Assuming the expected quantities would be available, the optimal production plan is

Variable
A
B
C1
C2
C3
C1A
C3A
C1B
C2B
C3B
R1
R2
R3

Local optimal solution

found at step: 6
Objective value: 4275.000

With this production plan,

the probabilities that sufficient quantities of C1, C2, & C3 are available
are 50%, 94.5%, and 50%, respectively.

Dennis L. Bricker
Dept of Mechanical & Industrial Engineering
The University of Iowa

Joint Chance Constraints: example

02/16/04

page 1 of 8

A company assembles two products,

using three components,
according to the table below:
Component 1
Component 2
Component 3
Selling price

Value Reduced Cost

30.000
0.0000
35.000
0.0000
100.00
0.0000
35.000
0.0000
125.00
0.0000
30.000
0.0000
90.000
0.0000
70.000
0.0000
35.000
0.0000
35.000
0.0000
0.500
0.0000
0.9452
0.0000
0.5000
0.0000

Joint Chance Constraints: example

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page 5 of 8

But, the probability that all three are simultaneously available is only
(0.5)(0.9452)(0.5) = 0.2362.

Product A
1
0
3
100

Product B
2
1
1
120

Cost
15
5
10

Availability
N(100,20)
N(75,25)
N(125,25)

That is, there is only 23.62% probability that this plan will be feasible!
Although management finds the profit of this plan attractive, they are not

The company wants a production plan for the next day, so as to maximize profit.

pleased that there is approximately 77% probability that the plan will be
infeasible!

The availability of the components, however, is random, with the probability

distributions shown in the table.

Management therefore decides that there must be at least a 75% probability

that the production plan is feasible,
i.e., that sufficient components are available to complete the planned
assemblies.

Joint Chance Constraints: example

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page 2 of 8

Suppose that we were to optimize assuming the expected amounts would be available:

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The revised optimization problem is

! Maximize profit = revenue from sales minus cost of materials;
Max= 100*A + 120*B - 15*C1 - 5*C2- 10*C3;

! Maximize profit = revenue from sales minus cost of materials;

Max= 100*A + 120*B - 15*C1 - 5*C2- 10*C3;

! Formula for product A;

A=C1A;
3*A=C3A;

! Formula for product A;

A=C1A;
3*A=C3A;

! Formula for product B;

2*B=C1B;
B=C2B;
B=C3B;

! Formula for product B;

2*B=C1B;
B=C2B;
B=C3B;

! Total quantity of components required;

C1=C1A+C1B;
C2=C2B;
C3=C3A+C3B;

! Total quantity of components required;

C1=C1A+C1B;
C2=C2B;
C3=C3A+C3B;

! Probability of sufficient quantities of each component (reliability);

R1 =(1-@PSN((C1-100)/20));
R2 =(1-@PSN((C2-75)/25));
R3 =(1-@PSN((C3-125)/25));

! Resource constraints (assuming expected values);

C1 <= 100;
C2 <= 75;
C3 <= 125;
! Probability of sufficient quantities of each component (reliability);
R1 =(1-@PSN((C1-100)/20));
R2 =(1-@PSN((C2-75)/25));
R3 =(1-@PSN((C3-125)/25));
END
Joint Chance Constraints: example

Joint Chance Constraints: example

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! Probability that all 3 components are available in sufficient quantity;

R1*R2*R3 >=0.75;
END

Joint Chance Constraints: example

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The optimal production plan satisfying the joint chance constraint is

Local optimal solution
found at step: 16
Objective value:
3352.279

LINGO has a number of probability-related functions, including

Variable
Cost
A
B
C1
C2
C3
C1A
C3A
C1B
C2B
C3B
R1
R2
R3

@PSN( x)
This is the cumulative standard normal probability distribution.
A standard normal random variable X has
mean = 0.0 and
standard deviation = 1.0
(the bell curve, centered on the origin).
The value returned by @PSN is the area under the curve to the left of the point
on the ordinate indicated by x, i.e., P{X x}.

Value

Reduced

17.412
31.927
81.268
31.927
84.165
17.412
52.238
63.855
31.927
31.927
0.82551
0.95754
0.94880

0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000

Notice the significant difference between the two production plans!

Joint Chance Constraints: example

02/16/04

page 4 of 8

Joint Chance Constraints: example

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