Goal Programming

Dr. Mukesh Kumar Mehlawat

Goal Programming - Definition
Goal programming (GP) is a branch of Multi Objective Optimization, which in turn is a
branch of Multi-Criteria Decision Analysis (MCDA). This is an optimization program. It
can be thought of as an extension or generalization of linear programming to handle
multiple, normally conflicting objective measures. Each of these measures is given a
goal or target value to be achieved. Unwanted deviations from this set of target
values are then minimized in an achievement function. This can be a vector or
a weighted sum dependent on the goal programming variant used. As satisfaction of
the target is deemed to satisfy the decision maker(s), an underlying satisficing
philosophy is assumed.

Goal programming is used to perform three types of analysis:

• Determine the required resources to achieve a desired set of objectives.

• Determine the degree of attainment of the goals with the available resources.
• Providing the best satisfying solution under a varying amount of resources and
priorities of the goals.
Basic Definitions
Decision : The decision maker(s) refer to the person(s), organization(s), or
Maker stakeholder(s) to whom the decision problem under consideration belongs.

Criterion : A criterion is a single measure by which the goodness of any solution to a

decision problem can be measured. There are many possible criteria arising
from different fields of application but some of the most commonly arising
relate at the highest level to:
• Cost
• Profit
• Time
• Distance
• Performance of a system
• Company or organizational strategy
• Personal preferences of the decision maker(s)
• Safety considerations

A decision problem which has more than one criterion is therefore referred
to as a multi-criteria decision making (MCDM) or multi-criteria decision aid
(MCDA) problem. The space formed by the set of criteria is known as
criteria space.
Decision : A decision variable is defined as a factor over which the decision maker has
Variable control. An example is a manufacturing company which has to decide how
many of a certain product to make in the next month.
The set of decision variables fully describe the problem and form the
decision to be made. The purpose of the goal programming model can be
viewed as a search of all the possible combinations of decision variable
values (known as decision space) in order to determine the point which best
satisfies the decision maker’s goals and constraints.

Objective : An objective is be referred to as a criterion with the additional information

of the direction (maximize or minimize) in which the decision maker(s)
prefer on the criterion scale, for example minimize cost or maximize the
performance of a system. A decision problem with a set of objectives to be
maximized or minimized is referred to as a multi-objective optimization
problem. In practice, these objectives will be conflicting, that is they cannot
reach their optimal values simultaneously. If they could, then the model can
be solved as a single-objective problem for any of the objectives. The space
formed by the values of the set of objectives is known as objective space.
Aspiration : The numerical value specified by the decision maker that reflects his/her
Level desire or satisfactory level with regard to the objective function under
consideration

Goal : An objective function along with its aspiration level

Goal Deviation : The difference between what we actually achieve and what we desire to
achieve.
If the Goal Deviation is positive, it reflects over-achievement of a goal
as the actual achieved value is more than the aspiration level.
On the other hand, a negative value of Goal Deviation denotes under -
achievement of the goal as the aspired level is more than what we could
actually manage to achieve.
Formulation of GP Problems
 Desirable vs. Undesirable Deviations: (depend on the objectives)
• Max goals (≥) - the more the better - 𝑑𝑑𝑖𝑖+ or 𝑝𝑝𝑖𝑖 desirable.
• Min goals (≤) - the less the better - 𝑑𝑑𝑖𝑖− or 𝑛𝑛𝑖𝑖 desirable.
• Exact goals (=) - exactly equal - both 𝑑𝑑𝑖𝑖+ (or 𝑝𝑝𝑖𝑖 ) and 𝑑𝑑𝑖𝑖− (or 𝑛𝑛𝑖𝑖 ) undesirable

 In all the situations, we first identify the undesirable deviation of the expression in
the goal and then attempt to minimize the same.

 In GP, the objective is to minimize the (weighted) sum of undesirable deviations

(all undesirable 𝑑𝑑𝑖𝑖+ (or 𝑝𝑝𝑖𝑖 ) and 𝑑𝑑𝑖𝑖− (or 𝑛𝑛𝑖𝑖 ) →→ 0 ).

