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# Mathematical Modeling

amelia santoso

Learning Objectives
1. Understand what a mathematical
model is.
building a mathematical model
3. Describe the process of building
mathematical model.
4. Discuss the various formal
approaches used for finding the
optimal solution.

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Mathematical Modeling

## What is a Mathematical Model?

A mathematical model expresses, in quantitative
terms, the relationship between the various
components, as they were defined in the relevant
system for the problem identified in the formulation
phase.
The term mathematical model could be in the form of
1. A simple table using a PC spreadsheet
2. Formal mathematical expressions:
a. Equations Q = ax + by
b. Inequalities ax + by c
c. Functions f(x) = ax +b/x
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Mathematical Modeling

## Terminology in Mathematical Model

Decision variables: the controllable aspects of a
problem the alternative courses of action.
Parameter, coefficients, or constants: the
uncontrollable inputs of a decision problem.
Constraints: mathematical expression that limit the
range of values that a decision variable can assume.
Performance measure or measure of effectiveness:
those aspects that measure how well the objectives of
the decision maker are achieved.
Objective function: if the measure of effectiveness
can be expressed as a function of the decision
variables.

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Mathematical Modeling

## Why Build Mathematical Models?

When a management scientist want to determine the best mode
of operation for an existing process, there are no convenient
alternative solutions available, nor is experimentation on the
existing facilities a viable option.
It would be far too disruptive, often too risky, and usually too
expensive.
Frequently, the problem deals with potential projects that are still
on the drawing board real-life tests are not possible.
But even if real tests could be done, the time delay caused by
testing one, let alone several dozen different configurations,
means that real-life testing is out of question.
Mathematical models are be the only way to obtain answers to
such problems quickly and reasonably inexpensively.
Mathematical models are usually easy to manipulate.
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Mathematical Modeling

## Essential Properties of Good Mathematical Models

1. Simple: more easily understood by the
problem owner or decision maker.
2. Complete: the model should include all
significant aspects of the problem
situation that affect the measure of
effectiveness.
3. Easy to manipulate: It should be possible
to obtain answers from the model, such
as the best solution, with a reasonable
amount of computational effort.
4. Adaptive: If changes invalidate the
model, it should be possible to adapt to
the new situation with relatively minor
model modifications only.
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Mathematical Modeling

## Essential Properties of Good Mathematical Models

5. Easy to communicative with: It should be easy for
the analyst and/or the user to prepare, update, and
change the inputs and get answers quickly.
6. The model is appropriate for the situation studied.
By this is meant that the model produces the
relevant outputs at the lowest possible cost and in
the time frame required for effective decision
making.
7. The model has to produce information that is
relevant and appropriate for decision making.
This means that the output of the model has to have
direct bearing on the decision process, has to be
useful for decision making, and has to be on a form
that it can be used directly as input for decision
making, without the need for further extensive
translation or manipulation.
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Mathematical Modeling

## The Art of Modeling

Ockhams Razor
Things should not be multiplied without good reason The
modeler has to be highly selective in including aspects into a
model.
An iterative process of enrichments
Building a mathematical model is a process of successive
rounds of enrichment. Start from a very simple model, move in
an evolutionary fashion toward more elaborate models which
more nearly reflect the complexities of the actual problem
situation.
Working out a numerical example
Construct an example with representative numbers and play
around with them.
Diagram and graphs
It helpful to see things in the form of graphs or other drawings
that express relationships or patterns
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Mathematical Modeling

## Mathematical Model for the LOD

Please, take a look at the influence diagram for the LOD
systems at the next slide.

## Circle 6: Annual number of Annual demand size of stock

stock replenishments met from stock replenishments

Circle 12: Annual setup cost for setup cost annual number of
stock replenishments per batch stock replenishments

## Circle 8: Average stock Average unit product

investment stock level value

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Mathematical Modeling

Production
setup cost per
batch

Order
1
pattern by
special
production
runs
3

Annual
volume by
special
production
runs

Annual
9
handling
cost for big
customers

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Product
handling
cost/unit

Unit product
value

## Cutoff for big?

Small? order

Customer
order pattern

Stock
replenishment
size

Order
pattern met
from stock

Average
stock level
5
4
Annual
number of
special
production
runs

10

Annual
setup cost
for special
production
runs

Annual
volume met
from stock

11 Annual
handling
cost for
small
customers

12

Annual
number
stock
replenishm
ent

Annual
setup cost
for stock
replenishm
ents

8
Average
stock
investment

Investment
holding cost/\$

14
13

Annual
stock
holding
cost

Value of
annual
demand

15
Total annual LOD
operating cost

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## Mathematical Model for the LOD

Circle 9: Annual handling cost Annual volume by Product handling
for big customers special production runs cost per unit

Circle 10: Annual setup cost for production setup annual number of
special production runs cost per batch special production runs

Circle 15:
Total cost Annual setup cost for Annual handling cost

## EOQ cost given L for small customers

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## Mathematical Model for the LOD

Circle 13: Annual stock

## Average stock holding cost/

holding cost investment \$/year

## Circle 11: Annual handling Product handling annual volume

cost small customers cost per unit met from stock

value

value of demand

Circle 15:

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relevant
cost
holding
cost
for
stock
replenishm
ent

## Annual handling Annual product

cost
value

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## Some Reflections on the Process of Modeling

The influence diagram serves as a basis for
mathematical modeling.
It indicates the existence of relationships
between the system environment and system
components, between system components
themselves, as well as system components and
system outputs.
The mathematical model express the form of
these relationships.
There are other types of systems diagrams,
such as precedence charts and flow diagrams,
which may also serve as an intermediate step
between the problem formulation and building
a quantitative model.
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## Deriving a Solution to the Model

Enumeration
If the number of alternative course of action is relatively small,
say in the tens rather than the hundreds, and the
computational effort to evaluate each alternative is relatively
minor, like in the LOD case, then finding the optimal solution
by simply evaluating the performance measure for each
alternative course of action or each discrete value of the
decision variable may be simple and fast.
The best solution is the one which achieves the best of the
performance measure a minimum or a maximum value,
whichever corresponds to the objective.
Search methods
If the performance measure to be optimized is in the form of
an objective function in one or several decision variables,
various search methods may reduce the computational effort
to find the optimal solution.

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## Algorithmic solution methods

This is a set of logical and mathematical operations
performed repeatedly in a specific sequence.
Each repetition of the rules is called an iteration.
This iteration is repeated until certain conditions
referred to as stopping rules are satisfied.
Classical methods of calculus
Classical methods of mathematics, in particular
differential calculus, can be used to find the optimal
solution.

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Exercise
Describe the OR/MS methodology
steps for your proposed system in
the previous group assignment.
Construct a influence diagram
based on the rich picture of that
proposed system.
Build some mathematical models
for that system based on the
influence diagram.
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Reference
Daellenbach, H.G., 1994, Systems and Decision
Making: A Management Science Approach,
John Wiley & Sons Ltd, Chapter 6.

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