Integer Programming, Goal

Programming, and Nonlinear

Programming
Introduction
• There are other mathematical programming models that can be
used when the assumptions of LP are not met
• A large number of business problems require variables have
integer values
• Many business problems have multiple objectives
• Goal programming permits multiple objectives
• Nonlinear programming allows objectives and constraints to be
nonlinear

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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
• Three types of integer programming problems
1. Pure integer programming – all variables have integer values
2. Mixed-integer programming – some but not all of the variables will
have integer values
3. Zero-one integer programming – special cases in which all the
decision variables must have integer solution values of 0 or 1

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Harrison Electric Company Example of Integer
Programming
• Company produces two products, old-fashioned chandeliers
and ceiling fans
• Both 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
• Only 12 hours of wiring time and 30 hours of assembly time are
available
• Each chandelier produced nets the firm $7 and each fan $6
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Harrison Electric Company Example of Integer
Programming
Production mix LP formulation
Maximize profit = $7X1 + $6X2
subject to 2X1 + 3X2 ≤ 12 (wiring hours)
6X1 + 5X2 ≤ 30 (assembly hours)
X1, X2 ≥ 0
where
X1 = number of chandeliers produced
X2 = number of ceiling fans produced

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Harrison Electric Company Example of Integer
Programming
FIGURE 1 – Harrison X2
Electric Problem 6–

5–
6X1 + 5X2 ≤ 30

4–

+ = Possible Integer Solution

3– +

Optimal LP Solution
2– + + + (X1= 3.75, X2 = 1.5, Profit = $35.25

1– 2X1 + 3X2 ≤ 12
+ + + +

| | | | | |
0 1 2 3 4 5 6 X1

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Harrison Electric Company Example of Integer
Programming
• Production planner recognizes this is an integer problem
• 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
• Generally not possible for large problems

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Harrison Electric Company Example of Integer
Programming
CHANDELIERS (X1) CEILING FANS (X2) PROFIT ($7X1 + $6X2)
0 0 $0
TABLE 2 – Integer 1 0 7
Solutions to the 2 0 14
Harrison Electric
3 0 21
Company Problem
4 0 28
5 0 35 Optimal solution to
0 1 6 integer programming
problem
1 1 13
2 1 20
3 1 27
4 1 34 Solution if rounding is
0 2 12 used
1 2 19
2 2 26
3 2 33
0 3 18
1 3 25
0 4 24
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Harrison Electric Company Example of Integer
Programming

• The optimal integer solution is less than the optimal LP solution of $35.25
• An integer solution can never be better than the LP solution and is usually a
lesser value

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Mixed-Integer Programming Problem Example
• Many situations in which only some of the variables are
restricted to integers
• Bagwell Chemical Company produces two industrial chemicals
• Xyline must be produced in 50-pound bags
• Hexall is sold by the pound and can be produced in any quantity
• Both xyline and hexall are composed of three ingredients – A, B, and C
• Bagwell sells xyline for $85 a bag and hexall for $1.50 per pound

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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

18 0.4 800 lb–ingredient B

2 0.1 200 lb–ingredient C

• Objective is to maximize profit

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Mixed-Integer Programming Problem Example
Let X = number of 50-pound bags of xyline
Let Y = number of pounds of hexall
A mixed-integer programming problem as Y is not required to be an integer

Maximize profit = $85X + $1.50Y

subject to 30X + 0.5Y ≤ 2,000

18X + 0.4Y ≤ 800

2X + 0.1Y ≤ 200
X, Y ≥ 0 and X integer
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Modeling With 0-1 (Binary) Variables
• Demonstrate how 0-1 variables can be used to model several
diverse situations
• Typically a 0-1 variable is assigned a value of 0 if a certain
condition is not met and a 1 if the condition is met
• This is also called a binary variable

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Capital Budgeting Example
• Common capital budgeting problem – select 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 cannot do them all

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Capital Budgeting Example
• Objective is to maximize net present value of projects undertaken
subject to Total funds used in year 1 ≤ $20,000
Total funds used in year 2 ≤ $16,000

