Linear Programming

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Decision Making
 Decision Making involves the use of a rational process for
selecting the best of several alternatives.
 The goodness of a selected alternative depend on the
quality of the data used in describing the decision
situation.
 From this standpoint, a decision- making process can fall
into one of three categories:

1. Decision making under certainty- Data are well defined and

deterministic.
2. Decision making under risk- Data can be described by
probability distributions.
3. Decision making under uncertainty- Data are ambiguous.
Data cannot be assigned weights that represent their degree
of relevance.
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Systems approach to problem solving

1. Problem definition- defining the scope of the

problem under investigation.
- Description of the decision alternatives.
- Determination of the objective of the study.
- Specification of the limitations under which the
modeled system operates.
2. Model construction.
3. Model analysis
- Determining a solution
- Testing a solution
- Interpreting and analyzing solution
4. Implementation and follow-up.

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Linear Programming (LP)

Linear programming is a mathematical technique

that enables a decision maker to arrive at the
optimal solution to problems involving the
allocation of scarce resources.

Typically, many economic and technical

problems involve maximization or minimization of
a certain objective subject to some restrictions.

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Examples of Business Problems for Modeling
1. A manufacturer wants to develop a production
schedule and inventory policy that will satisfy
sales demand in future periods and same time
minimize the total production and inventory
cost.

2. A financial analyst must select an investment

portfolio from a variety of stock and bond
investment alternatives. He would like to
establish the portfolio that maximizes the
return on investment.

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 Typical Applications of Linear
Programming contd…
3. A marketing manager wants to determine how to
best allocate a fixed advertising budget among
alternative advertising media such as radio, TV,
newspaper, and magazines. The goal is to
maximize advertising effectiveness.

4. A company has warehouses in a number of

locations throughout the country. For a set of
customer demands for its products, the company
would like to determine how much each
warehouse should ship to each customer so that
the total transportation costs are minimized.
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Constructing Linear Programming Models
Next we list what is required in order to construct
a linear programming model:

1. Objective Function. There must be an objective

(or goal or target) the firm or organization
wants to achieve.
For example, maximize profits, minimize cost,
maximize total number of expected potential
customers, minimize total time used, and so
forth.

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Constructing Linear Programming
Models contd…

2. Restrictions and Decisions. There must be

alternative courses of action or decisions, one of
which will achieve the objective.

3. Linear Objective Function and Linear Constraints.

We must be able to express the decision problem
incorporating the objective and restrictions on
the decisions using only linear equations and
linear inequalities. i.e., we must be able to state
the problem as a linear programming model.
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Three basic steps in constructing a linear
programming model:

Step I
Identify the unknown variables to be
determined (decision variables), and
represent them in terms of algebraic
symbols.

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Three basic steps in constructing a linear
programming model:

Step II
Identify all the restrictions or
constraints in the problem and
express them as linear equations or
inequalities which are linear functions
of the unknown variables.

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Three basic steps in constructing a linear
programming model:

Step III
Identify the objective or criterion
and represent it as a linear
function of the decision variables,
which is to be maximized or
minimized.

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Assumptions of Linear Programming
 Certainty.
In all LP models it is assumed that, all the model
parameters such as availability of resources, profit (or
cost) contribution of a unit of decision variable and
consumption of resources by a unit of decision variable
must be known with certainty and constant.

 Divisibility (Continuity)
The solution values of decision variables and resources
are assumed to have either whole numbers (integers) or
mixed numbers (integer or fractional). However, if only
integer variables are desired, then Integer programming
method may be employed.

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Assumptions of Linear Programming
 Additivity
The value of the objective function for the given value
of decision variables and the total sum of resources
used, must be equal to the sum of the contributions
(Profit or Cost) earned from each decision variable
and sum of the resources used by each decision
variable respectively. /The objective function is the
direct sum of the individual contributions of the
different variables.

 Linearity
All relationships in the LP model (i.e. in both objective
function and constraints) must be linear.

