
|– | | | | | | | | | | |
0 20 40 60 80 100 T
Number of Tables 2-60
Isoprofit Line Solution Method
Four Isoprofit Lines Plotted for ABC Furniture Company
100 –
–
$3,500 = $70T + $50C
80 –
Number of Chairs
100 –
–
80 –
Maximum Profit Line
Number of Chairs
–
60 – Optimal Solution Point
– (T = 30, C = 40)
40 –
– $4,100 = $70T + $50C
20 –
–
|– | | | | | | | | | | |
0 20 40 60 80 100 T
Number of Tables 2-62
Corner Point Solution Method
100 –
2 –
80 –
Number of Chairs
–
60 –
–
3
40 –
–
20 –
–
1 |– | | | | | | | | | | |
0 20 40
4 60 80 100 T
Number of Tables 2-64
Corner Point Solution Method
2-65
Corner Point Solution Method
2-66
Slack and Surplus
• Slack is the amount of a resource that is not
used. For a less-than-or-equal constraint:
– Slack = Amount of resource available – amount
of resource used.
• Surplus is used with a greater-than-or-equal
constraint to indicate the amount by which
the right hand side of the constraint is
exceeded.
– Surplus = Actual amount – minimum amount.
2-67
Summary of Graphical Solution Methods
ISOPROFIT METHOD
4. Find the values of the decision variables at this last point and compute the profit
(or cost).
3. Compute the profit (or cost) at each of the feasible corner points.
4. Select the corner point with the best value of the objective function found in Step 3.
This is the optimal solution.
2-68
Solving ABC Furniture’s LP Problem Using QM
for Windows and Excel
• Most organizations have access to software to solve
big LP problems.
• While there are differences between software
implementations, the approach each takes towards
handling LP is basically the same.
• Once you are experienced in dealing with
computerized LP algorithms, you can easily adjust to
minor changes.
269
Using QM for Windows
2-71
Using QM for Windows
2-72
Using QM for Windows
2-73
Using QM for Windows
QM for Windows Graphical Output for ABC Furniture Problem
2-74
Using Excel’s Solver Command to Solve LP Problems
2-75
Using Solver to Solve the ABC Furniture Problem
2-76
Using Solver to Solve the ABC Furniture Problem
2-78
Using Solver to Solve the ABC Furniture Problem
2-79
Using Solver to Solve the ABC Furniture Problem
2-80
Using Solver to Solve the ABC Furniture Problem
2-82
Using Solver to Solve the ABC Furniture
Problem
Starting Solver
2-83
Using Solver to Solve ABC Furniture
Problem
Solver Parameters
Dialog Box
2-84
Using Solver to Solve ABC Furniture
Problem
Solver Add Constraint Dialog Box
2-85
Using Solver to Solve the ABC Furniture
Problem
Solver Results Dialog Box
2-86
Using Solver to Solve the ABC Furniture
Problem
Solution Found by Solver
2-87
Solving Minimization Problems
• Many LP problems involve minimizing an objective
such as cost instead of maximizing a profit
function.
• Minimization problems can be solved graphically
by first setting up the feasible solution region and
then using either the corner point method or an
isocost line approach (which is analogous to the
isoprofit approach in maximization problems) to
find the values of the decision variables (e.g., X1
and X2) that yield the minimum cost.
2-88
Holiday Meal Turkey Ranch
The Holiday Meal Turkey Ranch is considering buying two
different brands of turkey feed and blending them to provide
a good, low-cost diet for its turkeys
Let
X1 = number of pounds of brand 1 feed purchased
X2 = number of pounds of brand 2 feed purchased
Minimize cost (in cents) = 2X1 + 3X2
subject to:
5X1+ 10X2 ≥ 90 ounces (ingredient constraint A)
4X1 + 3X2 ≥ 48 ounces (ingredient constraint B)
0.5X1 ≥ 1.5 ounces (ingredient constraint C)
X1 ≥ 0 (nonnegativity constraint)
X2 ≥ 0 (nonnegativity constraint) 2-89
Holiday Meal Turkey Ranch
Holiday Meal Turkey Ranch data
2-90
Holiday Meal Turkey Ranch
2-91
Feasible Region for the Holiday Meal Turkey
Ranch Problem
X2
–
20 – Ingredient C Constraint
Pounds of Brand 2
15 – Feasible Region
a
10 –
Ingredient B Constraint
5– b Ingredient A Constraint
| | | | c | |
0–
5 10 15 20 25 X1
Pounds of Brand 1
2-92
Holiday Meal Turkey Ranch
• Solve for the values of the three corner points.
• Point a is the intersection of ingredient constraints C and B.
4X1 + 3X2 = 48
X1 = 3
• Substituting 3 in the first equation, we find X2 = 12.
• Solving for point b with basic algebra we find X1 = 8.4 and
X2 = 4.8.
• Solving for point c we find X1 = 18 and X2 = 0.
2-93
Holiday Meal Turkey Ranch
Substituting these value back into the objective
function we find
Cost = 2X1 + 3X2
Cost at point a = 2(3) + 3(12) = 42
Cost at point b = 2(8.4) + 3(4.8) = 31.2
Cost at point c = 2(18) + 3(0) = 36
20 –
Pounds of Brand 2
15 – 54
¢=
Dir 2X
ecti 1 +
3X
on 2 Is
10 – of oco
31 D e st L
.2¢ cre i ne
=2 a sin
X gC
1 + ost
5– 3X
2
2-96
Holiday Meal Turkey Ranch
Excel 2010 Spreadsheet for the Holiday Meal Turkey Ranch
problem
2-97
Holiday Meal Turkey Ranch
Excel 2010 Solution to the Holiday Meal Turkey Ranch
Problem
2-98
Four Special Cases in LP
No feasible solution
– This exists when there is no solution to
the problem that satisfies all the
constraint equations.
– No feasible solution region exists.
– This is a common occurrence in the real
world.
– Generally one or more constraints are
relaxed until a solution is found.
2-100
Four Special Cases in LP
A problem with no feasible solution
X2
8–
–
6–
– Region Satisfying
4– Third Constraint
–
2–
–
0– | | | | | | | | | |
2 4 6 8 X1
Region Satisfying First Two Constraints
2-101
Four Special Cases in LP
Unboundedness
– Sometimes a linear program will not have a finite
solution.
– In a maximization problem, one or more solution
variables, and the profit, can be made infinitely
large without violating any constraints.
– In a graphical solution, the feasible region will be
open ended.
– This usually means the problem has been
formulated improperly.
2-102
Four Special Cases in LP
A Feasible Region That is Unbounded to the Right
X2
X1 ≥ 5
15 –
X2 ≤ 10
10 –
Feasible Region
5–
X1 + 2X2 ≥ 15
| | | | |
0– 5 10 15 X1
2-103
Four Special Cases in LP
Redundancy
– A redundant constraint is one that does not affect the
feasible solution region.
– One or more constraints may be binding.
– This is a very common occurrence in the real world.
– It causes no particular problems, but eliminating
redundant constraints simplifies the model.
2-104
Four Special Cases in LP
Problem
X
with a Redundant Constraint
2
30 –
25 –
2X1 + X2 ≤ 30
20 –
Redundant
Constraint
15 –
X1 ≤ 25
10 – X1 + X2 ≤ 20
Feasible
5– Region
| | | | | |
0–
5 10 15 20 25 30 X1
2-105
Four Special Cases in LP
2-106
Four Special Cases in LP
Example of Alternate Optimal Solutions
X2
8–
7–
A
6– Optimal Solution Consists of All
Combinations of X1 and X2 Along the AB
5– Segment
4–
2–
B Isoprofit Line for $12 Overlays
1 – Feasible Line Segment AB
Region
0– | | | | | | | |
1 2 3 4 5 6 7 8 X1
2-107
Sensitivity Analysis
• Optimal solutions to LP problems thus far have been found
under what are called deterministic assumptions.
• This means that we assume complete certainty in the data
and relationships of a problem.
• But in the real world, conditions are dynamic and
changing.
• We can analyze how sensitive a deterministic solution is to
changes in the assumptions of the model.
• This is called sensitivity analysis, postoptimality analysis,
parametric programming, or optimality analysis.
2-108
Sensitivity Analysis
• Sensitivity analysis often involves a series of WHAT-IF?
questions concerning constraints, variable coefficients,
and the objective function.
• One way to do this is the trial-and-error method where
values are changed and the entire model is resolved.
• The preferred way is to use an analytic postoptimality
analysis.
• After a problem has been solved, we determine a
range of changes in problem parameters that will not
affect the optimal solution or change the variables in
the solution.
2-109
High Note Sound Company
• The High Note Sound Company manufactures quality CD
players and stereo receivers.
• Products require a certain amount of skilled artisanship
which is in limited supply.
• The firm has formulated the following product mix LP
model.
Maximize profit = $50X1 + $120X2
Subject to 2X1 + 4X2 ≤ 80
(hours of electrician’s time
available)
3X1 + 1X2 ≤ 60
(hours of audio technician’s
time available)
X 1, X 2 ≥0
2-110
High Note Sound Company
The High Note Sound Company Graphical Solution
X2
(receivers)
60 –
2-112
Changes in the
Objective Function Coefficient
Changes in the Receiver Contribution Coefficients
X2
30 –
Old Profit Line for 50X1 + 120X2
(Passes through Point a)
20 – b
a Profit Line for 50X1 + 150X2
(Passes through Point a)
10 –
c
| | | | | |
0– 10 20 30 40 50 60 X1
2-113
QM for Windows and Changes in Objective
Function Coefficients
Input and Sensitivity Analysis for High Note Sound Data Using
QM For Windows
2-114
Excel Solver and Changes in Objective
Function Coefficients
Excel 2010 Spreadsheet for High Note Sound Company
2-115
Excel Solver and Changes in Objective Function
Coefficients
Excel 2010 Solution and Solver Results Window for High Note Sound Company
2-116
Excel Solver and Changes in Objective
Function Coefficients
Excel 2010 Sensitivity Report for High Note Sound Company
2-117
Changes in the
Technological Coefficients
2-118
Changes in the
Technological Coefficients
Change in the Technological Coefficients for the High Note
Sound Company
(a) Original Problem (b) Change in Circled (c) Change in Circled
Coefficient Coefficient
X2 X2 X2
60 – 60 – 60 –
Stereo Receivers
|c | | | e | | | |c | |
0– 20 40 X1 0– 20 30 40 X1 0– 20 40 X1
CD Players
2-119
Changes in Resources or Right-Hand-Side
Values
2-120
Changes in Resources or Right-Hand-Side
Values
• If the right-hand side of a constraint is changed, the
– feasible region will change (unless the constraint is
REDUNDANT).
– the optimal solution will change.
• The amount of change in the objective function value
that results from a unit change in one of the
resources available is called the dual price or dual
value .
• The dual price for a constraint is the improvement in
the objective function value that results from a one-
unit increase in the right-hand side of the constraint.
2-121
Changes in Resources or Right-Hand-Side
Values
• However, the amount of possible increase in
the right-hand side of a resource is limited.
• If the number of hours increased beyond the
upper bound, then the objective function
would no longer increase by the dual price.
• There would simply be excess (slack) hours of
a resource or the objective function may
change by an amount different from the dual
price.
• The dual price is relevant only within limits.
2-122
Changes in the Electricians’ Time Resource for the
High Note Sound Company
X2 (a)
60 –
| c | | |
0– 20 40 50 60 X1
2-123
Changes in the Electricians’ Time Resource for the
High Note Sound Company
X2 (b)
60 –
2-124
Changes in the Electricians’ Time Resource for the
High Note Sound Company
X2 (c)
40 –
Constraint
Representing
60 Hours of Audio
20 – Technician’s
Time Resource
| | | | | |
0– 20 40 60 80 100 120
X1
2-125
QM for Windows and Changes in Right-Hand-
Side Values
Sensitivity Analysis for High Note Sound Company Using QM
for Windows
2-126
Excel Solver and Changes in Right-Hand-
Side Values
Excel 2010 Sensitivity Analysis for High Note Sound Company
2-127
Chapter 3
3-129
Chapter Outline
3.1 Introduction
3.2 Marketing Applications
3.3 Manufacturing Applications
3.4 Employee Scheduling Applications
3.5 Financial Applications
3.6 Ingredient Blending Applications
3.7 Transportation Applications
3-130
Introduction
3-134
Win Big Gambling Club
THE PROBLEM FORMULATION IS
3-136
Marketing Research
• Linear programming has also been applied to
marketing research problems and the area of
consumer research.
• Statistical pollsters can use LP to help make
strategy decisions.
