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Integer Programming Lecture 2

The document discusses several examples of integer programming problems including capital budgeting, vehicle routing, staff scheduling, and facility location. It also provides examples of formulations for problems involving selecting optimal ingot sizes for steel production and determining optimal production quantities for multiple products given material constraints. Integer programming can be used to model problems with logical constraints and indivisibilities that require variables to take on integer values.

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ESHAAN KULSHRESHTHA
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© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
30 views

Integer Programming Lecture 2

The document discusses several examples of integer programming problems including capital budgeting, vehicle routing, staff scheduling, and facility location. It also provides examples of formulations for problems involving selecting optimal ingot sizes for steel production and determining optimal production quantities for multiple products given material constraints. Integer programming can be used to model problems with logical constraints and indivisibilities that require variables to take on integer values.

Uploaded by

ESHAAN KULSHRESHTHA
Copyright
© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Linear Integer Programming

Possible constraints in integer


programs
• The previous constraints represent
“economic indivisibilities”, either a
project is selected, or it is not. There is
no selecting of a fraction of a project.

• Similarly, integer variables can model


logical requirements (e.g., if stock 2 is
selected, then so is stock 1.)
Applications
• Capital budgeting
• Vehicle routing
• Staff scheduling
• Facility location
• Fixed charge problems
Capital Budgeting Example
The Ice-Cold Refrigerator Company is
considering investing in several projects that
have varying capital requirements over the next
four years. Faced with limited capital each
year, management would like to select the most
profitable projects. The estimated net present
value for each project, the capital requirements,
and the available capital over the four-year
period are shown on the next slide.
Capital Budgeting Example (contd.)
Project
Plant Warehouse New New
Expansion Expansion Machinery Product
research
Present 90 40 10 37 Total capital
Value available
Year 1 Cap 15 10 10 15 40
requirement
Year 2 Cap 20 15 10 50
requirement
Year 3 Cap 20 20 10 40
requirement
Year 4 Cap 15 5 4 10 35
requirement
All figures are in Rs. crores
Capital Budgeting Example (contd.)
 Optimal Solution
P = 1, W = 1, N = 1, R = 0.
Total estimated net present value = 140 crores.

The company should fund the plant expansion, the


warehouse expansion, and the new machinery projects.
The new product research project should be put on hold
unless additional capital funds become available.
The company will have 5 cr remaining in year 1, 15cr
remaining in year 2, and 11 cr remaining in year 4. Additional
capital funds of 10 cr in year 1 and 10 cr in year 3 will be needed to
fund the new product research project.
Stockco Example
Stockco is considering 6 investments. The cash
required from each investment as well as the NPV
of the investment is given next. The cash available
for the investments is Rs.1,40,00,000. Stockco
wants to maximize its NPV. What is the optimal
strategy?

An investment can be selected or not. One cannot


select a fraction of an investment.
Data for the Stockco Problem
Investment budget = Rs. 1,40,00,000

Investment 1 2 3 4 5 6

Cash Rs. 5 Rs. 7 Rs. 4 Rs. 3 Rs. 4 Rs. 6


Required
(1000,000s)
NPV added Rs. 16 Rs. 22 Rs. 12 Rs. 8 Rs. 11 Rs. 19

(1000,000s)
Integer Programming
Formulation
What are the decision variables?
1, if we invest in i  1,...,6,
xi  
 0, else

Objective and Constraints?

Max 16x1+ 22x2+ 12x3+ 8x4+ 11x5+ 19x6

5x1+ 7x2+ 4x3+ 3x4+ 4x5+ 6x6  14


How to model “logical” constraints

• Exactly 3 stocks are selected.


• If stock 2 is selected, then so is stock 1.
• If stock 1 is selected, then stock 3 is not
selected.
• Either stock 4 is selected or stock 5 is
selected, but not both.
Formulating Constraints
• Exactly 3 stocks are selected

x1+ x2+ x3+ x4+ x5+ x6=3


If stock 2 is selected then so is
stock 1
 The integer
programming
 A 2-dimensional constraint:
representation

x1  x 2
 Stock 2
Try to model the other
constraints.

 Stock 1
If stock 1 is selected then
stock 3 is not selected
 The integer
programming
 A 2-dimensional constraint:
representation

x1 + x3  1
 Stock 3

 Stock 1
Either stock 4 is selected or stock 5
is selected, but not both.
 The integer
programming
 A 2-dimensional constraint:
representation

x 4 + x5 = 1
 stock 5

 stock 4
The number of stocks selected is not
three
Either x1+x2+x3+x4+x5+x6  4 or (1)
x1+x2+x3+x4+x5+x6  2 (2)
The number of stocks selected is not
three
Either x1+x2+x3+x4+x5+x6  4 or (1)
x1+x2+x3+x4+x5+x6  2 (2)

