LGT5102 Models for decision making

Linear Programming: What-If Analysis

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Essence of What-If Analysis
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Continuing the Wyndor Case Study
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Changes in One Objective Function Coefficient (Case 1,
Sec 3)
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Simultaneous Changes in Objective Function
Coefficients (Case 2, Sec 4)
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Single Change in a Constraint (Case 3, Sec 5)
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Simultaneous Changes in the Constraints (Case 4, Sec
6)
 Essence of What-If Analysis

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Formulate LP → solve for optimal solution → manager
implement the optimal solution → done!?
 What would happen to the optimal solution if

parameters are not accurately estimated?

 What would happen if future conditions change?

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What-if (sensitivity, post-optimality) analysis: important
part of most LP studies
 To investigate the effect on the optimal solution if

parameters take on other possible values

 Performed after finding an optimal solution for “basic”

model
 Identify which parameters are most sensitive
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 Wyndor (before what-if analysis; revisited)
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Wyndor product mix
– 3 plants with limited production capacity
– 2 new products to be introduced
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Question: decide production rates of 2 products so as to maximize the total
profit (per week) subject to available production capacity.

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Wyndor: Management's What-If Questions
(Examples)

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What happens if the estimate of the unit profit of one of
Wyndor's new products is inaccurate? (Case 1)
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What happens if the estimate of the unit profit of both of
Wyndor's new products are inaccurate? (Case 2)
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What happens if a change is made in the number of
hours of production time per week being made available
to Wyndor's new products in one of the plants? (Case 3)
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What happens if simultaneous changes are made in the
number of hours of production time per week being
made available to Wyndor's new products in all the
plants? (Case 4)
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 Case 1: Effect of changes in one objective
function coefficient
Using the Spreadsheet to do Sensitivity Analysis

The profit per door has been revised from $300 to $200.
No change occurs in the optimal solution.

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 Using the Spreadsheet to do Sensitivity Analysis

The profit per door has been revised from $300 to $500.
No change occurs in the optimal solution.

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 Using the Spreadsheet to do Sensitivity Analysis

The profit per door has been revised from $300 to $1,000.
The optimal solution changes.

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 Using SolverTable to create one-way table

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Unit profit per door (cell C4)
varies from 100 to 1000 in
increments of 100
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Show the optimal profit and the
optimal product mix (decision
variable cells) in a one-way table

[Note: Require the SolverTable addin;

refer to the lecture notes.]

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 Using the Sensitivity Report to Find the Allowable Range

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Allowable range (increase/decrease) for objective coefficient:
– the range for the objective coefficient of a decision variable, within
which the optimal solution remains unchanged.

Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$C$12 Units Produced Doors 2 0 300 450 300
$D$12 Units Produced Windows 6 0 500 1E+30 300

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Case 2: Effect of simultaneous changes in
objective function coefficient
Using the Spreadsheet to do Sensitivity Analysis

The profit per door has been revised from $300 to $450.
The profit per window has been revised from $500 to $400.
No change occurs in the optimal solution.
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 Using the Spreadsheet to do Sensitivity Analysis

The profit per door has been revised from $300 to $600.
The profit per window has been revised from $500 to $300.
The optimal solution changes.
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 Using SolverTable to create two-way table

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Both unit profit per door (C4)
and unit profit per window
(D4) are being varied
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Show the number of windows
produced (D12 or
UnitsProduced_2) and the
optimal TotalProfit in a two-
way table

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 The 100 Percent Rule

The 100 Percent Rule for Simultaneous Changes in Objective

Function Coefficients:
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Calculate for each change the percentage of the allowable
change (increase or decrease) for that coefficient to remain
within its allowable range.
– If the sum of the percentage changes does not exceed 100
percent, the original optimal solution definitely will still be
optimal.
– If the sum does exceed 100 percent, then we cannot be sure.
 Case 3: Effect of single change in a
constraint
Using the Spreadsheet to do Sensitivity Analysis

The hours available in plant 2 have been increased from 12 to 13.