• For instance consider the research conducted by
Management Sciences Association
3-137
Management Sciences Association
• Management Sciences Associates (MSA) is a marketing
research firm.
• MSA determines that it must fulfill several requirements in
order to draw statistically valid conclusions:
– Survey at least 2,300 U.S. households.
– Survey at least 1,000 households whose heads are 30 years of age
or younger.
– Survey at least 600 households whose heads are between 31 and
50 years of age.
– Ensure that at least 15% of those surveyed live in a state that
borders on Mexico.
– Ensure that no more than 20% of those surveyed who are 51
years of age or over live in a state that borders on Mexico.
3-138
Management Sciences Association
• MSA decides that all surveys should be conducted in
person.
• It estimates the costs of reaching people in each age and
region category are as follows:
3-139
Management Sciences Association
• MSA’s goal is to meet the sampling
requirements at the least possible cost.
• The decision variables are:
Objective function
Minimize total = $7.50X1 + $6.80X2 + $5.50X3
interview costs
+ $6.90X4 + $7.25X5 + $6.10X6
subject to
X1 + X2 + X3 + X4 + X5 + X6 ≥ 2,300 (total households)
X1 + X4 ≥ 1,000 (households 30 or younger)
X2 + X5 ≥ 600 (households 31-50)
X1 + X2 + X3 ≥ 0.15(X1 + X2+ X3 + X4 + X5 + X6) (border states)
X3 ≤ 0.20(X3 + X6) (limit on age group 51+ who can live in
border state)
X1, X2, X3, X4, X5, X6 ≥ 0
3-141
MSA Solution in Excel 2010
3-142
Management Sciences Association
• The following table summarizes the results of the MSA
analysis.
• It will cost MSA $15,166 to conduct this research.
3-143
Manufacturing Applications
• Production Mix
– LP can be used to plan the optimal mix of
products to manufacture.
– Company must meet a myriad of constraints,
ranging from financial concerns to sales
demand to material contracts to union labor
demands.
– Its primary goal is to generate the largest
profit possible.
3-144
FIFTH AVENUE INDUSTRIES
• FIFTH AVENUE INDUSTRIES produces four varieties of ties:
– One is all-silk tie,
– one is an all-polyester tie,
– one is a blend of polyester and cotton, and
– one is a blend of silk and cotton.
• The table below shows the cost and availability of
the three materials used in the production
process:
MATERIAL COST PER YARD ($)
MATERIAL AVAILABLE PER
MONTH (YARDS)
Silk 24 1,200
Polyester 6 3,000
Cotton 9 1,600
3-145
FIFTH AVENUE INDUSTRIES
• The firm has contracts with several major
department store chains to supply ties.
• Contracts require a minimum number of ties but
may be increased if demand increases.
• Fifth Avenue’s GOAL is to maximize monthly profit
given the following decision variables.
All 100%
polyester 8.70 10,000 14,000 0.08 polyester
3-147
FIFTH AVENUE INDUSTRIES
• Fifth Avenue also has to calculate profit per
tie for the objective function.
SELLING MATERIAL MATERIAL
VARIETY OF PRICE PER REQUIRED PER COST PER COST PER PROFIT
TIE TIE ($) TIE (YARDS) YARD ($) TIE ($) PER TIE ($)
All silk $19.24 0.125 $24 $3.00 $16.24
All polyester $8.70 0.08 $6 $0.48 $8.22
Poly-cotton $9.52 0.05 $6 $0.30
blend 1
0.05 $9 $0.45 $8.77
Silk – cotton $10.64 0.066 $1.58
blend 2 $24
0.044 $9 $0.40 $8.66
3-148
FIFTH AVENUE INDUSTRIES
The complete Fifth Avenue Industries Model
Objective function
Maximize profit = $16.24X1 + $8.22X2 + $8.77X3 + $8.66X4
Subject to 0.125X1+ 0.066X4 ≤1200 (yds of silk)
0.08X2 + 0.05X3 ≤ 3,000 (yds of polyester)
0.05X3 + 0.044X4 ≤ 1,600 (yds of cotton)
X1 ≥ 5,000 (contract min for silk)
X1 ≤ 7,000 (contract min)
X2 ≥10,000 (contract min for all polyester)
X2 ≤14,000 (contract max)
X3 ≥13,000 (contract mini for blend 1)
X3 ≤16,000 (contract max)
X4 ≥ 5,000 (contract mini for blend 2)
X4 ≤ 8,500 (contract max) 3-149
Fifth Avenue Solution in Excel 2010
3-150
MANUFACTURING APPLICATIONS
• Production Scheduling
– Setting a low-cost production schedule over a period of
weeks or months is a difficult and important
management task.
– Important factors include labor capacity, inventory and
storage costs, space limitations, product demand, and
labor relations.
– When more than one product is produced, the
scheduling process can be quite complex.
– The problem resembles the product mix model for
each time period in the future.
3-151
Greenberg Motors
• GREENBERG MOTORS, INC. manufactures two different electric motors
for sale under contract to Drexel Corp.
• Drexel places orders three times a year for four months at a time.
• Demand varies month to month as shown below.
• Greenberg wants to develop its production plan for the next four
months.
MODEL JANUARY FEBRUARY MARCH APRIL
GM3A 800 700 1,000 1,100
The carrying cost for GM3A motors is $0.36 per unit per
month and the GM3B costs $0.26 per unit per month.
Monthly ending inventory levels are used for the average
inventory level.
3-156
Greenberg Motors
• Greenberg is starting a new four-month production cycle
with a change in design specification that left no old
motors in stock on January 1.
• Given JANUARY DEMAND for both motors:
IA1 = 0 + A1 – 800
IB1 = 0 + B1 – 1,000
Rewritten as January’s constraints:
A1 – IA1 = 800
B1 – IB1 = 1,000
3-157
Greenberg Motors
Constraints for February, March, and April:
A2 + IA1 – IA2 = 700 February GM3A demand
B2 + IB1 – IB2 = 1,200 February GM3B demand
A3 + IA2 – IA3 = 1,000 March GM3A demand
B3 + IB2 – IB3 = 1,400 March GM3B demand
A4 + IA3 – IA4 = 1,100 April GM3A demand
B4 + IB3 – IB4 = 1,400 April GM3B demand
And constraints for April’s ending inventory:
IA4 = 450
IB4 = 300
3-158
Greenberg Motors
• We also need constraints for warehouse space:
IA1 + IB1 ≤ 3,300
IA2 + IB2 ≤ 3,300
IA3 + IB3 ≤ 3,300
IA4 + IB4 ≤ 3,300
No worker is ever laid off so Greenberg has a base
employment level of 2,240 labor hours per month.
By adding temporary workers, available labor hours can be
increased to 2,560 hours per month.
Each GM3A motor requires 1.3 labor hours and each
GM3B requires 0.9 hours.
3-159
Greenberg Motors
Labor hour constraints:
1.3A1 + 0.9B1 ≥ 2,240 (January min hrs/month)
3-161
Greenberg Motors
Solution to Greenberg Motors Problem
PRODUCTION SCHEDULE JANUARY FEBRUARY MARCH APRIL
3-162
Employee Scheduling Applications
Labor Planning
These problems address staffing
needs over a particular time.
They are especially useful when
there is some flexibility in
assigning workers that require
overlapping or interchangeable
talents.
3-163
Hong Kong Bank of Commerce and Industry
HONG KONG Bank of Commerce and Industry
has requirements for between 10 and 18 tellers
depending on the time of day.
Lunch time from noon to 2 pm is generally the
heaviest .
The bank employs 12 full-time tellers but has
many part-time workers available.
Part-time workers must put in exactly four
hours per day, can start anytime between 9 am
and 1 pm, and are inexpensive.
Full-time workers work from 9 AM to 5 PM and
have 1 hour for lunch. 3-164
Hong Kong Bank of Commerce and Industry
Labor requirements for Hong Kong Bank
of Commerce and Industry
TIME PERIOD NUMBER OF TELLERS REQUIRED
9 AM – 10 AM 10
10 AM – 11 AM 12
11 AM – NOON 14
NOON – 1 PM 16
1 PM – 2 PM 18
2 PM – 3 PM 17
3 PM – 4 PM 15
4 PM – 5 PM 10 3-165
Hong Kong Bank of Commerce and Industry
Part-time hours are limited to a MAXIMUM
OF 50% of the day’s total requirements.
Part-timers earn $8 per hour ($32 per day)
on average.
Full-timers earn $100 per day on average.
The bank wants a schedule that will
minimize total personnel costs.
It will release one or more of its part-time
tellers if it is profitable to do so.
3-166
Hong Kong Bank of Commerce and Industry
Let
F = full-time tellers
P1 = part-timers starting at 9 am (leaving at 1 pm)
P2 = part-timers starting at 10 am (leaving at 2 pm)
P3 = part-timers starting at 11 am (leaving at 3 pm)
P4 = part-timers starting at noon (leaving at 4 pm)
P5 = part-timers starting at 1 pm (leaving at 5 pm)
3-167
Hong Kong Bank of Commerce and Industry
3-169
Labor Planning Solution in Excel 2010
3-170
Financial Applications
• Portfolio Selection
– Bank, investment funds, and insurance
companies often have to select specific
investments from a variety of alternatives.
– The manager’s overall objective is generally
to maximize the potential return on the
investment given a set of legal, policy, or risk
restraints.
3-171
International City Trust
• International City Trust (ICT) invests in short-term
trade credits, corporate bonds, gold stocks, and
construction loans.
• The board of directors has placed limits on how
much can be invested in each area:
MAXIMUM
INTEREST INVESTMENT ($
INVESTMENT EARNED (%) MILLIONS)
Trade credit 7 1.0
Corporate bonds 11 2.5
Gold stocks 19 1.5
Construction loans 15 1.8
3-172
International City Trust
• ICT has $5 million to invest and wants to
accomplish two things:
– Maximize the return on investment over the
next six months.
– Satisfy the diversification requirements set by
the board.
The board has also decided that at least 55% of the
funds must be invested in gold stocks and construction
loans and no less than 15% be invested in trade credit.3-173
International City Trust
The variables in the model are:
3-174
International City Trust
Objective:
Maximize dollars
of interest = 0.07X1 + 0.11X2 + 0.19X3 + 0.15X4
earned
3-176
ICT Portfolio Solution in Excel 2010
3-177
Truck Loading Problem
• Truck Loading Problem
– The truck loading problem involves deciding which
items to load on a truck so as to maximize the value of
a load shipped.
– Goodman Shipping has to ship the following six items:
1 7,500
22,500
2 24,000 7,500
3 8,000 3,000
4 9,500 3,500
5 4,000
11,500
3-178
6 9,750 3,500
Goodman Shipping
• The objective is to maximize the value
of items loaded into the truck.
• The truck has a capacity of 10,000
pounds.
• The decision variable is:
Xi = proportion of each item i loaded on the
truck
3-179
Goodman Shipping
Objective:
Maximize = $22,500X1 + $24,000X2 + $8,000X3
load value + $9,500X4 + $11,500X5 + $9,750X6
3-181
Goodman Shipping
• The Goodman Shipping problem raises an interesting
issue:
– The solution calls for one third of Item 1 to be loaded on the
truck.
– What if Item 1 cannot be divided into smaller pieces?
• Rounding down leaves unused capacity on the truck and
results in a value of $24,000.
• Rounding up is not possible since this would exceed the
capacity of the truck.
• Using integer programming, in which the solution is
required to contain only integers, the solution is to load
one unit of Items 3, 4, and 6 for a value of $27,250.
3-182
Ingredient Blending Applications
• Diet Problems
– This is one of the earliest LP
applications, and is used to determine
the most economical diet for hospital
patients.
– This is also known as the FEED MIX
PROBLEM.
3-183
Whole Food Nutrition Center
• The Whole Food Nutrition Center uses three bulk
grains to blend a natural cereal.
• It advertises that the cereal meets the U.S.
Recommended Daily Allowance (USRDA) for four
key nutrients.
• It wants to select the blend that will meet the
requirements at the minimum cost.