TABLE 3 – Quemo Chemical Company Information

PROJECT NET PRESENT VALUE YEAR 1 YEAR 2

Catalytic Converter $25,000 $8,000 $7,000
Software $18,000 $6,000 $4,000
Warehouse expansion $32,000 $12,000 $8,000
Available funds $20,000 $16,000

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Capital Budgeting Example
Decision variables 1 if catalytic converter project is funded
X1 =
0 otherwise
X2 = 1 if software project is funded
0 otherwise
X3 = 1 if warehouse expansion project is funded
0 otherwise

Formulation
Maximize NPV = 25,000X1 + 18,000X2 + 32,000X3
subject to 8,000X1 + 6,000X2 + 12,000X3 ≤ 20,000
7,000X1 + 4,000X2 + 8,000X3 ≤ 16,000
X1, X2, X3 = 0 or 1

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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

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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

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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
• Baytown, Texas
• Lake Charles, Louisiana
• Mobile, Alabama

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Fixed-Charge Problem Example
Constraints
1. Total production capacity at least 38,000 units each year
2. Number of units produced at the Baytown plant is 0 if the plant is not built
and no more than 21,000 if the plant is built
3. Number of units produced at the Lake Charles plant is 0 if the plant is not
built and no more than 20,000 if the plant is built
4. Number of units produced at the Mobile plant is 0 if the plant is not built
and no more than 19,000 if the plant is built

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Fixed-Charge Problem Example
TABLE 4 – Fixed and Variable Costs for Sitka Manufacturing

ANNUAL VARIABLE COST ANNUAL

SITE FIXED COST PER UNIT CAPACITY

Baytown, TX $340,000 $32 21,000

Lake Charles, LA $270,000 $33 20,000

Mobile, AL $290,000 $30 19,000

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Fixed-Charge Problem Example
Decision variables
X1 = 1 if factory is built in Baytown
0 otherwise

X2 = 1 factory is built in Lake Charles

0 otherwise

X3 = 1 if factory is built in Mobile

0 otherwise
X4 = number of units produced at Baytown plant

X5 = number of units produced at Lake Charles plant

X6 = number of units produced at Mobile plant

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Fixed-Charge Problem Example
Formulation
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
X1, X2, X3= 0 or 1
X4, X5, X6≥ 0 and integer
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Financial Investment Example
• Simkin, Simkin, and Steinberg specialize in recommending oil
stock portfolios
• One client has the following specifications
1. At least two Texas firms must be in the portfolio
2. No more than one investment can be made in a foreign oil company
3. 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

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Financial Investment Example
TABLE 4 – Oil Investment Opportunities

EXPECTED ANNUAL COST FOR BLOCK

STOCK COMPANY NAME RETURN ($1,000s) OF SHARES ($1,000s)
1 Trans-Texas Oil 50 480
2 British Petroleum 80 540
3 Dutch Shell 90 680
4 Houston Drilling 120 1,000
5 Texas Petroleum 110 700
6 San Diego Oil 40 510
7 California Petro 75 900

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Financial Investment Example
Formulation
Maximize return = 50X1 + 80X2 + 90X3 + 120X4 + 110X5 + 40X6 + 75X7

subject to
X1 + X4 + X5 ≥ 2 (Texas constraint)
X2 + X3 ≤ 1 (foreign oil constraint)
X6 + X7 = 1 (California constraint)
480X1 + 540X2 + 680X3 + 1,000X4 + 700X5 + 510X6 + 900X7 ≤ 3,000
($3 million limit)
Xi = 0 or 1 for all i
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Goal Programming
• Firms often have more than one goal
• In linear and integer programming methods the objective
function is measured in one dimension only
• It is not possible for LP to have multiple goals unless they are
all measured in the same units
• Highly unusual situation
• Goal programming developed to supplement LP

