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Minimization Problem

Objective function = ZMin = Minimum (c1 x1 + c2 x2 + . . . . +cn xn)

subject to

a11 x1 + a12 x2 + . .

a21 x1 + a22 x2 + . .

.

.

. .

.

.

. .

am1 x1 + am2 x2 + . .

x1 , x2 , x3, .., xn 0

. + a1n xn = b1

. + a2n xn = b2

.

.

.

.

.

.

. + amn xn = bm

b1, b2, . . .,bm are available resources.

a11, a12, . . ., amn are technological coefficients.

In matrix notation:

ZMin = C1n Xn1

subject to

Amn Xn1 = bm1

Xn1 0

A company wishes to schedule the production of a kitchen

appliance that requires two resources, labor and material.

The company is considering 3 models (A, B, and C) and its

production engineering department has furnished the

data given below. Formulate the following problem and

solve.

Model

Resource

Availability

requirement

Resource

A

B

C

Labour (Hrs/Unit)

7

3

6 150 Hrs

Material (Kg/Unit)

4

4

5 200 Kg

Profit (Rs. /Unit)

4

2

3

Decision Variables

X1 = Number of A type model produced

X2 = Number of B type model produced

X3 = Number of C type model produced

ZMax. = 4X1 +2X2 +3X3

Objective function

Subject to

Labour constraint

7X1 +3X2 +6X3 150

Material constraint

4X1 +4X2 +5X3 200

X1 , X2, X3 0

Boundary Constraint

Sasadhar Bera, IIM Ranchi

Primal Problem:

Profit coefficients

Technological coefficients

Subject to

RHS of a constraint

or

available resources

7 X1 +3 X2 +6 X3 150

4 X1 +4 X2 +5X3 200

X1 , X2, X3 0

Sasadhar Bera, IIM Ranchi

Objective function: Total profit maximization (ZMAX.)

ZMax. = 4X1 +2X2 +3X3

Subject to

7X1 +3X2 +6X3 150

4X1 +4X2 +5X3 200

X1 , X2 , X 3 0

ZMax = 4x1 + 2x2 + 3x3

subject to

7x1 + 3x2 + 6x3 + s1 = 150

4x1 + 4x2 + 5x3 + s2 = 200

x1, x2, x3 , s1, s2 0

s1 ,s2 are called slack variables

Sasadhar Bera, IIM Ranchi

MS Excel Output

Target Cell (Max)

Cell

$D$7

Adjustable Cells

Cell

Name

Total Profit

Name

12

100

$E$5

$F$5

$G$5

Nos of Production A

Nos of Production B

Nos of Production C

1

1

2

Cell

$I$10

$I$11

Name

Labour Constraint

Material Constraint

Cell Value

150

200

0

50

0

Constraints

Formula

Status Slack

$I$10<=$K$10 Binding 0

$I$11<=$K$11 Binding 0

Optimal numbers of model A : X1 = 0,

Optimal numbers of model B: X2 = 50,

Optimal numbers of model C: X3 = 0

Output tells us that company should not produce model A and

model C.

Sasadhar Bera, IIM Ranchi

For first constraint:

7X1 +3X2 +6X3 = 7*0 + 3*50 + 6*0 = 150 = RHS value of first

constraint. Hence total labour resource is fully utilized. It is

called binding constraint.

For second constraint:

4X1 +4X2 +5X3 = 4*0 + 4*50 + 5*0 = 200 = RHS value of second

constraint. Hence total raw material is fully utilized. It is also a

binding constraint.

In case of nonbinding constraint LHS value is not equal to RHS

value.

Sasadhar Bera, IIM Ranchi

MS Excel Output

Sensitivity Analysis Output

Adjustable Cells

Cell

Final

Value

Name

Cost Coefficient Increase Decrease

-0.667

0.667

Infinity

50

Infinity

0.286

-1

Infinity

Constraints

Cell

Name

Final

Value

Price

R.H. Side Increase Decrease

$I$10

Labour Constraint

150

0.667

150

150

200

200

infinity

What is Reduced Cost?

objective function coefficient has to improve (increase for

maximization problem and decrease for minimization

problem) before the corresponding decision variable could

assume a positive value in optimal solution.

Physical interpretation of reduced cost: The reduced cost

for each variable (here each product) equals its per unit

marginal profit minus the per unit cost of the resources it

consumes.