 For each goal, at least, one of 𝑑𝑑𝑖𝑖+ (or 𝑝𝑝𝑖𝑖 ) and 𝑑𝑑𝑖𝑖− (or 𝑛𝑛𝑖𝑖 ) must be equal to "0“

 The actual constraints of the problem are called RIGID goals or HARD goals
whereas, the goals representing the given objective functions are called SOFT
goals. When a set of criteria has been determined it is necessary to distinguish
between goals and hard constraints. Hard constraints are in variable space and are
conditions that must be satisfied in order for the solution to be implementable.
Any condition that does not fulfil this requirement should be included as a goal
and not a hard constraint.
Formulation of GP Problems
 Goals are prioritized in some sense, and their level of aspiration is stated.

 An optimal solution is attained when all the goals are reached as close as possible
to their aspiration level, while satisfying a set of constraints.

 There are two types of goal programming models:

Non- preemptive : No goal is pre-determined to dominate any other goal

goal programming
Pre-emptive goal : Goals are assigned different priority levels. Level 1
programming goal dominates level 2 goal, and so on.
Examples

1. Beaver Creek Pottery Company Example

2. Nicolo Investment Advisors Problem

Beaver Creek Pottery Company Example
The Problem (1 of 2)
Beaver Creek Pottery Company is a small crafts operation run by a Native American
tribal council. The company employs skilled artisans to produce clay bowls and mugs
with authentic Native American designs and colors. The two primary resources used
by the company are special pottery clay and skilled labor. Given these limited
resources, the company desires to know how many bowls and mugs to produce each
day in order to maximize profit.
The Problem (2 of 2)
The two products have the following resource requirements for production and profit
per item produced (i.e., the model parameters):

Resource Requirements

Labour Clay Profit

Product
( Hr./Unit ) ( Lb./Unit) ( $/Unit )

Bowl 1 4 40

Mug 2 3 50

There are 40 hours of labor and 120 pounds of clay available each day for production.
Now, the company (in order of importance, i.e. priorities):
Does not want to use fewer than 40 hours of labor per day.
Would like to achieve a satisfactory profit level of $1,600 per day.
Prefers not to keep more than 120 pounds of clay on hand each day.
Would like to minimize the amount of overtime.
Goal Constraints and Objective Function (1 of 2)
 Labor goals constraint (1, less than 40 hours labor; 4,
minimum overtime):
• Minimize {P1d1-, P4d1+}
 Add profit goal constraint (2, achieve profit of $1,600):
• Minimize {P1d1-, P2d2-, P4d1+}
 Add material goal constraint (3, avoid keeping more than 120
pounds of clay on hand):
• Minimize {P1d1-, P2d2-, P3d3+, P4d1+}
Goal Constraints and Objective Function (2 of 2)
Complete Goal Programming Model:
Minimize {P1d1-, P2d2-, P3d3+, P4d1+}
subject to:
x1 + 2x2 + d1- - d1+ = 40
40x1 + 50 x2 + d2 - - d2 + = 1,600
4x1 + 3x2 + d3 - - d3 + = 120
x1, x2, d1 -, d1 +, d2 -, d2 +, d3 -, d3 + ≥ 0
Graphical Interpretation (1 of 6)

Minimize {P1d1-, P2d2-, P3d3+, P4d1+}

subject to:
x1 + 2x2 + d1- - d1+ = 40
40x1 + 50 x2 + d2 - - d2 + = 1,600
4x1 + 3x2 + d3 - - d3 + = 120
x1, x2, d1 -, d1 +, d2 -, d2 +, d3 -, d3 + ≥ 0

Goal Constraints
Graphical Interpretation (2 of 6)

Minimize {P1d1-, P2d2-, P3d3+, P4d1+}

subject to:
x1 + 2x2 + d1- - d1+ = 40
40x1 + 50 x2 + d2 - - d2 + = 1,600
4x1 + 3x2 + d3 - - d3 + = 120
x1, x2, d1 -, d1 +, d2 -, d2 +, d3 -, d3 + ≥ 0

The First-Priority Goal: Minimize

Graphical Interpretation (3 of 6)