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Goal Programming
• Typically goals set by management can be achieved only at the
expense of other goals
• Establish a hierarchy of importance so that higher-priority goals
are satisfied before lower-priority goals
• Not always possible to satisfy every goal
• Goal programming attempts to reach a satisfactory level of
multiple objectives
• May not optimize but have to satisfice

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Goal Programming
• Main difference is in the objective function
• Goal programming tries to minimize the deviations between
goals and what can be achieved given the constraints
• Objective is to minimize deviational variables

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Harrison Electric Company Revisited
Production mix LP formulation

Maximize profit = $7X1 + $6X2

subject to 2X1 + 3X2 ≤ 12 (wiring hours)
6X1 + 5X2 ≤ 30 (assembly hours)
X1, X2 ≥ 0
where
X1 = number of chandeliers produced
X2 = number of ceiling fans produced

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Harrison Electric Company Revisited
• Moving to a new location and maximizing profit is not a realistic
objective
• A profit level of $30 would be satisfactory during this period
• The goal programming problem is to find the production mix that
achieves this goal as closely as possible given the production time
constraints
• Define two deviational variables
d1– = underachievement of the profit target
d1+ = overachievement of the profit target

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Harrison Electric Company Revisited
Single-goal programming formulation
Minimize under or
overachievement = d1– + d1+
of profit target

subject to
$7X1 + $6X2 + d1– – d1+ = $30 (profit goal
constraint)
2X1 + 3X2 ≤ 12
(wiring hours)
6X1 + 5X2 ≤ 30
(assembly hours)
X1, X2, d1–, d1+ ≥ 0 32
Harrison Electric Company Revisited

• Analyze each goal to see if underachievement or overachievement of that

goal is acceptable
• If overachievement is acceptable, eliminate the appropriate d+ variable from
the objective function
• If underachievement is okay, the d– variable should be dropped
• If a goal must be attained exactly, both d– and d+ must appear in the
objective function

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Extension to Equally Important Multiple Goals
Achieve several goals that are equal in priority
Goal 1: to produce a profit of $30 if possible during the production period
Goal 2: to fully utilize the available wiring department hours
Goal 3: to avoid overtime in the assembly department
Goal 4: to meet a contract requirement to produce at least seven ceiling fans

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Extension to Equally Important Multiple Goals
The deviational variables can be defined as
d1– = underachievement of the profit target
d1+ = overachievement of the profit target
d2– = idle time in the wiring department (underutilization)
d2+ = overtime in the wiring department (overutilization)
d3– = idle time in the assembly department (underutilization)
d3+ = overtime in the assembly department (overutilization)
d4– = underachievement of the ceiling fan goal
d4+ = overachievement of the ceiling fan goal

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Extension to Equally Important Multiple Goals
Management is unconcerned about d1+, d2+, d3–, and
d4+ so these may be omitted from the objective function
New objective function and constraints
Minimize total deviation = d1– + d2– + d3+ + d4–

subject to
$7X1 + $6X2 + d1– – d1+ = $30 (profit constraint)
2X1 + 3X2 + d2– – d2+ = 12 (wiring hours
constraint)
6X1 + 5X2 + d3– – d3+ = 30 (assembly hours
constraint)
X2 + d4– – d4+ = 7 (ceiling fan constraint)
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All Xi, di variables ≥ 0
Ranking Goals with Priority Levels
• In most goal programming problems, one goal will be more
important than another
• Lower-order goals considered only after higher-order goals are
met
• Priorities (Pis) are assigned to each deviational variable
• P1 is the most important goal
• P2 the next most important
• P3 the third, and so on

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Ranking Goals with Priority Levels
Harrison Electric has set the following priorities for their
four goals
GOAL PRIORITY
Reach a profit as much above $30 as possible P1
Fully use wiring department hours available P2
Avoid assembly department overtime P3
Produce at least seven ceiling fans P4

Priority 1 is infinitely more important than

Priority 2, which is infinitely more important
than the next goal, and so on

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Ranking Goals with Priority Levels
Harrison Electric has set the following priorities for their four
goals
GOAL PRIORITY
Reach a profit as much above $30 as possible P1
Fully use wiring department hours available P2
Avoid assembly department overtime P3
Produce at least seven ceiling fans P4