NUTRIENT USRDA
Protein 3 units
Riboflavin 2 units
Phosphorus 1 unit
Magnesium 0.425 unit
3-184
Whole Food Nutrition Center
the total amount of the grains used will be 2
ounces, or 0.125 pound
Let
XA = pounds of grain A in one 2-ounce serving of cereal
XB = pounds of grain B in one 2-ounce serving of cereal
XC = pounds of grain C in one 2-ounce serving of cereal
Whole Food’s Natural Cereal requirements:
COST PER PROTEIN RIBOFLAVIN PHOSPHOROUS MAGNESIUM
GRAIN POUND (CENTS) (UNITS/LB) (UNITS/LB) (UNITS/LB) (UNITS/LB)
A 33 22 16 8 5
B 47 28 14 7 0
C 38 21 25 9 6
3-185
Whole Food Nutrition Center
subject to
22XA + 28XB + 21XC ≥ 3 (protein units)
16XA + 14XB + 25XC ≥ 2 (riboflavin units)
8XA + 7XB + 9XC ≥ 1 (phosphorous units)
5XA + 0XB + 6XC ≥ 0.425 (magnesium units)
XA + XB + XC = 0.125 (total mix)
X A, X B, X C ≥ 0
3-186
Whole Food Diet Solution in Excel 2010
3-187
Ingredient Blending Applications
3-189
Low Knock Oil Company
The firm lets
X1 = barrels of crude X100 blended to produce the refined
regular
X2 = barrels of crude X100 blended to produce the refined
economy
X3 = barrels of crude X220 blended to produce the refined
regular
X4 = barrels of crude X220 blended to produce the refined
economy
The objective function is
3-192
Low Knock Oil Solution in Excel 2010
3-193
Transportation Applications
• Shipping Problem
– The transportation or shipping problem involves
determining the amount of goods or items to be
transported from a number of origins to a number
of destinations.
– The objective usually is to minimize total shipping
costs or distances.
– This is a specific case of LP and a special algorithm
has been developed to solve it.
3-194
Top Speed Bicycle Company
• The Top Speed Bicycle Co. manufactures and markets a line of
4-speed bicycles.
• The firm has final assembly plants in two cities where labor
costs are low.
• It has three major warehouses near large markets.
• The sales requirements for the next year are:
– New York – 10,000 bicycles
– Chicago – 8,000 bicycles
– Los Angeles – 15,000 bicycles
• The factory capacities are:
– New Orleans – 20,000 bicycles
– Omaha – 15,000 bicycles
3-195
Top Speed Bicycle Company
The cost of shipping bicycles from the plants to the
warehouses is different for each plant and warehouse:
TO
FROM NEW YORK CHICAGO LOS ANGELES
New Orleans $2 $3 $5
Omaha $3 $1 $4
3-196
Top Speed Bicycle Company
Network Representation of the Transportation Problem with Costs, Demands, and
Supplies
3-197
Top Speed Bicycle Company
The double subscript variables will represent the origin factory
and the destination warehouse:
Xij = bicycles shipped from factory i to warehouse j
So:
X11 = number of bicycles shipped from New Orleans to New York
X12 = number of bicycles shipped from New Orleans to Chicago
X13 = number of bicycles shipped from New Orleans to Los Angeles
X21 = number of bicycles shipped from Omaha to New York
X22 = number of bicycles shipped from Omaha to Chicago
X23 = number of bicycles shipped from Omaha to Los Angeles
3-198
Top Speed Bicycle Company
Objective:
Minimize total = 2X11 + 3X12 + 5X13 + 3X21 + 1X22 + 4X23
shipping costs
3-199
Top Speed Bicycle Company Solution in
Excel 2010
3-200
Top Speed Bicycle Company
Top Speed Bicycle solution:
TO
FROM NEW YORK CHICAGO LOS ANGELES
3-201
Chapter 4
4.1Introduction
4.2Integer Programming
4.3Modeling with 0-1 (Binary) Variables
4.4Goal Programming
4.5Nonlinear Programming
4-204
Introduction
• Not every problem faced by businesses can easily
fit into a neat linear programming context.
• A large number of business problems can be
solved only if variables have integer values.
• Many business problems have multiple objectives,
and GOAL PROGRAMMING is an extension to LP
that can permit multiple objectives
• Linear programming requires linear models, and
nonlinear programming allows objectives and
constraints to be nonlinear.
4-205
Integer Programming
• An integer programming model is one where one or
more of the decision variables has to take on an integer
value in the final solution.
• There are three types of integer programming problems:
1. PURE INTEGER programming where all variables have
integer values .
2. MIXED-INTEGER programming where some but not
all of the variables will have integer values.
3. ZERO-ONE INTEGER programming are special cases in
which all the decision variables must have integer
solution values of 0 or 1.
4-206
HARRISON ELECTRIC COMPANY:
Example of Integer Programming
• The Company produces TWO PRODUCTS popular with HOME
RENOVATORS: OLD-FASHIONED CHANDELIERS and CEILING FANS.
• Both the CHANDELIERS and FANS require a two-step
production process involving wiring and assembly.
• It takes about 2 hours to wire each chandelier and 3
hours to wire a ceiling fan.
• Final assembly of the chandeliers and fans requires 6 and
5 hours, respectively.
• The production capability is such that only 1 2 h o u rs of
wiring time and 3 0 h o u rs of assembly time are
available.
Each chandelier produced nets π of $7 and each fan 4-207
$6.
HARRISON ELECTRIC COMPANY:
Example of Integer Programming
• Harrison’s production mix decision can be formulated using
LP as follows:
4-208
Harrison Electric Problem
4-209
HARRISON ELECTRIC COMPANY:
Example of Integer Programming
• The production planner recognizes this is an integer
problem.
• His first attempt at solving it is to round the values to
X1 = 4 and X2 = 2.
• However, this is not feasible.
• Rounding X2 down to 1 gives a feasible solution, but it
may not be optimal.
• This could be solved using the enumeration method,
but enumeration is generally not possible for large
problems.
4-210
Integer Solutions to the Harrison Electric Company Problem
CHANDELIERS (X1) CEILING FANS (X2) PROFIT
($7X1 + $6X2)
0 0 $0
1 0 7
2 0 14
3 0 21
4 0 28
5 0
35 Optimal solution to
0 1 6 integer programming
1 1 13 problem
2 1 20
3 1 27
4 1 34
0 2 12 Solution if rounding
is used
1 2 19
2 2 26
3 2 33
0 3 18
1 3 25 4-211
HARRISON ELECTRIC COMPANY
4-212
Using Software to Solve the Harrison Integer Programming Problem
4-213
Using Software to Solve the Harrison Integer Programming Problem
4-214
Using Software to Solve the Harrison Integer Programming Problem
4-215
Mixed-Integer Programming Problem Example
AMOUNT OF
AMOUNT PER 50-POUND AMOUNT PER POUND INGREDIENTS
BAG OF XYLINE (LB) OF HEXALL (LB) AVAILABLE
30 0.5 2,000 lb–
ingredient A
800 lb–
18 0.4
ingredient B
2 0.1 200 lb–
ingredient C
4-219
Mixed-Integer Programming Problem Example
4-220
Modeling With 0-1 (Binary) Variables
4-221
Capital Budgeting Example
• A common capital budgeting problem is selecting from a set
of possible projects when budget limitations make it
impossible to select them all.
• A 0-1 variable is defined for each project.
• Quemo Chemical Company is considering three possible
improvement projects for its plant:
– A new catalytic converter.
– A new software program for controlling operations.
– Expanding the storage warehouse.
• It can not do them all
• It wants to maximize net present value of projects
undertaken.
4-222
Quemo Chemical Capital Budgeting
Quemo Chemical Company information
Software $18,000
$6,000 $4,000
4-225
Quemo Chemical Budgeting Capital
• This is solved with computer software, and the
optimal solution is X1 = 1, X2 = 0, and X3 = 1 with an
objective function value of 57,000.
• This means that Quemo Chemical should fund the
catalytic converter and warehouse expansion
projects only.
• The net present value of these investments will be
$57,000.
4-226
Limiting the Number of Alternatives
Selected
• One common use of 0-1 variables involves limiting the
number of projects or items that are selected from a group.
• Suppose Quemo Chemical is required to select no more than
two of the three projects regardless of the funds available.
• This would require adding a constraint:
X1 + X2 + X3 ≤ 2
• If they had to fund exactly two projects the constraint would
be:
X1 + X2 + X3 = 2
4-227
Dependent Selections
• At times the selection of one project depends on the
selection of another project.
• Suppose Quemo’s catalytic converter could only be
purchased if the software was purchased.
• The following constraint would force this to occur:
X1 ≤ X2 or X1 – X2 ≤ 0
• If we wished for the catalytic converter and software
projects to either both be selected or both not be selected,
the constraint would be:
X1 = X2 or X1 – X2 = 0
4-228
Fixed-Charge Problem Example
• Often businesses are faced with decisions involving a fixed
charge that will affect the cost of future operations.
• Sitka Manufacturing is planning to build at least one new
plant and three cities are being considered in:
– Baytown, Texas
– Lake Charles, Louisiana
– Mobile, Alabama
• Once the plant or plants are built, the company wants to have
capacity to produce at least 38,000 units each year.
4-229
Fixed-Charge Problem
4-230
Fixed-Charge Problem
Define the decision variables as:
4-231
Fixed-Charge Problem
The integer programming formulation becomes
Minimize cost =340,000X1 + 270,000X2 + 290,000X3 +
32X4 + 33X5 + 30X6
subject to X4+ X5+ X6 ≥ 38,000
X4 ≤ 21,000X1
X5 ≤ 20,000X2
X6 ≤ 19,000X3
The optimal solution is X1, X2, X3 = 0 or 1;
X4, X5, X6 ≥ 0 and integer
X1 = 0, X2 = 1, X3 = 1, X4 = 0, X5 = 19,000, X6 = 19,000
Objective function value = $1,757,000
4-232
Fixed-Charge Problem
Excel 2010 Solver Solution for Sitka Manufacturing Problem
4-233
Financial Investment Example
• Simkin, Simkin, and Steinberg specialize in recommending oil
stock portfolios for wealthy clients.
• One client has the following specifications:
– At least two Texas firms must be in the portfolio.
– No more than one investment can be made in a foreign oil company.
– One of the two California oil stocks must be purchased.
• The client has $3 million to invest and wants to buy large
blocks of shares.
4-234
Financial Investment
4-235
Financial Investment
Model formulation:
subject to
X1 + X4 + X5 ≥ 2 (Texas constraint)
X 2+ X 3 ≤ 1 (foreign oil constraint)
X6 + X7 = 1 (California constraint)
480X1 + 540X2 + 680X3 + 1,000X4 + 700X5
+ 510X6 + 900X7 ≤ 3,000 ($3 million limit)
4-236
Financial Investment
4-237
Goal Programming
• Firms often have more than one goal.
• In LINEAR and INTEGER PROGRAMMING methods
the objective function
– measured in ONE DIMENSION ONLY.
• It is not possible for LP to have multiple goals
unless they are all measured in the same units,
and this is a highly unusual situation.
• An important technique that has been developed
to supplement LP is called GOAL PROGRAMMING.
4-238
Goal Programming
• Typically goals set by management can be achieved
only at the expense of other goals.
• A hierarchy of importance needs to be established so
that higher-priority goals are satisfied before lower-
priority goals are addressed.
• It is not always possible to satisfy every goal so GOAL
PROGRAMMING attempts to reach a satisfactory
level of multiple objectives.
• The main difference is in the objective function
where GOAL PROGRAMMING tries to minimize the
DEVIATIONS between goals and what we can actually
achieve within the given constraints.
4-239
Example of Goal Programming: Harrison Electric Company Revisited
Minimize under or
overachievement of profit target = d1– + d1+
4-242
Extension to Equally Important Multiple Goals
4-251
Using QM for Windows to Solve
Harrison’s Problem
Summary Screen for Harrison Electric’s Goal Programming
Analysis Using QM for Windows
4-252
Using QM for Windows to Solve
Harrison’s Problem
The solution, with an analysis of deviations and goal
achievement, is found.
We see that the first two constraints have negative
deviational variables equal to 0, indicating full
achievement of those goals.
In fact, the positive deviational variables both have
values of 6, indicating overachievement of these goals
by six units each.
Goal (constraint) 3 has both overachievement
deviational variables
full
equal to 0, indicating complete achievement of achievement
of these goals by that
six units each
goal, whereas goal 4 has a negative deviational of those
goals
variable equal to 1, indicating underachievement
full achievement
those goals
of by
one unit. underachievement by
one unit
4-253
Nonlinear Programming
• The methods seen so far have assumed that the objective
function and constraints are LINEAR.
• Terms such as X13, 1/X2, log X3, or 5X1X2 are not allowed.
• But there are MANY NONLINEAR RELATIONSHIPS in the
real world that would require the objective function,
constraint equations, or both to be nonlinear.
• Excel can be used to solve these nonlinear programming
(NLP) problems.
• One disadvantage of NLP is that the solution yielded may
only be a LOCAL OPTIMUM, rather than a global optimum.