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Application Example 1
Product-Mix Problem

ABC Company wishes to schedule

the production of a kitchen appliance
which requires two resources – labor
and material. The company is
considering three different models of
this appliance and its engineering
department has furnished the
following data:

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Resources required Product/Model Resources
to produce 1 unit A B C Available
Labour (hours/unit) 7 3 6 150
Material (lbs./unit) 4 4 5 200
Profit ($/unit) 4 2 3

The supply of raw materials is restricted to 200 pounds

per day. The daily availability of manpower is 150 hours.

Formulate a linear programming model to determine the daily

production rate of the various models of appliances in order
to maximize the total profit.
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Step I: Identify the Decision Variables.

The unknown activities to be determined are the

daily rate of production for the three models (A, B,
C) in order to maximize the total profit.
Representing them by algebraic symbols,

xA = daily production of model A

xB = daily production of model B
xC = daily production of model C

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Step II: Identify the Constraints.

In this problem the constraints are the limited

availability of the two resources (labor and
material).

Model A requires 7 hours of labor for each unit,

and its production quantity is xA. Hence, the
requirement of manpower for model A alone
will be 7xA hours (assuming a linear
relationship).
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 Similarly, models B and C will require 3xB and 6xC
hours, respectively. Thus, the total requirement
of labor will be
7xA + 3xB + 6xC, which should not exceed the
available 150 hours.

So the labor constraint becomes:

7xA + 3xB + 6xC  150

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Similarly, the raw material constraint is given by

4xA + 4xB + 5xC  200

In addition, we restrict the variables to have non-

negative values. This is called the non-negativity
constraint, which the variables must satisfy
xA, xB and xC  0.

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Step III: Identifying the Objective.

The objective is to maximize the total profit from

the sales. Assuming that perfect market exists
for the product such that all that is produced can
be sold, the total profit from sales becomes

Z = 4xA + 2xB + 3XC.

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Thus, the linear programming model
for the product mix problem is:

Find xA, xB, xC which will maximize

Z = 4xA + 2xB + 3XC

subject to the constrains

7xA + 3xB + 6xC  150

4xA + 4xB + 5xC  200
xA  0, xB  0, xC  0
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Solving Linear Programming Problems
 Graphical Technique
 First graph the constraints:
the solution set of the system is that
region (or set of ordered pairs), which
satisfies ALL the constraints. This region
is called the feasible set

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 Graphical Technique contd…

￭ Locate all the corner points of the graph:

the coordinates of the corners will be
determined algebraically
It is important to note that the optima is
obtained at the boundary of the solution set
and furthermore at the corner points.
For linear programs, it can be shown that the
optima will always be obtained at corner
points.
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Graphical Technique contd…
￭ Determine the optimal value:
test all the corner points to see which
yields the optimum value for the
objective function

Objective function

Feasible
set Optimum

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 Application Example 2

Suppose a company produces two types of widgets, manual and electric.

Each requires in its manufacture the use of three machines; A, B, and C.
A manual widget requires the use of the machine A for 2 hours, machine
B for 1 hour, and machine C for 1 hour. An electric widget requires 1
hour on A, 2 hours on B, and 1 hour on C. Furthermore, suppose the
maximum numbers of hours available per month for the use of machines
A, B, and C are 180, 160, and 100, respectively. The profit on a manual
widget is $4 and on electric widget it is $6. See the table below for a
summary of data. If the company can sell all the widgets it can produce,
how many of each type should it make in order to maximize the monthly
profit?
Manual Electric Hours
available
A 2 1 180
B 1 2 160
C 1 1 100
profit $4 $6 25
 Example 2 continued

Step I Identify decision variables:

x = number of manual widgets
y = number of electric widgets

Step II Identify constraints:

2x + y  180
x + 2y  160
x + y  100
x0
y0

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 Example 2 continued

Step III Define objective function:

max P = 4x + 6y

Solving P for y gives

y = (-2/3)x + P/6.

