Final Assignment Yann JACOBSEN Research Methods For Managers

FinalAssignment
ResearchMethods
forManagers

YannJACOBSEN
International School of Management
ISEG Group 1A

Agenda

1. During the seminar we worked with the following cases:
a. Color chips
b. Computers S and L
c. Make or buy
d. Bike-lib
e. Scheduling personnel
f. Assigning planes
g. A case of public health

Describe briefly the main lessons that you got from each one of these cases.

2. Explain with several practical examples why sensitivity analyses (objective function
coefficients and RHS constraints) are so important.

3. Let`s suppose that two constraints have the Iollowing shadow prices:

Constraint A = 132.66
Constraint B = 79.02

Is it obvious that to increase the constraint A`s RHS is more interesting that to
increase the constraint`s B RHS?

4. With this final assignment you will find in Connect the slides that we used during the
seminar (Iile named 'RM slides Group 1A 2012). Slides 14 to 16 were not used in
class. In slide 15 you will find a network composed of nodes (circles in different
colors) and arcs (links between nodes). White figures associated to each link represent
the capacity of this link and red figures represent the cost of this link. Develop a LP
model in order to answer the question at the bottom of the slide: which is the maximal
quantity of flow that can reach the destination nodes (7 and 8) from the source nodes
(1, 2 and 3)?

5. Slide 16 shows the same network in slide 15 but now the destination nodes have a
given demand associated to these nodes (77 for node 7 and 82 for node 8).
Considering that the capacity and unit cost of each link are the same indicated in slide
15, develop a LP model in order to answer the question at the bottom of the slide:
which is the optimal distribution of flow (from source nodes via transhipment nodes
to destination nodes) to satisfy demand in destination nodes (7 and 8) minimizing
transportation costs.

6. ModiIy the problem oI 'A case in public health in order to know the minimal value
of the total fund in order to satisfy all proposed goals. Remember that several goals
should be expressed as percentages of the total fund you have to find. Explain very
clear your model and show the results you got.

All questions worth 10 points
Remember that this final assignment is strictly individual

1.

The main lessons that I`ve got Irom these diIIerent cases are

A: Color chips

In this case, chips we used permitted us to understand the way to maximize a production by
regarding resources. Furthermore, we discovered how to obtain the best profit according to
the way we use the resources.

On the other hand, the exercise permits us to discover that numerous possibilities exist in this
problem. Moreover, it has allowed us to understand that mathematical formulae make the
solution easier to find.

Accordingly, we noticed that there are many different numerous research methods which
permit to the manager to take the best decision.

B: Computers S and L

In this case, we had to find a way to organize the production of two different kinds of
computers with various components. It exists limitations we had to take in consideration,
which was the main difficulty.

So, this exercise showed us how we have to manage resources and also how we can manage
production which allows us to make the best choices in order to maximize the profit.

C: Make or buy

With this exercise, we had to discover if it was better to produce or to buy the product to
suppliers by taking in consideration the production costs of the product.

We had to decide how many sub-assemblies it should manufacture at home and also how
many it should buy abroad. The use of the solver permitted us to define the best profit for
each possibility.

D: Bike Lib

Here, the main idea is to arrive to minimize all the costs of bikes movement between a station
from another one. We had to develop an optimization tool in order to minimize reallocating
costs.

It allows us to understand how to optimize, in a company, the planning of tasks by a
diminution and minimizing the cost. We used to maximize the production to maximize the
profit.

E: Scheduling personnel

In this case, we were allowed to manage staff expenses. Moreover, we had to help the call
center proposing how many workers should participate in each schedule in order to minimize
the total costs.

So, we must minimize the cost of the payroll considering the timetable of the employees.

F: Assigning planes

Here, we had to propose an airplane assignment in order to minimize the number of
passengers that should change plane. So, we had to optimize a service which is offered by a
company. We must know how to spare time considering constraints.

G: A case of public health

Here, with our know-how in linear programming, we had to find an optimal allocation of
funds in order to meet the proposed goals. So, it`s a question oI scholarships` allocation
considering limitations. We must maximize the distribution to reduce constraints as better we
can.
2.

The sensitivity analysis is a method which consists in modifying variables, a way to predict
the outcome oI a decision. It`s a technique used within specific boundaries. It consists to
analyze changes to anticipate consequences of different modiIications. That`s why it`s very
important because in business, we can with this technique take the best decision we can in
order to maximize production and minimize costs.