PROFIT IS
271000
4-257
Both Nonlinear Objective Function and
Nonlinear Constraints
4-259
Both Nonlinear Objective Function and
Nonlinear Constraints
Excel 2010 Solution for Hospicare’s NLP Problem
4-260
Linear Objective Function and
Nonlinear Constraints
• Thermlock Corp. produces massive rubber
washers and gaskets like the type used to seal
joints on the NASA Space Shuttles.
• It combines two ingredients, RUBBER (X1) and
OIL (X2).
• The cost of the industrial quality RUBBER is
$5 per pound and the cost of high viscosity
OIL is $7 per pound.
• Two of the three constraints are nonlinear. 4-261
Linear Objective Function and Nonlinear
Constraints
The firm’s objective function and constraints are:
13X1 + X13
≥
80 4-262
Linear Objective Function and Nonlinear
Constraints
Excel 2010 Solution for Thermlock NLP Problem
4-263
Chapter 5
5-269
The Transportation Problem
5-270
Linear Programming for the
Transportation Example
5-271
Linear Programming for the Transportation
Example
• Minimize total cost = 5X11 + 4X12 + 3X13 +
8X21 + 4X22 + 3X23
+ 9X31 +7X32 + 5X33
• Subject to:
– X11 + X12 + X13 ≤ 100 (Adama supply)
– X21 + X22 + X23 ≤ 300 (Hawassa supply)
– X31 + X32 + X33 ≤ 300 (Dire Dawa supply)
– X11 + X21 + X31 = 300 (Bahir Dar demand)
– X12 + X22 + X32 = 200 (Mekelle demand)
– X13 + X23 + X33 = 200 (Semera demand)
5-272
Executive Furniture Corporation Solution in
Excel 2010
5-273
A General LP Model for Transportation
Problems
• Let:
– Xij = number of units shipped from
source i to destination j.
– cij = cost of one unit from source i to
destination j.
– si = supply at source i.
– dj = demand at destination j.
5-274
A General LP Model for Transportation
Problems
Minimize cost =
Subject to:
i = 1, 2,…, m.
j = 1, 2, …, n.
5-275
The Assignment Problem
• This type of problem determines
the most efficient assignment of
people to particular tasks, etc.
• Objective is typically to minimize
TOTAL COST or TOTAL TASK TIME.
5-276
LINEAR PROGRAM FOR ASSIGNMENT
Example
• The FIX-IT SHOP has just received three new
repair projects that must be repaired quickly: a
radio, a toaster oven, and a coffee table.
• Three workers with different talents are able to
do the jobs.
• The owner estimates the cost in wages if the
workers are assigned to each of the three jobs.
• Objective: minimize total cost.
5-277
Example of an Assignment Problem in a
Transportation Network Format
5-278
LINEAR PROGRAM FOR ASSIGNMENT
Example
Let: Xij = 1 if person i is assigned to
p r o j e c t j , or
0 otherwise.
Where: i = 1,2,3 with 1 = Adams, 2 = Brown, and
3 = Cooper
j = 1,2,3, with 1 = Project 1, 2 = Project 2, and
3 = Project 3.
5-279
LINEAR PROGRAM FOR ASSIGNMENT
Example
Minimize total cost = 11X11 + 14X12 + 6X13 +
8X21 + 10X22 + 11X23 +
9X31 + 12X32 + 7X33
Subject to:
X11 + X12 + X13 ≤ 1
X21 + X22 + X23 ≤ 1
X31 + X32 + X33 ≤ 1
X11 + X21 + X31 = 1
X12 + X22 + X32 = 1
X13 + X23 + X33 = 1
5-280
Fix-it Shop Solution in Excel 2010
5-281
Linear Program for Assignment Example
5-284
Transshipment Applications
Frosty Machines Transshipment Data
TO
NEW YORK
FROM CHICAGO BUFFALO CITY PHILADELPHIA ST LOUIS SUPPLY
Toronto $4 $7 — — — 800
Detroit $5 $7 — — — 700
Chicago — — $6 $4 $5 —
Buffalo — — $2 $3 $4 —
Minimize cost
= 4X13 + 7X14 + 5X23 + 7X24 + 6X35 + 4X36 + 5X37 + 2X45 + 3X46 + 4X47
subject to
X13 + X14 ≤ 800 (supply at Toronto)
X23 + X24 ≤ 700 (supply at Detroit)
X35 + X45 = 450 (demand at New York)
X36 + X46 = 350 (demand at Philadelphia)
X37 + X47 = 300 (demand at St Louis)
X13 + X23 = X35 + X36 + X37 (shipping through Chicago)
X14 + X24 = X45 + X46 + X47 (shipping through Buffalo)
Xij ≥ 0 for all i and j (nonnegativity) 5-288
Solution to Frosty Machines Transshipment
Problem
5-289
THE TRANSPORTATION ALGORITHM
TO WAREHOUSE
WAREHOUSE WAREHOUSE
AT FACTORY
FROM AT Bahir Dar AT Semera
Mekelle CAPACITY
$5 $4 $3
Adama FACTORY 100
$8 $4 $3
Hawassa FACTORY 300
$9 $7 $5
Dire Dawa FACTORY 300
WAREHOUSE
300 200 200 700
REQUIREMENTS
Cell representing a source-
Total supply to-destination (Hawassa to
Cost of shipping 1 unit from Dire Semera Semera) shipping assignment
and demand
Dawafactory to Mekelle warehouse that could be made
warehouse demand 5-291
Developing an Initial Solution:
Northwest Corner Rule
• Once we have arranged the data in a table, we must
establish an initial feasible solution.
• One systematic approach is known as the NORTHWEST
CORNER RULE.
• Start in the upper left-hand cell and allocate units to
shipping routes as follows:
1. Exhaust the supply (factory capacity) of each row before
moving down to the next row.
2. Exhaust the demand (warehouse) requirements of each
column before moving to the right to the next column.
3. Check that all supply and demand requirements are met.
• This problem takes five steps to make the initial shipping
assignments. 5-292
Developing an Initial Solution: Northwest Corner
Rule
1. Beginning in the upper left hand corner, we assign 100
units from Adama to Bahir Dar . This exhaust the supply
from Adama but leaves Bahir Dar 200 desks short. We
move to the second row in the same column.
TO Mekelle FACTORY
Bahir Dar (A) Semera (C)
FROM (B) CAPACITY
Adama $5 $4 $3
100 100
(D)
Hawassa $8 $4 $3
300
(E)
$9 $7 $5
Dire Dawa(F) 300
WAREHOUSE
300 200 200 700
REQUIREMENTS
5-293
Developing an Initial Solution: Northwest Corner
Rule
2. Assign 200 units from Hawassa to Bahir Dar . This meets
Bahir Dar ’s demand. Hawassa has 100 units remaining so
we move to the right to the next column of the second
row.
TO Mekelle FACTORY
Bahir Dar (A) Semera (C)
FROM (B) CAPACITY
Adama $5 $4 $3
100 100
(D)
Hawassa $8 $4 $3
200 300
(E)
$9 $7 $5
Dire Dawa(F) 300
WAREHOUSE
300 200 200 700
REQUIREMENTS
5-294
Developing an Initial Solution: Northwest Corner
Rule
3. Assign 100 units from Hawassa to Mekelle. The Hawassa
supply has now been exhausted but Mekelle is still 100
units short. We move down vertically to the next row in
the Mekelle column.
TO Mekelle FACTORY
Bahir Dar (A) Semera (C)
FROM (B) CAPACITY
Adama $5 $4 $3
100 100
(D)
Hawassa $8 $4 $3
200 100 300
(E)
$9 $7 $5
Dire Dawa(F) 300
WAREHOUSE
300 200 200 700
REQUIREMENTS
5-295
Developing an Initial Solution: Northwest Corner
Rule
4. Assign 100 units from Dire Dawa to Mekelle. This fulfills
Mekelle’s demand and Dire Dawastill has 200 units
available.
TO Mekelle FACTORY
Bahir Dar (A) Semera (C)
FROM (B) CAPACITY
Adama $5 $4 $3
100 100
(D)
Hawassa $8 $4 $3
200 100 300
(E)
$9 $7 $5
Dire Dawa(F) 100 300
WAREHOUSE
300 200 200 700
REQUIREMENTS
5-296
Developing an Initial Solution: Northwest Corner
Rule
5. Assign 200 units from Dire Dawa to Semera. This exhausts
Dire Dawa’s supply and Semera’s demand. The initial
shipment schedule is now complete.
TO Mekelle FACTORY
Bahir Dar (A) Semera (C)
FROM (B) CAPACITY
Adama $5 $4 $3
100 100
(D)
Hawassa $8 $4 $3
200 100 300
(E)
$9 $7 $5
Dire Dawa(F) 100 200 300
WAREHOUSE
300 200 200 700
REQUIREMENTS
5-297
Developing an Initial Solution: Northwest Corner
Rule
ROUTE
5-298
Stepping-Stone Method: Finding a Least
Cost Solution
Occupied shipping
routes (squares) =
Number
of rows
Number of
columns -1
+
When the number of occupied rows is less than this, the
solution is called degenerate.
5-300
Testing the Solution for Possible
Improvement
$5 $4
Mekelle shipping route Factory
A 100
– +
+ $8 – $4
Factory
H 200 100
TO
Bahir Dar Mekelle Semera FACTORY
FROM
CAPACITY
$5 $4 $3
Adama 100 100
$8 $4 $3
Hawassa 200 100 300
$9 $7 $5
Dire Dawa 100 200 300
WAREHOUSE
300 200 200 700
REQUIREMENTS
5-306
Five Steps to Test Unused Squares with the
Stepping-Stone Method
Evaluating the unused Adama– Warehouse B Warehouse M
99 $5 $4
Mekelle shipping route Factory
A 100 1
– +
+ $8 – $4
Factory 201 99
H 200 100
TO FACTORY
Bahir Dar Mekelle Semera
FROM CAPACITY
$5 $4 $3
Adama 100 100
$8 $4 $3
Hawassa 200 100 300
$9 $7 $5
Dire Dawa 100 200 300
WAREHOUSE
300 200 200 700
REQUIREMENTS
5-307
Five Steps to Test Unused Squares with the
Stepping-Stone Method
Evaluating the unused Adama– Warehouse A Warehouse B
99 $5 $4
Mekelle shipping route Factory
D 100 1
– +
+ $8 – $4
Factory 201 99
E 200 100
TO FACTORY
Bahir Dar Mekelle Semera
FROM Result of
CAPACITY Proposed Shift
$5 $4 $3 in Allocation
Adama 100 100
= 1 x $4
$8 $4 $3
– 1 x $5
Hawassa 200 100 300 + 1 x $8
– 1 x $4 = +$3
$9 $7 $5
Dire Dawa 100 200 300
WAREHOUSE
300 200 200 700
REQUIREMENTS
5-308
Five Steps to Test Unused Squares with the
Stepping-Stone Method
Step 4. Now compute an improvement index (Iij) for
the Adama–Mekelle route.
Add the costs in the squares with plus signs and
subtract the costs in the squares with minus signs:
Adama–Mekelle
index = IAM = +$4 – $5 + $8 – $4 = + $3
5-309
Five Steps to Test Unused Squares with the
Stepping-Stone Method
Step 5. Now examine the Adama–Semera unused route.
Again, only turn corners at squares that represent existing
routes.
Pass through the Hawassa–Semera square but we can not
turn there or put a + or – sign.
The closed path we will use is:
+ AS – AB + HB – HM + DM – DS
TO FACTORY
Bahir Dar Mekelle Semera
FROM CAPACITY
$5 $4 $3
Adama 100 100
$8 $4 $3
Hawassa 200 100 300
$9 $7 $5
Dire Dawa 100 200 300
WAREHOUSE
300 200 200 700
REQUIREMENTS 5-310
Five Steps to Test Unused Squares with the
Stepping-Stone Method
Evaluating the Adama–Semera Shipping Route
TO FACTORY
Bahir Dar Mekelle Semera
FROM CAPACITY
$5 $4 Start $3
Adama 100 100
– +
$8 $4 $3
Hawassa 200 100 300
+ –
$9 $7 $5
Dire Dawa 100 200 300
+ –
WAREHOUSE
300 200 200 700
REQUIREMENTS
Adama–Semera improvement
index = IAS = + $3 – $5 + $8 – $4 + $7 – $5 = + $4
5-311
Five Steps to Test Unused Squares with the
Stepping-Stone Method
Opening the Adama–Semera route will not lower our total
shipping costs.