Increasing or decreasing the objective function coefficient of

a decision variable equal to reduced cost has resulted an

alternative solution.

10

Sasadhar Bera, IIM Ranchi

What is Reduced Cost? (contd.)

Adjustable Cells

Final Reduced Objective Allowable Allowable

Value

Cost Coefficient Increase Decrease

Cell

Name

$E$5

Nos of Production A

-0.667

0.667

Infinity

$F$5

Nos of Production B

50

Infinity

0.286

-1

Infinity

Value of X2 already has positive value. Thus the reduced

cost is zero.

11

Sasadhar Bera, IIM Ranchi

What is Reduced Cost? (contd.)

In case of X1 and X3, Final Value are zero. Thus the reduced

cost is non-zero.

For X1, it means that unless the profit contribution (c1) of A

type of model is increased to (4+0.667 =) 4.667 or more, the

value of X1 will not come as nonzero in optimal solution. If c1

is exactly increased to 4.667, then there will have an

alternative solution.

Similarly, for X3, it means that unless the profit contribution

(c3) of C type of model is increased to (3+1 =) 4 or more,

the value of X3 will not come as nonzero in optimal solution.

If c3 is exactly increased to 4, then there will have an

alternative solution.

Sasadhar Bera, IIM Ranchi

12

Range of Optimality

Increase and Allowable Decrease columns in Adjustment

Cells of sensitivity output table.

Range of optimality: The range of value for each coefficient

of an objective function over which the solution will remain

optimal (i.e. optimal values of the decision variables would

not change).

one objective function coefficients. If the sum of the

absolute percent change (with respect to allowable change)

of all the coefficients does not exceed 100%, then the

original optimal solution was still be optimal. If it changes by

more than 100%, we cannot be sure.

13

Sasadhar Bera, IIM Ranchi

Range of Optimality (contd.)

Adjustable Cells

Final Reduced Objective Allowable Allowable

Value

Cost Coefficient Increase Decrease

Cell

Name

$E$5

Nos of Production A

-0.667

0.667

Infinity

$F$5

Nos of Production B

50

Infinity

0.286

-1

Infinity

is 0, the objective coefficient is 4, allowable increase is

0.667, and allowable decrease is . Hence the range of

optimality of c1 is: c1 (4+0.667)

Similarly, the range of optimality for c2 (model type B) is:

(2-0.286) c2 +

Sasadhar Bera, IIM Ranchi

14

Range of Optimality (contd.)

c3 (3+1)

Range of insignificance: The range in value over which an

objective function coefficient can change without causing

the corresponding decision variable to take a nonzero value.

15

Shadow Price and Range of Feasibility

the change in the optimal value of the objective function

when the right hand side (RHS) of the same constraint

changes by one unit, assuming all other coefficients

remain constant. Shadow price may be positive or

negative.

constraint is the range for which the shadow price

remains unchanged for that particular constraint.

16

Shadow Price (contd.)

Constraints

Final Shadow Constraint Allowable Allowable

Value

Price R.H. Side Increase Decrease

Cell

Name

$I$10

Labour Constraint

150

0.667

150

150

$I$11

Material Constraint

200

200

infinity

and material constraint each separately.

The Shadow Price column provides the shadow price of

each constraint.

resources for labour and material.

Sasadhar Bera, IIM Ranchi

17

Shadow Price (contd.)

that if we decreases number of labour (b1) from 150 to 149

then the objective function value (profit) decreases to 100

to 99.333. (i.e. 100 -1*(+0.667) = 99.333)

that if number of material unit (b2) increases from 200 to

201 then there will be no change in the objective function

value (profit).

18

Shadow Price (contd.)

describe the shadow price. Shadow price and Dual price are

same in sign for maximization problem. In case of

minimization problem, Shadow price and Dual price are in

opposite sign.

It is to be noted that shadow price of a non-binding

constraint is zero.

19

Range of Feasibility

Constraints

Final Shadow Constraint Allowable Allowable

Value

Price R.H. Side Increase Decrease

Cell

Name

$I$10

Labour Constraint

150

0.667

150

150

$I$11

Material Constraint

200

200

infinity

and Allowable Decrease columns of above sensitivity output

table.