Add an auxiliary variable w  {0,1} with the following


properties:
If w = 1, then the first constraint is satisfied (A)
If w = 0, then the second constraint is satisfied (B)
Since w is 0 or 1, at least one of the two constraints must be
satisfied.
The number of stocks selected is not
three (cont’d)
Add the constraint:
x1+x2+x3+x4+x5+x6  4w (A)
So, if w=1 then x1+x2+x3+x4+x5+x6  4 (1)
Note: if w = 0, the first constraint is automatically satisfied.

x1+x2+x3+x4+x5+x6  2 + 4w (B)
So, if w=0 then x1+x2+x3+x4+x5+x6  2 (2)
Note: if w = 1, the second constraint is automatically satisfied.
(If we had written “ 2 + 3w”, then we would incorrectly have
eliminate the solution in which xj = 1 for all j.)
You must select stock 1 unless the
NPV of the portfolio exceeds
Rs.4,20,00,000.
You must select stock 1 unless the
NPV of the portfolio exceeds
Rs.4,20,00,000.
If NPV < 42 then x1=1.

Add the constraint: x1  (42 – NPV)/42.


A larger denominator will also work.
Recall that NPV is
16x1+ 22x2+ 12x3+ 8x4+ 11x5+ 19x6

42x1  42 - (16x1+22x2+12x3+8x4+11x5+19x6)
Fixed Charge Problem, Example

In RMC, three raw materials are used to produce 3 products:


a fuel additive, a solvent base, and a carpet cleaning fluid.
The profit contributions are Rs.40 per ton for the fuel
additive, Rs.30 per ton for the solvent base, and Rs.50 per
ton for the carpet cleaning fluid.
Each ton of fuel additive is a blend of 0.4 tons of material 1
and 0.6 tons of material 3. Each ton of solvent base requires
0.5 tons of material 1, 0.2 tons of material 2, and 0.3 tons of
material 3. Each ton of carpet cleaning fluid is a blend of 0.6
tons of material 1, 0.1 tons of material 2, and 0.3 tons of
material 3.
Fixed Charge Problem, Example (contd.)

RMC has 20 tons of material 1, 5 tons of material 2, and 21


tons of material 3, and is interested in determining the
optimal production quantities for the upcoming planning
period.
Fixed Charge Problem, Example (contd.)

With fixed cost


There is a fixed cost for production setup of the products,
as well as a maximum production quantity for each of the
three products.
Product Setup cost Maximum
production
Fuel additive Rs.200 50 tons
Solvent base Rs. 50 25 tons
Carpet cleaning Rs. 400 40 tons
fluid
Case (Abridged): Selecting Optimal
Ingot Sizes
In the process of making steel products, molten
outputs from the main furnaces is poured into large
molds to produce rectangular blocks called ingots.
After the molds have been removed, ingots are
reheated and rolled into product shapes such as I-
beams and flat sheets.

Bethlehem’s Mills using this process make


approximately n = 130 different products. The
dimensions of ingots directly affect efficiency. For
example, ingots of one dimension may be easiest
to roll into I-beams, but another produces sheet
steel with less waste. Some ingot sizes cannot be
used at all in making certain products.

Based on, Wolf, Stott and Scheirer (1989) ‘Selecting Optimal Ingot sizes for Bethlehem steel’, Interfaces, 19(1), 68-84
Bethlehem Steel [contd]
A careful examination of the best mold dimensions
for different products yielded m = 600 candidate
designs. However it is impractical to use more than
a few because of the cost handling and storage.
We wish to select at most p = 6 and to minimize
the waste associated with using them to produce
all n products.

Based on, Wolf, Stott and Scheirer (1989) ‘Selecting Optimal Ingot sizes for Bethlehem steel’, Interfaces, 19(1), 68-84
Bethlehem Steel [contd]
Major index dimensions:
i = mold design number (i = 1, 2, …, m)
j = product number (j = 1, 2, …, n)
Input parameters:
Cij = amount of waste caused by using ingot
mold i on product j.
Ij = Collection of indexes i corresponding to
molds that could be used for product j.
If i Є Ij mold i is feasible for product j.
Based on, Wolf, Stott and Scheirer (1989) ‘Selecting Optimal Ingot sizes for Bethlehem steel’, Interfaces, 19(1), 68-84
Bethlehem Steel [contd]

1, if ingot of mold i is selected


yi  
0, if not
1, if ingot of mold i is used for product j
xi , j  
0, if not

Based on, Wolf, Stott and Scheirer (1989) ‘Selecting Optimal Ingot sizes for Bethlehem steel’, Interfaces, 19(1), 68-84
Bethlehem Steel [contd]
n
min.  ci , j xi , j (Total waste)
j 1 iI j

s.t.
m

y
i 1
i p (select at most p)



x
i Ij
i, j 1 j  1,..., n (only one mold for each product)

xi , j  yi j  1,..., n; iI j (use only if selected)


yi and xi , j are bunary variables

Based on, Wolf, Stott and Scheirer (1989) ‘Selecting Optimal Ingot sizes for Bethlehem steel’, Interfaces, 19(1), 68-84

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