Evaluating the other two routes we find:
Hawassa-Semera
= IHS = + $3 – $4 + $7 – $5 = + $1
index
The closed path is + HS – HM + DM – DS
. Dawa–Bahir Dar
Dire
index = IDB= + $9 – $7 + $4 – $8 = – $2
Opening the Dire Dawa-Bahir Dar route will lower our total
transportation costs 5-312
Obtaining an Improved Solution
$8 $4 $3
H 200 100 300
– +
$9 $7 $5
D 100 200 300
+ –
WAREHOUSE
300 200 200 700
REQUIREMENTS
5-315
Obtaining an Improved Solution
TO FACTORY
B M S
FROM CAPACITY
$5 $4 $3
A 100 100
$8 $4 $3
H 100 200 300
$9 $7 $5
D 100 200 300
WAREHOUSE
300 200 200 700
REQUIREMENTS
Total shipping costs have been reduced by (100 units) x ($2 saved per unit) and
now equals $4,000.
5-316
Obtaining an Improved Solution
TO FACTORY
B M S
FROM CAPACITY
$5 $4 $3
A 100 100
H 100
$8
200
$4 Start $3
300
– +
$9 $7 $5
D 100 200 300
+ –
WAREHOUSE
300 200 200 700
REQUIREMENTS
ROUTE
TOTAL
FROM TO DESKS PER UNIT COST
SHIPPED x COST ($) = ($)
A B 100 5 500
H M 200 4 800
H S 100 3 300
D B 200 9 1,800
D S 100 5 500
3,900
5-319
Obtaining an Improved Solution
TO FACTORY
B M S
FROM CAPACITY
$5 $4 $3
A 100 100
$8 $4 $3
H 200 100 300
$9 $7 $5
D 200 100 300
WAREHOUSE
300 200 200 700
REQUIREMENTS
5-320
Obtaining an Improved Solution
This solution is optimal as the improvement
indices that can be computed are all greater than
or equal to zero.
A to M = IAM= + $4 – $5 + $9 – $5 + $3 – $4 = + $2
(closed path: + AM– AB + DB – DS + HS– HM)
A to S = IAS = + $3 – $5 + $9 – $5 = + $2
(closed path: + AS – AB + DB – DS)
H to B = ISB = + $8 – $9 + $5 – $3 = + $1
(closed path: + HB – DB + DS – HS)
D to M = IFB = + $7 – $5 + $3 – $4 = + $1
(closed path: + DM – DS + HS – SM) 5-321
Summary of Steps in Transportation Algorithm
(Minimization)
1. Set up a balanced transportation table.
2. Develop initial solution using the northwest corner
method .
3. Calculate an improvement index for each empty cell using
the stepping-stone method.
If improvement indices are all nonnegative, stop as the optimal
solution has been found.
If any index is negative, continue to step 4.
4. Select the cell with the improvement index indicating the
greatest decrease in cost.
Fill this cell using the stepping-stone path and go to step 3.
5-322
UNBALANCED TRANSPORTATION PROBLEMS
• In real-life problems, total demand is frequently
not equal to total supply.
• These unbalanced problems can be handled easily
by introducing dummy sources or dummy
destinations.
• If total supply is greater than total demand, a
dummy destination (warehouse), with demand
exactly equal to the surplus, is created.
• If total demand is greater than total supply, we
introduce a dummy source (factory) with a supply
equal to the excess of demand over supply. 5--323
Special Situations with the
Transportation Algorithm
• Unbalanced Transportation Problems
– In either case, shipping cost coefficients of
zero are assigned to each dummy location or
route as no goods will actually be shipped.
– Any units assigned to a dummy destination
represent excess capacity.
– Any units assigned to a dummy source
represent unmet demand.
5-324
Demand Less Than Supply
• Suppose that the Adama factory increases its rate of
production from 100 to 250 desks.
• The firm is now able to supply a total of 850 desks each
period.
• Warehouse requirements remain the same (700) so the
row and column totals do not balance.
• We add a dummy column that will represent a fake
warehouse requiring 150 desks.
• This is somewhat analogous to adding a slack variable.
• We use the stepping-stone method to find the optimal
solution.
5-325
Demand Less Than Supply
$8 $4 $3 0
H 50 200 50 300
$9 $7 $5 0
D 150 150 300
WAREHOUSE
300 200 200 150 850
REQUIREMENTS
$10 $5 $8
PLANT X 175
$12 $7 $6
PLANT Y 75
Totals do
WAREHOUSE
250 100 150
450 not
DEMAND 500
balance
5-328
Demand Greater than Supply
Initial Solution to an Unbalanced Problem in Which Demand is Greater Than
Supply
$6 $4 $9
PLANT W 200 200
$10 $5 $8
PLANT X 50 100 25 175
$12 $7 $6
PLANT Y 75 75
0 0 0
PLANT Y 50 50
WAREHOUSE
250 100 150 500
DEMAND
5-329
Degeneracy in Transportation Problems
5-330
Degeneracy in Transportation Problems
5-331
Degeneracy in an Initial Solution
$10 $9 $9
WAREHOUSE 2 0 100 20 120
$7 $10 $7
WAREHOUSE 3 80 80
CUSTOMER
100 100 100 300
DEMAND
5-335
Degeneracy During Later
Solution Stages
$15 $10 $7
FACTORY B 50 80 130
$3 $9 $10
FACTORY C 30 50 80
WAREHOUSE
150 80 50 280
REQUIREMENT
5-336
Degeneracy During Later
Solution Stages
Tracing a Closed Path for the Factory B – Warehouse 3 Route
TO
WAREHOUSE 1 WAREHOUSE 3
FROM
$15 $7
FACTORY B 50
– +
$3 $10
FACTORY C 30 50
+ –
5-337
More Than One Optimal Solution
• It is possible for a transportation problem to have multiple
optimal solutions.
• This happens when one or more of the improvement
indices is zero in the optimal solution.
– This means that it is possible to design alternative shipping routes
with the same total shipping cost.
– The alternate optimal solution can be found by shipping the most
to this unused square using a stepping-stone path.
• In the real world, alternate optimal solutions provide
management with greater flexibility in selecting and using
resources.
5-338
Maximization Transportation Problems
5-339
Unacceptable Or Prohibited Routes
46,000
ESTIMATED PRODUCTION COST
Supply needed from new
PERplant
UNIT= 46,000 – 35,000 = 11,000
AT PROPOSED PLANTSunits per month
Seattle $53
Birmingham $49
5-343
Locating a New Factory for Hardgrave
Machine Company
TO LOS
FROM DETROIT DALLAS NEW YORK ANGELES
CINCINNATI $25 $55 $40 $60
SALT LAKE 35 30 50 40
PITTSBURGH 36 45 26 66
SEATTLE 60 38 65 27
BIRMINGHAM 35 30 41 50
5-344
Locating a New Factory for Hardgrave
Machine Company
Birmingham Plant Optimal Solution: Total Hardgrave Cost is
$3,741,000
TO LOS FACTORY
FROM DETROIT DALLAS NEW YORK ANGELES CAPACITY
73 103 88 108
CINCINNATI 10,000 1,000 4,000 15,000
85 80 100 90
SALT LAKE 1,000 5,000 6,000
88 97 78 118
PITTSBURGH 14,000 14,000
84 79 90 99
BIRMINGHAM 11,000 11,000
WAREHOUSE
10,000 12,000 15,000 9,000 46,000
REQUIREMENT
5-345
Locating a New Factory for Hardgrave
Machine Company
Seattle Plant Optimal Solution: Total Hardgrave Cost is $3,704,000.
TO LOS FACTORY
FROM DETROIT DALLAS NEW YORK ANGELES CAPACITY
73 103 88 108
CINCINNATI 10,000 4,000 1,000 15,000
85 80 100 90
SALT LAKE 6,000 6,000
88 97 78 118
PITTSBURGH 14,000 14,000
113 91 118 80
SEATTLE 2,000 9,000 11,000
WAREHOUSE
10,000 12,000 15,000 9,000 46,000
REQUIREMENT
5-346
Locating a New Factory for Hardgrave
Machine Company
• By comparing the total system costs of the two
alternatives, Hardgrave can select the lowest
cost option:
– The Birmingham location yields a total system cost
of $3,741,000.
– The Seattle location yields a total system cost of
$3,704,000.
• With the lower total system cost, the Seattle
location is favored.
• Excel QM can also be used as a solution tool.
5-347
Excel QM Solution for Facility Location
Example
5-348
The Assignment Algorithm
• The second special-purpose LP algorithm is the
assignment method.
• Each assignment problem has associated with it a table,
or matrix.
• Generally, the rows contain the objects or people we
wish to assign, and the columns comprise the tasks or
things to which we want them assigned.
• The numbers in the table are the costs associated with
each particular assignment.
• An assignment problem can be viewed as a
transportation problem in which the capacity from each
source is 1 and the demand at each destination is 1. 5-349
Assignment Model Approach
• The Fix-It Shop has three rush projects to repair.
• The shop has three repair persons with different
talents and abilities.
• The owner has estimates of wage costs for each
worker for each project.
• The owner’s objective is to assign the three
project to the workers in a way that will result in
the lowest cost to the shop.
• Each project will be assigned exclusively to one
worker. 5-350
Assignment Model Approach
Estimated Project Repair Costs for the Fix-It Shop Assignment
Problem
PROJECT
PERSON 1 2 3
Brown 8 10 11
Cooper 9 12 7
5-351
Assignment Model Approach
Summary of Fix-It Shop Assignment Alternatives and Costs
PRODUCT ASSIGNMENT
LABOR TOTAL
1 2 3 COSTS ($) COSTS ($)
Adams Brown Cooper 11 + 10 + 7 28
Adams Cooper Brown 11 + 12 + 11 34
Brown Adams Cooper 8 + 14 + 7 29
Brown Cooper Adams 8 + 12 + 6 26
Cooper Adams Brown 9 + 14 + 11 34
Cooper Brown Adams 9 + 10 + 6 25
5-352
The Hungarian Method (Flood’s Technique)
5-355
Steps in the
Assignment
Method
5-356
The Hungarian Method (Flood’s
Technique)
5-357
The Hungarian Method (Flood’s
Technique)
Cost of Each Person-Project Row Opportunity Cost Table for the
Fix-it Shop Step 1, Part (a)
Assignment for the Fix-it Shop
Problem
PROJECT PROJECT
PERSON 1 2 3 PERSON 1 2 3
Brown 8 10 11 Brown 0 2 3
Cooper 9 12 7 Cooper 2 5 0
5-358
The Hungarian Method (Flood’s
Technique)
Derive the total opportunity costs by taking the costs in Table
and subtract the smallest number in each column from each
number in that column.
Total Opportunity Cost Table for the Fix-it Shop Step 1, Part (b)
PROJECT
PERSON 1 2 3
Adams $5 $6 $0
Brown 0 0 3
Cooper 2 3 0
5-359
The Hungarian Method (Flood’s Technique)
• Step 2: Test for the optimal assignment.
– We want to assign workers to projects in such a way
that the total labor costs are at a minimum.
– We would like to have a total assigned opportunity
cost of zero.
– The test to determine if we have reached an
optimal solution is simple.
– We find the minimum number of straight lines
necessary to cover all the zeros in the table.
– If the number of lines equals the number of rows or
columns, an optimal solution has been reached.
5-360
The Hungarian Method (Flood’s
Technique)
Test for Optimal Solution to Fix-it Shop Problem
PROJECT
PERSON 1 2 3
Adams $5 $6 $0
Cooper 2 3 0
Covering line 2
This requires only two lines to cover the zeros so the solution is not optimal.
5-361
The Hungarian Method (Flood’s
Technique)
5-362
The Hungarian Method (Flood’s
Technique)
Revised Opportunity Cost Table for the Fix-it Shop Problem
PROJECT
PERSON 1 2 3
Adams $3 $4 $0
Brown 0 0 5
Cooper 0 1 0
5-363
The Hungarian Method (Flood’s
Technique)
Optimality Test on the Revised Fix-it Shop Opportunity Cost Table
PROJECT
PERSON 1 2 3
Adams $3 $4 $0
Cooper 0 1 0
This requires three lines to cover the zeros so the solution is optimal.
5-364
Making the Final Assignment
• The optimal assignment is Adams to project 3,
Brown to project 2, and Cooper to project 1.
• For larger problems one approach to making
the final assignment is to select a row or
column that contains only one zero.
– Make the assignment to that cell and rule out its
row and column.
– Follow this same approach for all the remaining
cells.
5-365
Making the Final Assignment
Total labor costs of this assignment are:
Adams to project 3 6
Brown to project 2 10
Cooper to project 1 9
Total cost 25
5-366
Making the Final Assignment
Making the Final Fix-it Shop Assignments
1 2 3 1 2 3 1 2 3
5-367
Excel QM Solution for Fix-It Shop Assignment Problem
5-368
Unbalanced Assignment Problems
• Often the number of people or objects to be assigned does
not equal the number of tasks or clients or machines listed in
the columns, and the problem is unbalanced.