The total profit increases by $150 per week.
(“Shadow price” is $150 per week.)
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 Using the Spreadsheet to do Sensitivity Analysis

The hours available in plant 2 have been further increased from 13 to 18.
The total profit increases by $750 per week ($150 per hour added in plant 2).
(“Shadow price” is still $150 per week.)

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 Using the Spreadsheet to do Sensitivity Analysis

The hours available in plant 2 have been further increased from 18 to 20.
The total profit does not increase any further.

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Using SolverTable to create one-way table

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One-way table example:
 show how the changing
cells and total profit change
as the number of available
hours in Plant 2 range
between 4 and 20.
 (Exercise: how to create
the table?)

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 Using the Sensitivity Report

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Shadow price: How much the optimal objective value changes when
the R.H.S of a constraint increase by 1.
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Allowable range (increase/decrease) for RHS of constraint:

the range for the R.H.S of this constraint, over which the shadow
price remains valid.

Variable Cells
Final Reduced Objective Allowable Allowable
Cell Name Value Cost Coefficient Increase Decrease
$C$12 Units Produced Doors 2 0 300 450 300
$D$12 Units Produced Windows 6 0 500 1E+30 300

Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$E$7 Plant 1 Used 2 0 4 1E+30 2
$E$8 Plant 2 Used 12 150 12 6 6
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$E$9 Plant 3 Used 18 100 18 6 6
 Case 4: Effect of Simultaneous Changes in the
Constraints
Using the Spreadsheet to do Sensitivity Analysis

One available hour in plant 3 has been shifted to plant 2.

The total profit increases by $50 per week.

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 Creative use of data table, example

Spreadsheet modified to generate a one-way table:

By inserting a formula into cell G8 [=H8-G9] that keeps the

total number of hours available in plant 2 and 3 equal to 30, it
will be possible to generate a one-way table to show the effect
of shifting more and more of the hours from plant 3 to plant 2.20
 Creative use of data table (con’t)

This one-way table (formatted) shows the effect of shifting

more and more of the hours available from plant 3 to plant
2 for the Wyndor problem.

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 The 100 Percent Rule

The 100 Percent Rule for Simultaneous Changes in Right-Hand

Sides (RHS):
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The shadow prices remain valid (for predicting the effect of
simultaneously changing the RHS of some of the functional
constraints) as long as the changes are not too large.
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To check whether the changes are small enough, calculate for each
change the percentage of the allowable change (decrease or
increase) for that RHS to remain within its allowable range.
– If the sum of the percentage changes does not exceed 100
percent, the shadow prices definitely will still be valid.
– If the sum does exceed 100 percent, then we cannot be sure.
 Sensitivity report (summary)
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Objective coefficient – allowable range (increase/decrease):
the range for the objective coefficient of a decision variable,
within which the optimal solution remains unchanged.
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Constraint R.H.Side – allowable range (increase/decrease): the
range for the R.H.S of this constraint, over which the shadow
price remains valid.
 For nonbinding constraint: the range of the R.H.S so that the

constraint keeps non-binding

 For binding constraint:

 Allowable increase: the maximum amount to add on the

R.H.S so that the constraint keeps binding.

 Allowable decrease: the minimum amount to subtract

from the R.H.S so that some other binding constraint

becomes non-binding.
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Shadow price: How much the optimal objective value changes
when the R.H.S of a constraint increase by 1.
 Assignment

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Review
 Slides, lecture notes (incl. review questions)
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Assignment
 Problem 1 (P&G Selling Soap)
 Submission via Blackboard: due date (refer to Blackboard)
 Requirement: (1) please upload a single Word file for question answers
(incl. explanation of your models and solutions) and a single Excel file
containing spreadsheets. Name them (work/spreadsheet files) properly.
(2) You may work individually or in groups of two. If you work in
a group, only one submission (via Blackboard) is required.
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Preview for next class
 Lecture notes “modeling with spreadsheets”

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