This defines a so-called ”family” of parallel lines,

isoprofit lines.
Each line gives all possible combinations of x and y
that yield the same profit.
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Example 2 continued

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Example 2 continued

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 Application Example 3
 A city hospital has the following minimal daily requirements for nurses:

Period Clock time (24 hours Minimum

day) number of
nurses required
1 6 a.m. – 10 a.m. 2
2 10 a.m. – 2 p.m. 7
3 2 p.m. – 6 p.m. 15
4 6 p.m. – 10 p.m. 8
5 10 p.m. – 2 a.m. 20
6 2 a.m. – 6 a.m. 6

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Nurses report at the hospital at the beginning of
each period and work for 8 consecutive hours.
The hospital wants to determine the minimal
number of nurses to be employed so that there
will be a sufficient number of nurses available
for each period. Formulate this as a linear
programming problem by setting up appropriate
constraints and objective function.

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 Application Example 4
Financial planning
 A bank makes four kinds of loans to its personal customers and
these loans yield the following annual interest rates to the bank:
 First mortgage 14%
 Second mortgage 20%
 Home improvement 20%
 Personal overdraft 10%
The bank has a maximum foreseeable lending capability of Rs. 250
million and is further constrained by the policies:
1. first mortgages must be at least 55% of all mortgages issued and
at least 25% of all loans issued (in Rs. terms)
2. second mortgages cannot exceed 25% of all loans issued (in Rs.
terms)
3. to avoid public displeasure and the introduction of a new windfall
tax the average interest rate on all loans must not exceed 15%.
 Formulate the bank's loan problem as an LP so as to maximize
interest income whilst satisfying the policy limitations.

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 Application Example 5
 A company assembles four products (1, 2, 3, 4) from
delivered components. The profit per unit for each
product (1, 2, 3, 4) is Rs 10, Rs 15, Rs 22 and Rs 17
respectively. The maximum demand in the next week
for each product (1, 2, 3, 4) is 50, 60, 85 and 70 units
respectively.
 There are three stages (A, B, C) in the manual assembly
of each product and the man-hours needed for each
stage per unit of product are shown below:
 Product 1 2 3 4
 Stage A 2 2 1 1
B 2 4 1 2
C 3 6 1 5

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 The nominal time available in the next week for
assembly at each stage (A, B, C) is 160, 200 and 80
man-hours respectively.
 It is possible to vary the man-hours spent on
assembly at each stage such that workers previously
employed on stage B assembly could spend up to
20% of their time on stage A assembly and workers
previously employed on stage C assembly could spend
up to 30% of their time on stage A assembly.
 Production constraints also require that the ratio
(product 1 units assembled)/(product 4 units
assembled) must lie between 0.9 and 1.15.
 Formulate the problem of deciding how much to
produce next week as a linear program.

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Application Example 6
An advertising company wishes to plan an advertising
campaign in three different media – television, radio, and
magazines. The purpose of the advertising program is to
reach as many potential customers as possible. Result of
a market study are given below:
TV, TV,
day time prime time Radio Magazines
Cost of an
Advertising 40 000 75 000 30 000 15 000
unit, in $
# of potential
customers 400 000 900 000 500 000 200 000
reached/unit
# of women
customers 300 000 400 000 200 000 100 000
reached/unit

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The company does not want to spend more than
$800 000 on advertising. It further requires that
(1) at least 2 million exposures take place among
women; (2) advertising on TV be limited to $500
000; (3) at least 3 advertising units be bought on
day time TV, and two units during prime time;
and (4) the number of advertising units on radio
and magazines should each be between 5 and 10.
Formulate as an LP-problem

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Assume no of tv day time ads=w
no of tv prime time ads=x
no of radio ads=y
no of magazines ads=z

40000w+75000x+30000y+15000z<=800000

Constraints:
(1) 300000w+400000x+200000y+100000z>=2000000
(2) 40000w+75000x<=500000
(3) w>=3, x>=2
(4) 5<=y<=10
5<=z<=10
w,x,y,z>=0