• When this occurs, and there are more rows than columns,
simply add a dummy column or task.
• If the number of tasks exceeds the number of people
available, we add a dummy row.
• Since the dummy task or person is nonexistent, we enter
zeros in its row or column as the cost or time estimate.
5-369
Unbalanced Assignment Problems
• Suppose the Fix-It Shop has another worker available.
• The shop owner still has the same basic problem of
assigning workers to projects, but the problem now needs
a dummy column to balance the four workers and three
projects.
PROJECT
PERSON 1 2 3 DUMMY
Adams $11 $14 $6 $0
Brown 8 10 11 0
Cooper 9 12 7 0
Davis 10 13 8 0
5-370
Maximization Assignment Problems
5-371
Maximization Assignment Problems
5-373
Maximization Assignment Problems
5-374
Maximization Assignment Problems
SECTOR
SHIP A B C D
1 40 0 10 5
2 20 50 0 5
3 20 0 10 20
4 15 0 5 10
5-376
Maximization Assignment Problems
SECTOR
SHIP A B C D
1 25 0 10 0
2 5 50 0 0
3 5 0 10 15
4 0 0 5 5
5-377
Maximization Assignment Problems
ASSIGNMENT EFFICIENCY
Ship 1 to sector D 55
Ship 2 to sector C 80
Ship 4 to sector A 65
5-378
Chapter 6
Network Models
Learning Objectives
After completing this chapter, students will be able to:
1. Connect all points of a network while minimizing
total distance using the minimal-spanning tree
technique.
2. Determine the maximum flow through a network
using the maximal-flow technique and linear
programming.
3. Find the shortest path through a network using the
shortest-route technique and linear programming.
4. Understand the important role of software in solving
network problems.
6-380
Chapter Outline
6.1 Introduction
6.2 Minimal-Spanning Tree Problem
6.3 Maximal-Flow Problem
6.4 Shortest-Route Problem
6-381
Introduction
• This chapter covers three network models that can
be used to solve a variety of problems.
• The minimal-spanning tree technique determines a
path through a network that connects all the points
while minimizing the total distance.
• The maximal-flow technique finds the maximum flow
of any quantity or substance through a network.
• The shortest-route technique can find the shortest
path through a network.
6-382
Introduction
• Large scale problems may require hundreds or
thousands of iterations making efficient
computer programs a necessity.
• All types of networks use a common
terminology.
• The points on a network are called nodes and
may be represented as circles of squares.
• The lines connecting the nodes are called arcs.
6-383
Minimal-Spanning Tree Technique
6-384
Network for Lauderdale Construction
3
2 5
4
3
5
3 7
7
1 2 2
3
3 8
5 1
2 6
6
4
Gulf
6-385
Steps for the Minimal-Spanning Tree
Technique
1. Select any node in the network.
2. Connect this node to the nearest node that
minimizes the total distance.
3. Considering all the nodes that are now
connected, find and connect the nearest node
that is not connected. If there is a tie, select one
arbitrarily. A tie suggests there may be more than
one optimal solution.
4. Repeat the third step until all nodes are
connected.
6-386
Lauderdale Construction Company
• Start by arbitrarily selecting node 1.
• The nearest node is node 3 at a distance of 2 (200
feet) and we connect those nodes.
• Considering nodes 1 and 3, we look for the next
nearest node.
• This is node 4, the closest to node 3.
• We connect those nodes.
• We now look for the nearest unconnected node to
nodes 1, 3, and 4.
• This is either node 2 or node 6.
• We pick node 2 and connect it to node 3. 6-387
Minimal-Spanning Tree Technique
• Following this same process we connect from
node 2 to node 5.
• We then connect node 3 to node 6.
• Node 6 will connect to node 8.
• The last connection to be made is node 8 to
node 7.
• The total distance is found by adding up the
distances in the arcs used in the spanning tree:
2 + 2 + 3 + 3 + 3 + 1 + 2 = 16 (or 1,600 feet)
6-388
Minimal-Spanning Tree Technique
First Iteration for Lauderdale Construction
6-389
Minimal-Spanning Tree Technique
Second and Third Iterations for Lauderdale Construction
6-390
Minimal-Spanning Tree Technique
Fourth and Fifth Iterations for Lauderdale Construction
6-391
Minimal-Spanning Tree Technique
Sixth and Seventh (Final) Iterations for Lauderdale Construction
6-392
Summary of Steps in Lauderdale Construction
Minimal-Spanning Tree Problem
Step Connected Unconnected Closest Un- Arc Arc Total
Nodes Nodes connected Selected Length Distance
Node
1 1 2,3,4,5,6,7,8 3 1-3 2 2
2 1,3 2,4,5,6,7,8 4 3-4 2 4
3 1,3,4 2,5,6,7,8 2 or 6 2-3 3 7
4 1,2,3,4 5,6,7,8 5 or 6 2-5 3 10
5 1,2,3,4,5 6,7,8 6 3-6 3 13
6 1,2,3,4,5,6 7,8 8 6-8 1 14
7 1,2,3,4,5,6,8 7 7 7-8 2 16
6-393
QM for Windows Solution for Lauderdale Construction
Company Minimal Spanning Tree Problem
6-394
Maximal-Flow Technique
• The maximal-flow technique allows us to determine the
maximum amount of a material that can flow through a
network.
• Waukesha, Wisconsin is in the process of developing a road
system for the downtown area.
• Town leaders want to determine the maximum number of
cars that can flow through the town from west to east.
• The road network is shown in Figure .
• The numbers by the nodes indicate the number of cars that
can flow from the node.
6-395
Maximal-Flow Technique
Road network for Waukesha
Capacity in Hundreds of
Cars per Hour
2
1 2 2 East
1 1 6 Point
3 0
West 2
Point 1
10 0 1 1
4
1
6
1
3 5
0 2
3
6-396
Maximal-Flow Technique
Four steps of the Maximal-Flow Technique
1. Pick any path from the start (source) to the finish
(sink) with some flow. If no path with flow exists, then
the optimal solution has been found.
2. Find the arc on this path with the smallest flow
capacity available. Call this capacity C. This represents
the maximum additional capacity that can be
allocated to this route.
6-397
Maximal-Flow Technique
Four steps of the Maximal-Flow Technique
3. For each node on this path, decrease the flow
capacity in the direction of flow by the amount C. For
each node on the path, increase the flow capacity in
the reverse direction by the amount C.
4. Repeat these steps until an increase in flow is no
longer possible.
6-398
Maximal-Flow Technique
• We start by arbitrarily picking the path 1–2–6 which is at
the top of the network.
• The maximum flow is 2 units from node 2 to node 6.
• The path capacity is adjusted by adding 2 to the
westbound flows and subtracting 2 from the eastbound
flows.
• The result is the new path in Figure which shows the
new relative capacity of the path at this stage.
6-399
Maximal-Flow Technique
Capacity Adjustment for Path 1–2–6 Iteration 1
Add 2
2
1 2 2
6
3
1 Subtract 2
Old Path
0
3 2 4
6
1
1
New Path
6-400
Maximal-Flow Technique
• We repeat this process by picking the path 1–2–4–6.
• The maximum capacity along this path is 1.
• The path capacity is adjusted by adding 1 to the
westbound flows and subtracting 1 from the eastbound
flows.
• The result is the new path in Figure
• We repeat this process by picking the path 1–3–5–6.
• The maximum capacity along this path is 2.
• The Figure shows this adjusted path.
6-401
Maximal-Flow Technique
Second Iteration for Waukesha Road System
3 Add 1
2
1 1 6
1
1
1 1 0
4 2 4
4 0 6
2
0 0
Subtract 1
1 2
Old Path 0 2 0
10
4
1
6
1
3 5
0 2
3
New Network
6-402
Maximal-Flow Technique
Third and Final Iteration for Waukesha Road System
0
4 2 4
0 2 6
0 2
1 2
8 0 2 0
4
1
4
3
3 5
2 0
3
6-403
Maximal-Flow Technique
• There are no more paths from nodes 1 to 6 with unused
capacity so this represents a final iteration.
• The maximum flow through this network is 500 cars.
1–2–6 200
1–2–4–6 100
1–3–5–6 200
Total 500
6-404
Linear Programming for Maximal Flow
• Define the variables as:
– Xij = flow from node i to node j.
6-405
Linear Programming for Maximal Flow
Constraints
X12 ≤ 3 X13 ≤ 10 X14 ≤ 2
X21 ≤ 1 X24 ≤ 1 X26 ≤ 2
X34 ≤ 3 X35 ≤ 2 X42 ≤ 1
X43 ≤ 1 X46 ≤ 1 X53 ≤ 1
X56 ≤ 1 X62 ≤ 2 X64 ≤ 1
6-406
Linear Program for Maximal Flow
Constraints continued:
X61 = X12 + X13 + X14 or X61 – X12 – X13 – X14 =0
X12+X42+X62 = X21+X24+X26 or X12+X42+X62-X21-X24-X26 = 0
X13+X43+X53 = X34 +X35 or X13+X43+X53-X34-X35 =0
X14+X24+
X34+X64 = X42 + X43 + X46 or X14+X24 +X34+X64
– X42 – X43 – X53 =0
X35 = X56 + X53 or X35 – X53 – X56 =0
X26+X46+X56 = X61 or X26 + X46 + X56 – X61 =0
Xij ≥0 and integer
This problems can now be solved in QM for Windows or using Excel Solver.
6-407
QM for Windows Solution for Waukesha Road Network
Maximal Flow Problem
6-408
Shortest-Route Problem
• The shortest-route technique identifies how a person or item
can travel from one location to another while minimizing the
total distance traveled.
• It finds the shortest route to a series of destinations.
• Ray Design, Inc. transports beds, chairs, and other furniture
from the factory to the warehouse.
• The company would like to find the route with the shortest
distance.
• The road network is shown in Figure
6-409
Shortest-Route Problem
Roads from Ray’s Plant to Warehouse
200
2 4
Plant
0 100
10
10
50 0 150
1 6
20 0
0 10
40
3 5 Warehouse
6-410
Shortest-Route Problem
Steps of the shortest-route technique:
1. Find the nearest node to the origin (plant). Put the
distance in a box by the node.
2. Find the next-nearest node to the origin and put the
distance in a box by the node. Several paths may have to
be checked to find the nearest node.
3. Repeat this process until you have gone through the
entire network. The last distance at the ending node will
be the distance of the shortest route.
6-411
Shortest-Route Technique
• We can see that the nearest node to the plant is node 2.
• We connect these two nodes.
• After investigation, we find node 3 is the next nearest
node but there are two possible paths.
• The shortest path is 1–2–3 with a distance of 150.
• We repeat the process and find the next node is node 5 by
going through node 3.
• The next nearest node is either 4 or 6 and 6 turns out to
be closer.
• The shortest path is 1–2–3–5–6 with a distance of 290
miles.
6-412
Shortest-Route Problem
First Iteration for Ray Design
100
200
2 4
Plant
0 100
10
10
50 0 150
1 6
20 0
0 10
40
3 5 Warehouse
6-413
Shortest-Route Technique
Second Iteration for Ray Design
100
200
2 4
Plant
0 100
10
10
50 0 150
1 6
200 0
10
40
150
3 5 Warehouse
6-414
Shortest-Route Technique
Third Iteration for Ray Design
100
200
2 4
Plant
0 100
10
10
50 0 150
1 6
20 0
0 10
40
3 5 Warehouse
190
150
6-415
Shortest-Route Technique
Fourth and Final Iteration for Ray Design
100
200
2 4
Plant
0 100 290
10
10
50 0 150
1 6
20 0
0 10
40
3 5 Warehouse
150 190
6-416
Linear Program for Shortest-Route Problem
6-417
Linear Program for Shortest-Route Problem
Minimize distance =
100X12 + 200X13 + 50X23 + 50X32 + 200X24 + 200X42 + 100X25
+ 100X52 + 40X35 + 40X53 + 150X45 + 150X54 + 100X46 +
100X56
Subject to:
This problems can now be solved in QM for Windows or using Excel Solver.
6-418
QM for Windows Input Screen for Ray Design,
Inc., Shortest-Route Problem
6-419
QM for Windows Solution Screen for Ray Design, Inc.,
Shortest-Route Problem
6-420
Chapter 7
Project Management
Learning Objectives
After completing this chapter, students will be able to:
1. Understand how to plan, monitor, and control
projects with the use of PERT and CPM.
2. Determine earliest start, earliest finish, latest start,
latest finish, and slack times for each activity, along
with the total project completion time.
3. Reduce total project time at the least total cost by
crashing the network using manual or linear
programming techniques.