For labour constraint, range of feasibility:

Lower bound = 150 - 150 = 0, Upper bound = 150 + 0 = 150

0 b1 150

For material constraint, range of feasibility:

Lower bound = 200 0 = 200, Upper bound= Infinity

200 b2 +

20

Sensitivity Analysis

Sensitivity analysis is the study of how the optimal solution

will be impacted with the changes in the different

coefficients of a linear program. Using the sensitivity

analysis we can answer how optimal solution affect under

the following conditions:

1. Change in the objective function coefficient (ci)

2. Change in resources (RHS of a constraint) (bi)

3. Change in technological coefficients (aij)

4. Addition of a new decision variable

5. Addition of a new constraint

Sensitivity analysis is also referred to as postoptimality

analysis.

21

Sasadhar Bera, IIM Ranchi

1) Values of LP parameters might change

If a parameter changes, sensitivity analysis shows

whether is it necessary to re-solve the problem

again?

2) Uncertainty about LP parameters

Even if demand is uncertain, manager of a

company can be fairly confident that it can still

produce optimal amounts of products.

22

Sensitivity Analysis

Change in only one coefficient (ci) of a objective function

function provides us the sensitivity of objective function

coefficient.

Values in the Allowable Increase and Allowable Decrease

columns in adjustment Cells of sensitivity analysis report

indicate the amounts by which an objective function

coefficient can be changed without changing the optimal

solution, assuming all other coefficients remain constant.

It is to be noted that the objective function value (Z) would

change due to change in profit (or cost ) coefficient within

the range of optimality.

Sasadhar Bera, IIM Ranchi

23

Sensitivity Analysis

Change in more than one coefficient (ci) simultaneously

solution when multiple profit (or cost) coefficients are

different than what you expected.

In the above situation, 100% rule is applicable. This rule says

that if the sum of the absolute percent change (with respect

to allowable increase or decease) of all the coefficients does

not exceed 100%, then the original optimal solution will still

be optimal. If it changes by more than 100%, we cannot be

sure.

24

Sensitivity Analysis

Calculating a Percentage Change

calculated as:

Absolute[(New Value Old Value) / Allowable increase or

decrease]

For example: when coefficient value 300 changes to 600

and the allowable increase is 900 you get a proportional

change of (600-300)/900 which equals approximately

33.33%.

25

Sensitivity Analysis

Change in resources (RHS of a constraint) (bi)

available to the firm. The resources could be labour hours,

machine hours, money, and material etc.

additional resources could be used to realize higher profit.

If the RHS of a constraint is changed, the feasible region

will change (unless the constraint is redundant) and often

optimal solution changes.

26

Sensitivity Analysis

Change in resources (RHS of a constraint) (bi) (contd.)

that occur in the objective function value that results from

one unit change in RHS value of a constraint.

zero.

Changing a RHS value for a binding constraint also

changes the feasible region and the optimal solution.

To find the optimal solution after changing a binding

RHS value, we must re-solve the problem.

Sasadhar Bera, IIM Ranchi

27

Sensitivity Analysis

Change in Technological Coefficient (aij)

the LHS of a constraint because of labour, raw material and

technology etc. Changes of technological coefficients can

significantly changes the shape of the feasible region and

hence in optimal profit or cost value (Z) .

The changes of technological coefficient can be two types:

2) Change of aij coefficient in basic columns

Refer book Operations Research by H. M. Taha for above two

types of sensitivity analysis.

Sasadhar Bera, IIM Ranchi

28

Sensitivity Analysis

Adding a new decision variable or activity

variable (Xn+1) we have to calculate the (zj cj) in 0th row for

(n+1)th variable. If (zj cj) 0 for minimization problem

then the current solution is optimal. On the other hand, if

(zj cj) 0 then Xn+1 is introduced into the basis and the

simplex method continues to find the new optimal

solution.

For understanding of (zj cj) value and 0th row refer to Operations

Research by H. M. Taha.

29

Sensitivity Analysis

Adding a new constraint

current optimal solution is still be best solution.

If the optimal solutions does not satisfy the new constraint

then dual simplex method is used to find the new optimal

solution to an LP with added constraint.

For dual simplex method refer Operations Research by H. M.

Taha.

30

Microsoft solvers sensitivity analysis report performs

two types of sensitivity analysis:

i. On the coefficient of the objective function

ii. On the right hand side of a constraint

31

Duality

Every linear programming (LP) problem can have two

forms:

1) Primal

2) Dual

The original formulation of a linear programming problem

is called Primal or Primal Problem.