With ranking of goals considered, the new objective function

is
Minimize total deviation = P1d1– + P2d2– + P3d3+ + P4d4–

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Goal Programming with Weighted Goals
• Priority levels assume that each level is infinitely more important
than the level below it
• However a goal may be only two or three times more important
than another
• Instead of placing these goals on different levels, they are
placed on the same level but with different weights
• The coefficients of the deviation variables in the objective
function include both the priority level and the weight

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Goal Programming with Weighted Goals
• Suppose Harrison decides to add another goal of producing at least two
chandeliers
• The goal of producing seven ceiling fans is considered twice as important
as this goal
• The goal of two chandeliers is assigned a weight of 1 and the goal of
seven ceiling fans is assigned a weight of 2 and both of these will be
priority level 4
• The new constraint and objective function are
X1 + d5– – d5+ = 2 (chandeliers)
Minimize
total = P1d1– + P2d2– + P3d3+ + P4(2d4–) + P4d5–
deviation

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Nonlinear Programming
• The methods seen so far have assumed that the objective
function and constraints are linear
• However, there are many nonlinear relationships in the real
world that would require the objective function and/or constraint
equations to be nonlinear
• Computational procedures for nonlinear programming (NLP)
may only provide a local optimum solution rather than a global
optimum

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Nonlinear Objective Function and Linear
Constraints
• The Great Western Appliance Company sells two models of toaster
ovens, the Microtoaster (X1) and the Self-Clean Toaster Oven (X2)
• They earn a profit of $28 for each Microtoaster no matter the number
of units sold
• For the Self-Clean oven, profits increase as more units are sold due to
a fixed overhead
– The profit function for the Self-Clean oven
21X2 + 0.25X22

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Nonlinear Objective Function and Linear
Constraints
• The objective function is nonlinear and there are two linear constraints on
production capacity and sales time available

Maximize profit = 28X1 + 21X2 + 0.25X22

subject to
X1 + X2 ≤ 1,000 (units of production
capacity)
0.5X1 + 0.4X2 ≤ 500 (hours of sales time
available)
X1, X2 ≥ 0
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Nonlinear Objective Function and Linear
Constraints
• The objective function is nonlinear and there are two linear constraints on
production capacity and sales time available
Maximize profit = 28X1 + 21X2 + 0.25X22
subject to
X1 + X2 ≤ 1,000 (units of production
capacity)
0.5X1 + 0.4X2 ≤ 500 (hours of sales time available)
X1, X2 ≥ 0

When an objective function contains a squared term and the problem

constraints are linear, it is called a quadratic programming problem
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Both Nonlinear Objective Function and
Nonlinear Constraints
• The annual profit at a medium-sized (200-400 beds) Hospicare
Corporation hospital depends on
• The number of medical patients admitted (X1)
• The number of surgical patients admitted (X2)
• The objective function for the hospital is nonlinear
• There are three constraints, two of which are nonlinear
• Nursing capacity - nonlinear
• X-ray capacity - nonlinear
• Marketing budget required

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Both Nonlinear Objective Function and
Nonlinear Constraints
• Objective function and constraint equations

Maximize profit = $13X1 + $6X1X2 + $5X2 + $1/X2

subject to
2X12 + 4X2 ≤ 90 (nursing capacity in thousands of
labor-days)
X1 + X23 ≤ 75 (x-ray capacity in thousands)
8X1 – 2X2 ≤ 61 (marketing budget required in
thousands of $)

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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

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Linear Objective Function and Nonlinear
Constraints
• Objective function and constraints

Minimize costs = $5X1 + $7X2

subject to
3X1 + 0.25X12 + 4X2 + 0.3X22 ≥ 125 (hardness
constraint)
13X1 + X13 ≥ 80 (tensile strength)
0.7X1 + X2 ≥ 17 (elasticity)

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