4. Understand the important role of software in project
management.
7-422
Chapter Outline
7.1 Introduction
7.2 PERT/CPM
7.3 PERT/Cost
7.4 Project Crashing
7.5 Other Topics in Project Management
7-423
Introduction
7-425
Six Steps of PERT/CPM
1. Define the project and all of its significant activities or tasks.
2. Develop the relationships among the activities and decide
which activities must precede others.
3. Draw the network connecting all of the activities.
4. Assign time and/or cost estimates to each activity.
5. Compute the longest time path through the network; this is
called the critical path.
6. Use the network to help plan, schedule, monitor, and
control the project.
The critical path is important since any delay in these activities can delay the
completion of the project.
7-426
PERT/CPM
Given the large number of tasks in a project, it is
easy to see why the following questions are
important:
1. When will the entire project be completed?
2. What are the critical activities or tasks in the project,
that is, the ones that will delay the entire project if
they are late?
3. Which are the non-critical activities, that is, the ones
that can run late without delaying the entire project’s
completion?
4. If there are three time estimates, what is the
probability that the project will be completed by a
specific date? 7-427
PERT/CPM
5. At any particular date, is the project on
schedule, behind schedule, or ahead of
schedule?
6. On any given date, is the money spent
equal to, less than, or greater than the
budgeted amount?
7. Are there enough resources available to
finish the project on time?
7-428
General Foundry Example of PERT/CPM
• General Foundry, Inc. has long been trying to avoid
the expense of installing air pollution control
equipment.
• The local environmental protection group has
recently given the foundry 16 weeks to install a
complex air filter system on its main smokestack.
• General Foundry was warned that it will be forced
to close unless the device is installed in the allotted
period.
• They want to make sure that installation of the
filtering system progresses smoothly and on time.
7-429
General Foundry Example of PERT/CPM
7-430
Drawing the PERT/CPM Network
7-431
General Foundry Example of PERT/CPM
7-432
Activity Times
• In some situations, activity times are known with
certainty.
• The CPM assigns just one time estimate to each
activity and this is used to find the critical path.
• In many projects there is uncertainty about activity
times.
• PERT employs a probability distribution based on
three time estimates for each activity, and a
weighted average of these estimates is used for the
time estimate and this is used to determine the
critical path.
– PERT often assumes time estimates follow a beta
probability distribution. 7-433
Activity Times
The time estimates in PERT are:
Optimistic time (a) = time an activity
will take if everything goes as well as
possible. There should be only a small
probability (say, 1/100) of this occurring.
Pessimistic time (b) = time
an activity would take assuming very
unfavorable conditions. There should
also be only a small probability that the
activity will really take this long.
Most likely time (m) = most
realistic time estimate to complete the
activity
7-434
Activity Times
Beta Probability Distribution with Three Time Estimates
7-435
Activity Times
To find the expected activity time (t), the beta
distribution weights the estimates as follows:
a 4m b
t
6
To compute the dispersion or variance of activity
completion time, we use the formula:
2
b a
Variance
6
7-436
Activity Times
Time estimates (weeks) for General Foundry
B 2 3 4 3 4/36
C 1 2 3 2 4/36
D 2 4 6 4 16/36
E 1 4 7 4 36/36
F 1 2 9 3 64/36
G 3 4 11 5 64/36
H 1 2 3 2 4/36
25
7-437
How to Find the Critical Path
• We accept the expected completion time for each
task as the actual time for now.
• The total of 25 weeks in Table does not take into
account the obvious fact that some of the tasks could
be taking place at the same time.
• To find out how long the project will take we perform
the critical path analysis for the network.
• The critical path is the longest path through the
network.
7-438
How to Find the Critical Path
General Foundry’s Network With Expected Activity Times
7-439
How to Find the Critical Path
To find the critical path, we need to determine the
following quantities for each activity in the network.
1. Earliest start time (ES): the earliest time an activity
can begin without violation of immediate
predecessor requirements.
2. Earliest finish time (EF): the earliest time at which an
activity can end.
3. Latest start time (LS): the latest time an activity can
begin without delaying the entire project.
4. Latest finish time (LF): the latest time an activity can
end without delaying the entire project. 7-440
How to Find the Critical Path
In the nodes, the activity time and the early and late start
and finish times are represented in the following manner.
ACTIVITY t
ES EF
LS LF
A t =2
ES = 0 EF = 0 + 2 = 2
Start
B t =3
ES = 0 EF = 0 + 3 = 3
7-442
How to Find the Critical Path
General Foundry’s Earliest Start (ES) and Earliest Finish (EF)
times
7-443
How to Find the Critical Path
Latest times are computed as
Latest start time = Latest finish time
– Expected activity time
LS = LF – t
For activity H:
LS = LF – t = 15 – 2 = 13 weeks
7-444
How to Find the Critical Path
General Foundry’s Latest Start (LS) and Latest Finish (LF) times
7-445
How to Find the Critical Path
• Once ES, LS, EF, and LF have been determined, it is a
simple matter to find the amount of slack time that each
activity has:
Slack = LS – ES, or Slack = LF – EF
• From Table we see activities A, C, E, G, and H have no slack
time.
• These are called critical activities and they are said to be
on the critical path.
• The total project completion time is 15 weeks.
• Industrial managers call this a boundary timetable.
7-446
How to Find the Critical Path
General Foundry’s Schedule and Slack Times
7-447
How to Find the Critical Path
General Foundry’s Critical Path
7-448
Probability of Project Completion
∑
variances of activities on the
Project variance = critical path
7-449
Probability of Project Completion
• From Table we know that
ACTIVITY VARIANCE
A 4/36
C 4/36
E 36/36
G 64/36
H 4/36
7-450
Probability of Project Completion
7-451
Probability Distribution for Project
Completion Times
7-452
Probability of Project Completion
The standard normal equation can be applied as follows:
7-453
Probability of General Foundry Meeting the
16-week Deadline
7-454
What PERT Was Able to Provide
• PERT has been able to provide the project manager with
several valuable pieces of information.
• The project’s expected completion date is 15 weeks.
• There is a 71.6% chance that the equipment will be in
place within the 16-week deadline.
• Five activities (A, C, E, G, H) are on the critical path.
• Three activities (B, D, F) are not critical but have some
slack time built in.
• A detailed schedule of activity starting and ending dates
has been made available.
7-455
Using Excel QM in the General Foundry
Example
Excel QM Initialization Screen for General Foundry Example with Three Time
Estimates
7-456
Using Excel QM in the General Foundry
Example
Excel QM Input Screen and Solution for General Foundry Example with Three
Time Estimates
7-457
Sensitivity Analysis and
Project Management
• The time required to complete an activity can vary from
the projected or expected time.
• If the activity is on the critical path, the completion time
of the project will change.
• This will also have an impact on ES, EF, LS, and LF times for
other activities.
• The exact impact depends on the relationship between
the various activities.
• A predecessor activity is one that must be accomplished
before the given activity can be started.
• A successor activity is one that can be started only after
the given activity is finished.
7-458
Sensitivity Analysis and
Project Management
Impact of an Increase (Decrease) in an Activity Time for a
Critical Path Activity
SUCCESSOR PARALLEL PREDECESSOR
ACTIVITY TIME ACTIVITY ACTIVITY ACTIVITY
Earliest start Increase (decrease) No change No change
7-459
PERT/COST
• Although PERT is an excellent method of
monitoring and controlling project length, it
does not consider the very important factor of
project cost.
• PERT/Cost is a modification of PERT that
allows a manager to plan, schedule, monitor,
and control cost as well as time.
• Using PERT/Cost to plan, schedule, monitor,
and control project cost helps accomplish the
sixth and final step of PERT. 7-460
Planning and Scheduling Project Costs: Budgeting
Process
7-464
Budgeting for General Foundry
Activity costs for General Foundry, Inc.
EARLIEST LATEST TOTAL BUDGETED
START, START, EXPECTED BUDGETED COST PER
ACTIVITY ES LS TIME, t COST ($) WEEK ($)
A 0 0 2 22,000 11,000
B 0 1 3 30,000 10,000
C 2 2 2 26,000 13,000
D 3 4 4 48,000 12,000
E 4 4 4 56,000 14,000
F 4 10 3 30,000 10,000
G 8 8 5 80,000 16,000
H 13 13 2 16,000 8,000
Total 308,000
7-465
Budgeted Cost (Thousands of Dollars) for General
Foundry, Inc., Using Earliest Start Times
WEEK
ACTIVITY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 TOTAL
A 11 11 22
B 10 10 10 30
C 13 13 26
D 12 12 12 12 48
E 14 14 14 14 56
F 10 10 10 30
G 16 16 16 16 16 80
H 8 8 16
308
Total to date 21 42 65 90 126 162 198 212 228 244 260 276 292 300 308
7-466
Budgeting for General Foundry
• It is also possible to prepare a budget based on the
latest starting time.
• This budget will delay the expenditure of funds until
the last possible moment.
• The following table shows the latest start budget for
the General Foundry project.
• The two tables form a budget range.
• Any budget can be chosen between these two values
depending on when the company wants to actually
spend the money.
• The budget ranges are plotted in Figure
7-467
Budgeted Cost (Thousands of Dollars) for General
Foundry, Inc., Using Latest Start Times
WEEK
ACTIVITY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 TOTAL
A 11 11 22
B 10 10 10 30
C 13 13 26
D 12 12 12 12 48
E 14 14 14 14 56
F 10 10 10 30
G 16 16 16 16 16 80
H 8 8 16
308
Total per 11 21 23 23 26 26 26 26 16 16 26 26 26 8 8
week
Total to 11 32 55 78 104 130 156 182 198 214 240 266 292 300 308
date
7-468
Budget Ranges for General Foundry
7-469
Monitoring and Controlling Project Costs
VALUE OF
TOTAL WORK ACTIVITY
BUDGETED PERCENT OF COMPLETED ACTUAL DIFFERENCE
ACTIVITY COST ($) COMPLETION ($) COST ($) ($)
A 22,000 100
22,000 20,000 –2,000
B 30,000 100
30,000 36,000 6,000
C 26,000 100
26,000 26,000 0
D 48,000 10
4,800 6,000 1,200
E 56,000 20
11,200 20,000 8,800
F 30,000 20
6,000 4,000 –2,000
G 80,000 0 Overrun
0 0 0
H 16,000 0 7-471
0 0 0
Monitoring and Controlling Project Costs
7-472
Project Crashing
• Projects will sometimes have deadlines that
are impossible to meet using normal
procedures.
• By using exceptional methods it may be
possible to finish the project in less time than
normally required at a greater cost.
• Reducing a project’s completion time is called
crashing.
7-473
Project Crashing
• Crashing a project starts with using the normal
time to create the critical path.
• The normal cost is the cost for completing the
activity using normal procedures.
• If the project will not meet the required
deadline, extraordinary measures must be
taken.
– The crash time is the shortest possible activity time
and will require additional resources.
– The crash cost is the price of completing the activity
in the earlier-than-normal time. 7-474
Four Steps to Project Crashing
1. Find the normal critical path and identify the
critical activities.
2. Compute the crash cost per week (or other time
period) for all activities in the network using the
formula:
7-475
Four Steps to Project Crashing
3. Select the activity on the critical path with the
smallest crash cost per week and crash this
activity to the maximum extent possible or to
the point at which your desired deadline has
been reached.
4. Check to be sure that the critical path you were
crashing is still critical. If the critical path is still
the longest path through the network, return to
step 3. If not, find the new critical path and
return to step 2.
7-476
General Foundry
• Suppose that General Foundry has been given 14 weeks
instead of 16 weeks to install the new equipment.
• The critical path for the project is 15 weeks.
• What options does the firm have?
– The normal and crash times and costs are shown in Table .
– Crash costs are assumed to be linear and Figure shows the crash
cost for activity B.
• Crashing activities B and A will shorten the completion
time to 14 but it creates a second critical path.
• Any further crashing must be done to both critical paths.
7-477
General Foundry
Normal and Crash Data for General Foundry, Inc.
TIME (WEEKS) COST ($)
CRASH
COST PER CRITICAL
ACTIVITY NORMAL CRASH NORMAL CRASH WEEK ($) PATH?