Minimize {P1d1-, P2d2-, P3d3+, P4d1+}

subject to:
x1 + 2x2 + d1- - d1+ = 40
40x1 + 50 x2 + d2 - - d2 + = 1,600
4x1 + 3x2 + d3 - - d3 + = 120
x1, x2, d1 -, d1 +, d2 -, d2 +, d3 -, d3 + ≥ 0

The Second-Priority Goal: Minimize

Graphical Interpretation (4 of 6)

Minimize {P1d1-, P2d2-, P3d3+, P4d1+}

subject to:
x1 + 2x2 + d1- - d1+ = 40
40x1 + 50 x2 + d2 - - d2 + = 1,600
4x1 + 3x2 + d3 - - d3 + = 120
x1, x2, d1 -, d1 +, d2 -, d2 +, d3 -, d3 + ≥ 0

The Third-Priority Goal: Minimize

Graphical Interpretation (5 of 6)

Minimize {P1d1-, P2d2-, P3d3+, P4d1+}

subject to:
x1 + 2x2 + d1- - d1+ = 40
40x1 + 50 x2 + d2 - - d2 + = 1,600
4x1 + 3x2 + d3 - - d3 + = 120
x1, x2, d1 -, d1 +, d2 -, d2 +, d3 -, d3 + ≥ 0

The Fourth-Priority Goal: Minimize

Graphical Interpretation (6 of 6)
Goal programming solutions do not always achieve all goals and
they are not optimal, they achieve the best or most satisfactory
solution possible.
Minimize {P1d1-, P2d2-, P3d3+, P4d1+}
subject to:
x1 + 2x2 + d1- - d1+ = 40
40x1 + 50 x2 + d2 - - d2 + = 1,600
4x1 + 3x2 + d3 - - d3 + = 120
x1, x2, d1 -, d1 +, d2 -, d2 +, d3 -, d3 + ≥ 0

Solution: x1 = 15 bowls
x2 = 20 mugs
d1- = 15 hours
Additional Notes
The graphical solution procedure can also be worked out as mentioned:

1. Rank the goals of the problem in order of importance (i.e., priority wise).

2. Identify the feasible solution points that satisfy the problem constraints.

3. The solution procedure considers one goal at a time, starting with the highest
priority goal and ending with the lowest. The process is carried out such that the
solution obtained from a lower – priority goal never degrades any higher –
priority solutions. Identify all feasible solutions that achieve the highest – priority
goal; if no feasible solutions achieve the highest – priority goal, identify the
solution(s) that comes closest to achieving it. Let the highest priority goal, G1,
attain a value G1 = G1*.

4. Move down one priority level. Add the constraint G1 = G1* to the existing
constraints of the problem and determine the “best” solution.

5. Repeat Step 4 until all priority levels have been considered.

The following example illustrates this procedure.

Nicolo Investment Advisors Problem
Nicolo Investment Advisors Problem
A client has $80,000 to invest and, as an initial strategy, would like the investment
portfolio restricted to two stocks:

Estimated Annual
Stock Price/Share Risk Index / Share
Return / Share
U. S. Oil $25 $3 0.50
Hub Properties $50 $5 0.25

U. S. Oil, which has a return of $3 on a $25 share price, provides an annual rate of
return of 12%, whereas Hub Properties provides an annual rate of return of 10%. The
risk index per share, 0.50 for U. S. Oil and 0.25 for Hub Properties, is a rating Nicolo
assigned to measure the relative risk of the two investments. Higher risk index values
imply greater risk; hence, Nicolo judged U. S. Oil to be the riskier investment. By
specifying a maximum portfolio risk index, Nicolo will avoid placing too much of the
portfolio in high risk investments.
To illustrate how to use the risk index per share to measure the total portfolio risk,
suppose that Nicolo chooses a portfolio that invests all $80,000 in U. S. Oil, the higher
risk but higher return, investment. Nicolo could purchase $80,000/$25 = 3200 shares
of U. S. Oil, and the portfolio would have a risk index of 3200(0.50) = 1600.
Conversely, if Nicolo purchases no shares of either stock, the portfolio will have no
risk, but also no return. Thus, the portfolio risk index would vary from 0 (least risk) to
1600 (most risk).