We can now illustrate this method with a concrete example. A car company wants to
schedule a negotiation. In this way, the want to buy to the suppliers all resources needed to
manufacture cars that they want to sell in the market. They have to know the number of units
they want to produce with all the different elements of the car. This car company resolved
this problem knowing variables like quantities and also the all constraints which correspond
to the price or the discounts. Moreover, the company imagines a negotiation in order to
minimize costs and also to maximize quantity. The aim is to manufacture as much units they
can starting from their resources they negotiated forward.

3.

Shadow price is an opportunity cost of an activity to a society and also the value of a profit
which corresponds to the number of resources.

In this case, we have two constraints corresponding to A (132,66) and B (79,02). If the
shadow price of A is 132,66, that means that when we have an additional resource A, we are
going to obtain a better proIit than 132,66. It`s the same Ior B, that means that when we have
an additional resource B of 79,02, we are going to obtain a better profit than 79,02.

Nevertheless, shadow price doesn`t include and doesn`t consider the constraints. So, when we
consider diIIerent constraints, it`s easier to know and to arrive to a better profit. Moreover,
the solver and also the sensitivity are very important. We must on the one hand look the final
result but also to see how we can diversify this result taking into consideration the constraints
and variables affected.

4.

We have to develop a Linear Program in order to answer this question: which is the maximal
quantity of flow that can reach the destination nodes from the source nodes?

First of all, we must define a model with these decision variables:

- X1= the quantity of products that can travel from node 1 to node 4

In consequence, we can define the objective function which is:

Max (X1+X2+X3+X4+X5+X6+X7+X8+X9+X10+X11+X12+X13+X14+X15+X16+X17)

Now, I can define the constraints:

- Total quantity of products _ total capacities of flows (that can reach the
destination nodes)
- Decision variables _ 0
- Consider all products that can reach the transhipments nodes
- The last one have to be redistributed to reach the destination nodes

Now this is the Excel document:

Here we have two boards. The first one corresponds to the translation of the PowerPoint
slides. The second one corresponds to the translation of the equation solver. So we can now
solve the objective function which determines the maximal quantity of products that can
reach the destination nodes.

Furthermore, there are different colours in the boxes. The yellow ones represent the variables
cells we have to need to find out.

The blue ones are here to represent the maximal quantity that can reach the transhipments
nodes.

The salmon ones define the total quantity that can reach the destination nodes according to
the blue boxes.

Different formulas were used like:

- J12 = SOMME(B12:I12)
- E18 = SOMME(E12:E17)
- H18 = SOMME(H12:H17)
- J22 = the result we are trying to find out
- L22 = SOMMEPROD(B2:I7;B12:I17)

After the use of the solver, we can say that the maximal quantity of flow that can reach the
destination nodes from the source nodes is 182.

5.

The decision variables are the same as the fourth question:


The objective function is this one:

Min (X1*its cost+X2*its cost+X3*its cost+X4*its cost+X5*its cost+X6*its cost+X7*its
cost+X8*its cost+X9*its cost+X10*its cost+X11*its cost+X12*its cost+X13*its cost
+X14*its cost+X15*its cost+X16*its cost+X17*its cost)

Moreover, constraints are the same as the fourth question but there are two more. That means
the six constraints are:

- Total quantity oI products _ total capacities oI Ilows (that can reach the
destination nodes)
- Decision variables _ 0
- Consider all products that can reach the transhipments nodes
- The last one have to be redistributed to reach the destination nodes
- Maximal cost we can have to the destination 7 is 77
- Maximal cost we can have to the destination 8 is 82

In Excel, there are the costs (board which translates the constraints representing by costs
associated to each flow), the capacity (boards which translates the decision variables) and a
third board which translates the equation solver in order to solve the objective function.

The different formulas are:
- K13 =SOMME(C13:J13). It`s the same Iormula Ior the others lines (K14
=SOMME(C14;J14), .)
- F19 =SOMME(F13:F18); It`s the same formula for the others columns (F20
SOMME(G13;G18), .)
- K19 =SOMME(K13:K18)
- K26 =SOMMEPROD(C3:J8;C13:J18)

These next pictures correspond to the solver I made:

This is why I can say that the optimal flow
distribution to satisfy the demand
minimizing costs is 1434.
6.

Now we are going to modify the A problem. We have to find the minimal value of the total
fund in order to satisfy all proposed goals.

If we compare to the exercise from the public health, we can try to take into consideration the
money constraints and we can also try to minimize then objective function.

If we put it on Excel, we can say that the answer on the Excel document is:

These are the formulas:
- A17 =SOMMEPROD(A6:E6;$A$5:$E$5)
- E16 =SOMME(A20:A22)

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