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Goal Programming

Goal programming is used to solve problems with multiple objectives and constraints. It involves three main components: 1) the objective function, 2) economic constraints, and 3) goal constraints. The objective function seeks to minimize deviations from goal targets based on their priority. Economic constraints cannot be violated. Goal constraints specify targets and use deviation variables (d+) and (d-) to convert inequalities to equalities and minimize distance from the targets. An example is provided to illustrate a multi-objective project selection problem with net present value, net income, and sales growth objectives.

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61 views

Goal Programming

Goal programming is used to solve problems with multiple objectives and constraints. It involves three main components: 1) the objective function, 2) economic constraints, and 3) goal constraints. The objective function seeks to minimize deviations from goal targets based on their priority. Economic constraints cannot be violated. Goal constraints specify targets and use deviation variables (d+) and (d-) to convert inequalities to equalities and minimize distance from the targets. An example is provided to illustrate a multi-objective project selection problem with net present value, net income, and sales growth objectives.

Uploaded by

saurav_das_19
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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GOAL PROGRAMMING

GOAL CONSTRAINTS

Goal Programming Format


Three Principal Components: 1. The Objective Function 2. The Economic Constraints 3. The Goal Constraints In general, the goal programming format is as follows: Minimise= ,P*f(d, d)++P*f(d, d )+ + . + P[fm(dm , dm)+-

Subject to: aj1 Xj C1 aj2 Xj C2 ajk Xj Ck bj1 Xj + d - d = G1 bj2 Xj + d2 - d2 = G2 bjm Xj + dm- dm = Gm Xj , dj , dj 0

Goal programming formulation

The Objective Function

The economic constraint

The goal constraints.

OBJECTIVE FUNCTION
Seek to minimize the weighted deviation from the target levels of various objectives in accordance with priority structure. The representation of the objective function calls for specifying the following:
The priority level of goal. The relative weights attached to each goal where there are two or more goals at the same priority level. The relevant deviational variable which should be minimized with respect to each goal.

Economic Constraints:
Also called Hard Constraints. They represent resource limitations emerging from the decision environment and which cannot be violated. They are similar to the constraints found in Linear programming model. Make use of slack and surplus variables. Example:

GOAL CONSTRAINTS
Represents target levels of various goals that are pursued by the decision makers. It contains two deviational variables. deviation variables are used to convert inequalities to equalities. The deviation variable d is defined as:

d = T

- A (X) i i

From a reality point of view, a deviation variable represents the distance (deviation) between the aspiration level (target) and the actual attainment of the goal.

The deviation variable d can be replaced by two variables: d = di- - di+ where di- , di+ can be 0 or di-, di+ 0 i = 1,2, . . . , m

The goal formulation (now) becomes: Ai(X) + di- - di+ = Ti; subject to di- , di+ = 0 and di-, di+ 0

A goal is always expressed as an equality:

And when considering this equality, the following will be trueif Ai(X) < Ti is true, then (di- > 0 AND di+ = 0) must be true;
if Ai(X) > Ti is true, then (di- = 0 AND di+ > 0) must be true; if Ai(X) = Ti is true, then (di- = 0 AND di+ = 0) must be true.

Consider the preceding three situations again. To achieve a goal (i.e., reach the target), 3 situations are possible: 1. To achieve Ai(X) Ti, we must minimize ( di+ )

2. To achieve Ai(X) Ti, we must minimize ( di- )


3. To achieve Ai(X) = Ti, we must minimize (di- + di+ ). Question may come: What if you have more than one goal?

That is, how do you minimize multiple deviation variables?


Two approaches are: 1) Assign weights and calculate the sum of the deviation variables (distance to target) multiplied by their individual weights. Min z = (w1d1- + w2d2+ + .) = S (widi- + wkdk+ ) Rank order goal deviations in priority levels, often referred to as a preemptive formulation. The preemptive formulation does not exclude the assignment of weights. in words, Goal A has to be achieved before Goal B. I should not even think about Goal B if Goal A has not been achieved yet.

2)

Example:
PROJECT NET PRESENT CASH VALUE(NPVj) OUTFLOW IN PERIODT1 (CFj1) 6 8 8 7 4 12 9 5 9 12 3 4 10 13 CASH OUTFLOW IN PERIOD2 (CFj2) 7 5 4 10 6 15 9 POWER REQUIREME NT(Ej) 2 4 5 3 4 7 6 MANAGEME NT REQUIREME NT(Mj) 6 5 7 2 4 8 3 Sum(XjMj)<= 20

1 2 3 4 5 6 7

Sum(XjCFj1)<= Sum(XjCFj2)<= Sum(XjEj)<= 35 30 18

In addition to the NPV objective,there are 2 other goals:Net income objective and Sales growth objective. The firm wants net income from the projects selected to be 6 and 9 respectively in years 1 and 2. The firm set the sales growth target to 10% for first 2 years.

NET INCOME
PROJECT 1 2 3 YEAR1 1.0 2.1 1.8 YEAR2 1.4 1.6 2.5 YEAR1 0.010 0.015 0.018

SALES GROWTH
YEAR2 0.020 0.010 0.025

4
5 6 7

1.2
1.0 2.5 1.4

3.0
0.8 1.2 1.3

0.020
0.015 0.030 0.025

0.025
0.010 0.025 0.020

PRIORITY ASSIGNED TO VARIOUS GOALS: PRIORITY1:Net income PRIOROTY2:Sales growth PRIORITY3:NPV At priority level 1,net income for year1 is weighted 2times as important as net income for year2. Sales growth for year 1 is considered 3 times as important for year 2.

Summary
Can a project be viewed in isolation??? Constraints like project dependence, capital rationing and project indivisibility Can there be only one objective??? Even with multiple objective what if they contrast, contradict and conflict each other??? Consider the 2 casesReduce Labor cost and improve efficiency Increase production reduce energy usage Economic constraints which cannot be violated like time, budget allocation

Goal programming needs to be converted into LPP The goal constraints are converted into equality constraint by using additional variables called deviational variables d+ is overachieving d- is underachieving Just like slack and surplus variables For example, for the first goal, if d+ is > 0, then the constraints left side is greater than the right side, and d+ merely absorbs the excess to make the left side equal the right side. When d- is > 0, then the left side is less than the right side, and d- adds to the left side to make the two side equal. This is formulated to minimize the penalty for violating goals Eg-if the loss for not producing x quantity of A is greater than the loss for not producing y quantity of B then production of A is our most important goal

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