Nicolo’s client would like to avoid a high risk portfolio; thus, investing all funds in
U. S. Oil would not be desirable. However, the client agreed that an acceptable level
of risk would correspond to portfolios with a maximum total risk index of 700 or less.

Another goal of the client is to obtain an annual return of at least $9000. This goal
can be achieved with a portfolio consisting of 2000 shares of U. S. Oil [at a cost of
2000($25) = $50,000] and 600 shares of Hub Properties [at a cost of 600($50) =
$30,000]; the annual return in this case would be 2000($3) + 600($5) = $9,000. Note,
however, that the portfolio risk index for this investment strategy would be
2000(0.50) + 600(0.25) = 1150; thus, this portfolio achieves the annual return goal
but does not satisfy the portfolio risk index goal.
Suppose that the client’s top – priority goal is to restrict the risk; that is, keeping the
portfolio risk index at 700 or less is so important that the client is not willing to trade
the achievement of this goal for any amount of an increase in annual return. As long
as the portfolio risk index does not exceed 700, the client seeks the best possible
return. Based on this statement of priorities, the goals for the problem are as follows:

Primary Goal (Priority Level 1)

Goal 1: Find a portfolio that has a risk index of 700 or less.

Secondary Goal (Priority Level 2)

Goal 2: Find a portfolio that will provide an annual return of at least $9,000
Problem Formulation
Lex Min z = {𝑃𝑃1 d1+, 𝑃𝑃2 d2-} d- : negative deviational variable
d+: positive deviational variable

subject to:
25U + 50H ≤ 80,000 (Funds available)
0.50U + 0.25H – d1+ + d1- = 700 (Goal 1)
3U + 5H – d2+ + d2- = 9,000 (Goal 2)

U, H, d1+, d1-, d2+, d2- ≥ 0

where:
U: number of shares of U. S. Oil purchased
H: number of shares of Hub Properties purchased
Portfolios that satisfy the Available Funds Constraint

25U + 50H ≤ 80,000 (Funds available)

U, H ≥0

Feasible
Portfolios
Portfolios that satisfy the P1 Goal
Min d1+
subject to:
25U + 50H ≤ 80,000
0.50U + 0.25H – d1+ + d1- = 700
3U + 5H – d2+ + d2- = 9,000
U, H, d1+, d1-, d2+, d2- ≥ 0

d1 + = 0
Feasible
Portfolios
that will
achieve Priority
Level 1 Goal
Best Solution with respect to Both Goals
Min d2-
subject to:
25U + 50H ≤ 80,000
0.50U + 0.25H – d1+ + d1- = 700
3U + 5H – d2+ + d2- = 9,000
d1+ = 0
U, H, d1 , d1 , d2 , d2 ≥ 0
+ - + -
Final Solution
Thus, the solution recommends that :

U = 800 shares
H = 1200 shares

Note that the priority level 1 goal of a portfolio risk index of 700 or less has been
achieved. However, the priority level 2 goal of at least a $9,000 annual return is not
achievable. The annual return for the recommended portfolio is $8,400.
Example 3: Conceptual Products
Conceptual Products is a computer company that produces the CP400
and CP500 computers. Many of the components used in the two
computer models are produced in abundant supply by the company.
However, the memory modules, external hard drives, and cases are
bought from suppliers. The CP400 model uses two memory modules
and no external hard drive, whereas the CP500 uses one memory module
and one external hard drive. Both models use one case.

Suppliers can provide Conceptual Products with 1000 memory modules,

500 external hard drives, and 600 cases on a weekly basis. It takes one
hour to manufacture a CP400 and its profit is $200 and it takes one and
one-half hours to manufacture a CP500 and its profit is $500.
Example: Conceptual Products
The company has four goals:

Priority 1: Meet a state contract of 200 CP400 machines weekly.

(Goal 1)

Priority 2: Make at least 500 total computers weekly. (Goal 2)

Priority 3: Make at least $250,000 weekly. (Goal 3)

Priority 4: Use no more than 400 man-hours per week. (Goal 4)

Example: Conceptual Products
Example: Conceptual Products
Example: Conceptual Products
Example: Conceptual Products
Example: Conceptual Products
Example: Conceptual Products
Example: Conceptual Products
Example: Conceptual Products
Example: Conceptual Products