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Example 7
Solve the following LPP by graphical method
Maximize Z = 2.80X1 + 2.20X2
Subject to constraints
X1 ≤ 20,000
X2 ≤ 40,000
0.003X1 + 0.001X2 ≤ 66
X1 + X2 ≤ 45,000
X1, X2 ≥ 0
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Solution:
The first constraint X1 ≤ 20,000 can be
represented as follows.
We set X1 = 20,000
The second constraint X2 ≤ 40,000 can be
represented as follows,
We set X2 = 40,000

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The third constraint 0.003X1 + 0.001X2 ≤ 66 can be
represented as follows, We set 0.003X1 + 0.001X2 = 66
When X1 = 0 in the above constraint, we get,
0.003 x 0 + 0.001X2 = 66
X2 = 66/0.001 = 66,000
Similarly when X2 = 0 in the above constraint, we get,
0.003X1 + 0.001 x 0 = 66
X1 = 66/0.003 = 22,000
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The fourth constraint X1 + X2 ≤ 45,000 can be
represented as follows, We set X1 + X2 = 45,000
When X1 = 0 in the above constraint, we get,
0 + X2 = 45,000
X2 = 45,000
Similarly when X2 = 0 in the above constraint, we get,
X1 + 0 = 45,000
X1 =45,000
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Point X1 X2 Z = 2.80X1 + 2.20X2
0 0 0 0
Z = 2.80 x 0 + 2.20 x 40,000 =
A 0 40,000
88,000
Z = 2.80 x 5,000 + 2.20 x
B 5,000 40,000
40,000 = 1,02,000
Z = 2.80 x 10,500 + 2.20 x
C 10,500 34,500
34,500 = 1,05,300* Maximum
Z = 2.80 x 20,000 + 2.20 x
D 20,000 6,000
6,000 = 69,200
Z = 2.80 x 20,000 + 2.20 x 0 =
E 20,000 0
56,000

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The Maximum profit is at point C
When X1 = 10,500 and X2 = 34,500
Z = 1,05,300

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Example 8

Solve the following LPP by graphical method

Maximize Z = 10X1 + 8X2
Subject to constraints,
2X1 + X2 ≤ 20
X1 + 3X2 ≤ 30
X1 - 2X2 ≥ -15
X1 X2 ≥ 0

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Solution:
The first constraint 2X1 + X2 ≤ 20 can be
represented as follows.
We set 2X1 + X2 = 20
When X1 = 0 in the above constraint, we get,
2 x 0 + X2 = 20
X2 = 20

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Similarly when X2 = 0 in the above constraint, we get,
2X1 + 0 = 20
X1 = 20/2 = 10
The second constraint X1 + 3X2 ≤ 30 can be
represented as follows,
We set X1 + 3X2 = 30

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When X1 = 0 in the above constraint, we get,
0 + 3X2 = 30
X2 = 30/3 = 10
Similarly when X2 = 0 in the above constraint, we get,
X1 + 3 x 0 = 30
X1 = 30

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The third constraint X1 - 2X2 ≥ -15 can be represented
as follows,
We set X1 - 2X2 = -15
When X1 = 0 in the above constraint, we get,
0 - 2X2 = -15
X2 = -15/2 = 7.5
Similarly when X2 = 0 in the above constraint, we get,
X1 – 2 x 0 = -15
X1 = -15
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Point X1 X2 Z = 10X1 + 8X2
0 0 0 0
A 0 7.5 Z = 10 x 0 + 8 x 7.5 = 60
B 3 9 Z = 10 x 3 + 8 x 9 = 102
Z = 10 x 6 + 8 x 8 = 124*
C 6 8
Minimum
D 10 0 Z = 10 x 10 + 8 x 0 = 100
The Maximum profit is at point C
When X1 = 6 and X2 = 8
Z = 124

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Sensitivity Analysis
 Deals with obtaining additional information
about the behavior of optimal solution when
the model undergoes some parameter
(objective & constraint coefficients) changes.
 LP model is a snapshot of a real situations in
which the model parameters assume static
values.
 To enhance the applicability we add a dynamic
dimension that investigates the impact of
making changes in the model parameters on
the optimal solution.
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