A 2 1 22,000 23,000 1,000 Yes
B 3 1 30,000 34,000 2,000 No
C 2 1 26,000 27,000 1,000 Yes
D 4 3 48,000 49,000 1,000 No
E 4 2 56,000 58,000 1,000 Yes
F 3 2 30,000 30,500 500 No
G 5 2 80,000 86,000 2,000 Yes
H 2 1 16,000 19,000 3,000 Yes
7-478
General Foundry
Crash and Normal Times and Costs for Activity B
7-479
Project Crashing with
Linear Programming
7-480
Project Crashing with
Linear Programming
General Foundry’s Network With Activity Times
7-481
Project Crashing with
Linear Programming
The decision variables for the problem are:
XA = EF for activity A
XB = EF for activity B
XC = EF for activity C
XD = EF for activity D
XE = EF for activity E
XF = EF for activity F
XG = EF for activity G
XH = EF for activity H
Xstart = start time for project (usually 0)
Xfinish = earliest finish time for the project
7-482
Project Crashing with
Linear Programming
• Additional decision variables for the problem are:
7-483
Project Crashing with
Linear Programming
• Crash time constraints This completion constraint
ensure activities are not specifies that the last event must
crashed more than is take place before the project
deadline:
allowed.
YA ≤ 1
YB ≤ 2 Xfinish ≤ 12
YC ≤ 1 This constraint indicates the
YD ≤ 1 project is finished when
activity H is finished:
YE ≤ 2
YF ≤ 1 Xfinish ≥ XH
YG ≤ 3 7-484
Project Crashing with
Linear Programming
Constraints describing the network have the form:
7-486
Other Topics in Project Management
• Subprojects
– For extremely large projects, an activity may be
made of several smaller sub-activities which can
be viewed as a smaller project or subproject of
the original .
• Milestones
– Major events in a project are often referred to
as milestones and may be reflected in Gantt
charts and PERT charts to highlight the
importance of reaching these events. 7-487
Other Topics in Project Management
• Resource Leveling
– Resource leveling adjusts the activity start away from the
early start so that resource utilization is more evenly
distributed over time.
• Software
– There are many project management software packages
on the market for both personal computers and larger
mainframe machines.
– Most of these create PERT charts and Gantt charts and
can be used to develop budget schedules, adjust future
start times, and level resource utilization.
7-488
Chapter 8
8.1 Introduction
8.2 Waiting Line Costs
8.3 Characteristics of a Queuing System
8.4 Single-Channel Queuing Model with Poisson
Arrivals and Exponential Service Times (M/M/1)
8.5 Multichannel Queuing Model with Poisson Arrivals
and Exponential Service Times (M/M/m)
8-491
Chapter Outline
8-492
Introduction
8-496
Three Rivers Shipping Company
8-498
Characteristics of a Queuing System
8-499
Characteristics of a Queuing System
8-500
Characteristics of a Queuing System
Behavior of arrivals
– Most queuing models assume customers are
patient and will wait in the queue until they are
served and do not switch lines.
– Balking refers to customers who refuse to join the
queue.
– Reneging customers enter the queue but become
impatient and leave without receiving their service.
– That these behaviors exist is a strong argument for
the use of queuing theory to managing waiting
lines. 8-501
Characteristics of a Queuing System
8-502
Characteristics of a Queuing System
8-504
Characteristics of a Queuing System
Service time distribution
– Service patterns can be either constant or
random.
– Constant service times are often machine
controlled.
– More often, service times are randomly
distributed according to a negative exponential
probability distribution.
– Analysts should observe, collect, and plot service
time data to ensure that the observations fit the
assumed distributions when applying these
models.
8-505
Identifying Models Using
Kendall Notation
• D. G. Kendall developed a notation for queuing models
that specifies the pattern of arrival, the service time
distribution, and the number of channels.
• Notation takes the form:
The arrival rate and the service rate must be defined for the same time
period.
8-509
Single-Channel Model, Poisson Arrivals,
Exponential Service Times (M/M/1)
1. The average number of customers or units in the system, L:
L
2. The average time a customer spends in the system, W:
1
W
3. The average number of customers in the queue, Lq:
2
Lq
( )
8-510
Single-Channel Model, Poisson Arrivals,
Exponential Service Times (M/M/1)
k 1
Pn k
8-512
ARNOLD’S MUFFLER SHOP
Example
• Arnold’s mechanic can install mufflers at a rate of 3 per
hour.
• Customers arrive at a rate of 2 per hour.
• So:
= 2 cars arriving per hour
= 3 cars serviced per hour
2 2
L 2 cars in the system
3 2 1
on average
1 1
W 1 hour that an average
3 2
car spends in the system 8-513
ARNOLD’S MUFFLER SHOP
Example
2 22 4
Lq 1.33 cars waiting in line on
( ) 3(3 2) 3(1) average
2
Wq hour 40 minutes average
( ) 3 waiting time per car
2
0.67 percentage of time
3 mechanic is busy
2
P0 1 1 0.33 probability that there are 0
3 cars in the system
8-514
ARNOLD’S MUFFLER SHOP
Example
Probability of more than k cars in the system
k Pn>k = (2/3)k+1
8-515
Excel QM Solution to Arnold’s Muffler
Example
8-516
ARNOLD’S MUFFLER SHOP
Example
• Introducing costs into the model:
– Arnold wants to do an economic analysis of the
queuing system and determine the waiting cost and
service cost.
– The total service cost is:
Total service = (Number of channels)
cost x (Cost per channel)
Total service
cost = mCs
8-517
ARNOLD’S MUFFLER SHOP
Example
Waiting cost when the cost is based on time in the system:
Total waiting
cost = (W)Cw
1 1
W 1/2 hour that an average car
4 2 spends in the system
8-521
ARNOLD’S MUFFLER SHOP
Example
2 22 4
Lq 1/2 car waiting in line on
( ) 4( 4 2) 8(1) the average
1
Wq hour 15 minutes average
( ) 4 waiting time per car
2
0.5 percentage of time
4 mechanic is busy
2
P0 1 1 0.5 probability that there are 0
4 cars in the system
8-522
ARNOLD’S MUFFLER SHOP
Example
Probability of more than k cars in the system
k Pn>k = (2/4)k+1
0 0.500
1 0.250
2 0.125
3 0.062
4 0.031
5 0.016
6 0.008
7 0.004
8-523
ARNOLD’S MUFFLER SHOP
Example
• The customer waiting cost is the same $50 per hour:
8-525
Enhancing the Queuing Environment
8-526
Multichannel Queuing Model with Poisson Arrivals
and Exponential Service Times (M/M/m)
n 0 n! m! m
8-528
Multichannel Model, Poisson Arrivals, Exponential
Service Times (M/M/m)
2. The average number of customers or units in the system
( / ) m
L P
2 0
( m 1)! ( m )
3. The average time a unit spends in the waiting line or being served, in the system
m
( / ) 1 L
W P
2 0
( m 1)! ( m )
8-529
Multichannel Model, Poisson Arrivals, Exponential
Service Times (M/M/m)
4. The average number of customers or units in line waiting
for service
Lq L
5. The average number of customers or units in line waiting for service
1 Lq
Wq W
6. The average number of customers or units in line waiting for service
m
8-530
ARNOLD’S MUFFLER SHOP
Example Revisited
• Arnold wants to investigate opening a second garage bay.
• He would hire a second worker who works at the same
rate as his first worker.
• The customer arrival rate remains the same.
1
P0 for m
n m 1
1
n
1 m
m
n!
n 0 m! m
1
P0 0.5
1 2
1 n
1 2 2(3)
2
n 0 n! 3 2! 3 2(3) 2
probability of 0 cars in the system 8-531
ARNOLD’S MUFFLER SHOP
Example Revisited
• Average number of cars in the system
( / ) m
L P
2 0
(m 1)!(m )
2(3)(2 / 3) 2 1 2
L 2
( ) 0.75
(1)![2(3) 2] 2 3
L 3
W hour 22 1 minutes
8 2
8-532
ARNOLD’S MUFFLER SHOP
Example Revisited
• Average number of cars in the queue
3 2 1
Lq L 0.083
4 3 12
1
0.083 Lq
Wq W 0.0415 hour 2 1 minutes
2 2
8-533
ARNOLD’S MUFFLER SHOP
Example Revisited
• Adding the second service bay reduces the waiting time in
line but will increase the service cost as a second
mechanic needs to be hired.
Total daily waiting cost = (8 hours per day)WqCw
= (8)(2)(0.0415)($50) = $33.20
This is the cheapest option: open the second bay and hire a second worker at
the same $15 rate.
8-534
Effect of Service Level on Arnold’s Operating
Characteristics
LEVEL OF SERVICE
8-535
Excel QM Solution to Arnold’s Muffler
Multichannel Example
8-536
Constant Service Time Model (M/D/1)
8-537
Constant Service Time Model (M/D/1)
2
Lq
2 ( )
Wq
2 ( )
8-538
Constant Service Time Model (M/D/1)
L Lq
1
W Wq
8-539
GARCIA-GOLDING RECYCLING, INC.
Example
• The company collects and compacts aluminum cans
and glass bottles.
• Trucks arrive at an average rate of 8 per hour (Poisson
distribution).
• Truck drivers wait about 15 minutes before they
empty their load.
• Drivers and trucks cost $60 per hour.
• A new automated machine can process truckloads at
a constant rate of 12 per hour.
• A new compactor would be amortized at $3 per truck
unloaded.
8-540
Constant Service Time Model (M/D/1)
Analysis of cost versus benefit of the purchase
Current waiting cost/trip = (1/4 hour waiting time)($60/hour cost)
= $15/trip
New system: = 8 trucks/hour arriving
= 12 trucks/hour served
Average waiting
time in queue = Wq = 1/12 hour
Waiting cost/trip
with new compactor = (1/12 hour wait)($60/hour cost) = $5/trip
Savings with
new equipment = $15 (current system) – $5 (new system)
= $10 per trip
Cost of new equipment
amortized = $3/trip
Net savings = $7/trip
8-541
Excel QM Solution for Constant Service Time Model
with Garcia-Golding Recycling Example
8-542
Finite Population Model
(M/M/1 with Finite Source)
• When the population of potential customers is limited,
the models are different.
• There is now a dependent relationship between the
length of the queue and the arrival rate.
• The model has the following assumptions:
1. There is only one server.
2. The population of units seeking service is finite.
3. Arrivals follow a Poisson distribution and service
times are exponentially distributed.
4. Customers are served on a first-come, first-served
basis.
8-543
Finite Population Model
(M/M/1 with Finite Source)
Equations for the finite population model:
Using = mean arrival rate, = mean service rate, and N
= size of the population, the operating characteristics
are:
8-544
Finite Population Model
(M/M/1 with Finite Source)
2. Average length of the queue:
Lq N 1 P0
L Lq 1 P0
Lq
Wq
( N L)
8-545
Finite Population Model
(M/M/1 with Finite Source)
5. Average time in the system:
1
W Wq
n
N!
Pn P0 for n 0,1,..., N
N n !
8-546
Department of Commerce
8-547
DEPARTMENT OF COMMERCE
Example
1. 1
P0 5 n
0.564
5! 0.05
n 0 ( 5 n )!
0 .5
2.
0.05 0.5
Lq 5 1 P0 0.2 printer
0.05
8-548
DEPARTMENT OF COMMERCE
Example
4. 0.2 0.2
Wq 0.91 hour
(5 0.64 )0.05 0.22
5. 1
W 0.91 2.91 hours
0.50
If printer downtime costs $120 per hour and the technician is paid $25 per hour,
the total cost is:
8-549
Excel QM For Finite Population Model with Department
of Commerce Example
8-550
Some General Operating Characteristic
Relationships
• Certain relationships exist among specific operating
characteristics for any queuing system in a steady state.
• A steady state condition exists when a system is in its
normal stabilized condition, usually after an initial
transient state.
• The first of these are referred to as Little’s Flow Equations:
L = W (or W = L/)
Lq = Wq (or Wq = Lq/)
And
W = Wq + 1/
8-551
More Complex Queuing Models and the Use of
Simulation
• In the real world there are often variations from basic queuing
models.
• Computer simulation can be used to solve these more
complex problems.
• Simulation allows the analysis of controllable factors.
• Simulation should be used when standard queuing models
provide only a poor approximation of the actual service
system.
8-552
Thanks
Comments
Areas of enhancement
Areas of separation
Areas of addition
Coincident or Not ?
If, ABC D EFGHI J K L M N O PQ R S T U V W X Y Z
Equals,
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
Then,
K+ N +O +W+ L +E+D+G+E
11 + 14 + 15 + 23 + 12 + 5 + 4 + 7 + 5 = 96%
H+A+R +D+W+ O+ R +K
8 + 1 + 18 + 4 + 23 + 15 + 18 + 11 = 98%
Both are important, but the total falls just short of 100%
But,
A+T +T + I+T + U +D+E
1 + 20 + 20 + 9 + 20 + 21 + 4 + 5 = 100%
Safety really is about attitude. Make 100% Safe Behavior your choice
both ON and OFF the job