Another linear program associated with Primal is called its

dual which is involving a different set of variables, but

sharing the same data.

32

Primal: ZMax = c1 x1 + c2 x2 + . . .+cn xn

subject to

a11 x1 + a12 x2 + . . . + a1n xn b1

a21 x1 + a22 x2 + . . . + a2n xn b2

.

.

. . .

.

.

am1 x1 + am2 x2 + . . . + amn xn bm

x1 , x2 , .., xn 0

Dual: YMin = w1 b1 + w2 b2 + . . .+ wm bm

subject to

a11 w1 + a21 w2 + . . . + am1 wm c1

a12 w1 + a22 w2 + . . . + am2 wm c2

.

.

. . .

.

.

a1n w1 + a2n w2 + . . . + amn wn cn

w1 , w2 , .., wm 0

Resources

Dual variable

33

Sasadhar Bera, IIM Ranchi

Primal objective function: Maximization of profit subject to

availability of limited resources.

Dual objective function: Minimization of the total implicit

value of resources consumed by the different activities.

xj : Quantity of jth type product, j = 1, 2, . .,n.

The dual variables are interpreted as the contribution to profit

per unit of resource. For this reason, dual variables are often

referred to as resource shadow prices.

Dual variables are used to determine the marginal values of

resources i. e. how much profit for one unit of each resource is

equivalent to.

Sasadhar Bera, IIM Ranchi

34

Meaning of primal constraint:

(ai1 x1 + ai2 x2 + . . . + ain xn) bi represents total

consumed resources should be at most available resource,

where i = 1, 2, . .,m.

(a1j w1 + a2j w2 + . . . + amj wm) cj represents the

minimum cj unit profit should be paid for the resources

needed to produce the jth type of product.

35

Formulation of Dual

If Primal is Minimization problem then dual is Maximization

Problem and vice versa.

There is exactly one dual variable for each primal constraint

and exactly one dual constraint for each primal variable.

Primal-dual relationship table (shown in next slide) is useful

to put dual variable restriction and inequality sign (, or = )

in each constraint.

36

Minimization

Problem

Variables

0

0

Unrestricted

Constraints

Maximization

Problem

0

0

Constraints

Variables

Unrestricted

Sasadhar Bera, IIM Ranchi

37

Ex1:

Primal: Maximize 6x1 + 8x2

subject to 3x1 + x2 4

5x1 + 2x2 7

x1 , x2 0

Dual:

subject to 3w1 + 5w2 6

w1 + 2w2 8

w1 , w2 0

38

EX2:

Primal: Minimize 6x1 + 8x2

subject to

3x1 + x2 - x3

=4

5x1 + 2x2

- x4 = 7

x1 , x2 , x3 , x4 0

subject to 3w1 + 5w2 6

w1 + 2w2 8

- w1

0

- w2 0

w1, w2 unrestricted

Sasadhar Bera, IIM Ranchi

39

EX3:

Primal: Minimize -12 x1 + 13 x2 + 15 x3

subject to

-2x1 + x2 + 3x3 + x4 15

2x1

+ x3 +3x4 14

+2x2 + x3 + x4 = 16

x1 0 x2, x3 0, x4 unrestricted

Dual: Maximize 15 w1 + 14 w2 + 16 w3

subject to

-2w1 + 2w2

-12

w1

+ 2w3 13

3w1 + w2

+ w3 15

w1 + 3w2

+ w3 = 0

w1 0 w2 0, w3 unrestricted

Sasadhar Bera, IIM Ranchi

40

The optimal value of the objective function of the primal

problem equals the optimal value of the objective function

of the dual problem.

Solving the dual might be computationally more efficient

when the primal has large number of constraints and few

variables.

EX: Let us consider a Primal Linear Programming problem

has 8 variables and 800 constraints. Maximum number of

iterations required to solve Primal is high as the number of

constraints is large. In such situation, Dual LP converts the

same optimization problem with 800 variables and 8

constraints. Hence, computational time is less for dual LP as

it has fewer constraints.

Sasadhar Bera, IIM Ranchi

41

Lets consider a situation where an analyst has overlooked

a constraint in the model during problem formulation

stage. In the solution development stage, analyst wants to

incorporate this new constraint. In such instances, it is

sometimes difficult to find a starting basic solution that is

feasible to linear programming. Using dual LP, it is often

possible to find out optimal solution.

42

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