Table of Contents Chapter 4 (Linear Programming: Formulation and Applications)

Super Grain Corp. Advertising-Mix Problem (Section 4.1) Resource Allocation Problems & Think-Big Capital Budgeting (Section 4.2) Cost-Benefit-Trade-Off Problems & Union Airways (Section 4.3) Distribution-Network Problems & Big M Co. (Section 4.4) Continuing the Super Grain Corp. Case Study (Section 4.5) Mixed Formulations & Save-It Solid Waste Reclamation (Section 4.6) 4.24.5 4.64.10 4.114.15 4.164.20 4.214.24 4.254.30

Super Grain Corp. Advertising-Mix Problem

Goal: Design the promotional campaign for Crunchy Start. The three most effective advertising media for this product are
Television commercials on Saturday morning programs for children. Advertisements in food and family-oriented magazines. Advertisements in Sunday supplements of major newspapers.

The limited resources in the problem are

Advertising budget ($4 million). Planning budget ($1 million). TV commercial spots available (5).

The objective will be measured in terms of the expected number of exposures.

Question: At what level should they advertise Crunchy Start in each of the three media?

Cost and Exposure Data

Costs Cost Category Each TV Commercial Each Magazine Ad Each Sunday Ad

Ad Budget
Planning budget Expected number of exposures

$300,000
90,000 1,300,000

$150,000
30,000 600,000

$100,000
40,000 500,000

Spreadsheet Formulation

B 3 4 5 6 7 8 9 10 11 12 13 14 15 Exposures per Ad (thousands)

C TV Spots 1,300

D Magazine Ads 600

E SS Ads 500

Ad Budget Planning Budget

300 90

Cost per Ad ($thousands) 150 30

100 40

Budget Spent 4,000 1,000

<= <=

Budget Available 4,000 1,000 Total Exposures (thousands) 17,000

Number of Ads Max TV Spots

TV Spots 0 <= 5

Magazine Ads 20

SS Ads 10

Algebraic Formulation

Let TV = Number of commercials for separate spots on television M = Number of advertisements in magazines. SS = Number of advertisements in Sunday supplements. Maximize Exposure = 1,300TV + 600M + 500SS subject to Ad Spending: 300TV + 150M + 100SS 4,000 ($thousand) Planning Cost: 90TV + 30M + 30SS 1,000 ($thousand) Number of TV Spots: TV 5 and TV 0, M 0, SS 0.

Think-Big Capital Budgeting Problem

Think-Big Development Co. is a major investor in commercial real-estate development projects. They are considering three large construction projects
Construct a high-rise office building. Construct a hotel. Construct a shopping center.

Each project requires each partner to make four investments: a down payment now, and additional capital after one, two, and three years.

Question: At what fraction should Think-Big invest in each of the three projects?

Financial Data for the Projects

Investment Capital Requirements Year 0 1 2 3 Net present value Office Building $40 million 60 million 90 million 10 million $45 million Hotel $80 million 80 million 80 million 70 million $70 million Shopping Center $90 million 50 million 20 million 60 million $50 million

Spreadsheet Formulation

B 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Net Present Value ($millions)

C Office Building 45

D Hotel 70

E Shopping Center 50

Now End of Year 1 End of Year 2 End of Year 3

Cumulative Capital Required ($millions) 40 80 90 100 160 140 190 240 160 200 310 220 Office Building 0.00% Shopping Center 13.11%

Cumulative Capital Spent 25 44.757 60.583 80

<= <= <= <=

Cumulative Capital Available 25 45 65 80 Total NPV ($millions) 18.11

Participation Share

Hotel 16.50%

Algebraic Formulation

Let OB = Participation share in the office building, H = Participation share in the hotel, SC = Participation share in the shopping center. Maximize NPV = 45OB + 70H + 50SC subject to Total invested now: 40OB + 80H + 90SC 25 ($million) Total invested within 1 year: 100OB + 160H + 140SC 45 ($million) Total invested within 2 years: 190OB + 240H + 160SC 65 ($million) Total invested within 3 years: 200OB + 310H + 220SC 80 ($million) and OB 0, H 0, SC 0.

Summary of Formulation Procedure for ResourceAllocation Problems

1. Identify the activities for the problem at hand. 2. Identify an appropriate overall measure of performance (commonly profit).

3. For each activity, estimate the contribution per unit of the activity to the overall measure of performance.
4. Identify the resources that must be allocated. 5. For each resource, identify the amount available and then the amount used per unit of each activity. 6. Enter the data in steps 3 and 5 into data cells. 7. Designate changing cells for displaying the decisions. 8. In the row for each resource, use SUMPRODUCT to calculate the total amount used. Enter and the amount available in two adjacent cells. 9. Designate a target cell. Use SUMPRODUCT to calculate this measure of performance.

Union Airways Personnel Scheduling

Union Airways is adding more flights to and from its hub airport and so needs to hire additional customer service agents. The five authorized eight-hour shifts are
Shift 1: Shift 2: Shift 3: Shift 4: Shift 5: 6:00 AM to 2:00 PM 8:00 AM to 4:00 PM Noon to 8:00 PM 4:00 PM to midnight 10:00 PM to 6:00 AM

Question: How many agents should be assigned to each shift?

Schedule Data
Time Periods Covered by Shift Minimum Number of Agents Needed 48 79 65

Time Period
6 AM to 8 AM 8 AM to 10 AM 10 AM to noon

Noon to 2 PM
2 PM to 4 PM 4 PM to 6 PM 6 PM to 8 PM 8 PM to 10 PM 10 PM to midnight Midnight to 6 AM Daily cost per agent

$195

87
64 73 82 43 52 15

$170

$160

$175

$180

Spreadsheet Formulation

B 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Cost per Shift Time Period 6am-8am 8am-10am 10am- 12pm 12pm-2pm 2pm-4pm 4pm-6pm 6pm-8pm 8pm-10pm 10pm-12am 12am-6am

C 6am-2pm Shift $170

D 8am-4pm Shift $160

E Noon-8pm Shift $175

F 4pm-midnight Shift $180

G 10pm-6am Shift $195

1 1 1 1 0 0 0 0 0 0 6am-2pm Shift 48

Shift Works Time Period? (1=yes, 0=no) 0 0 0 1 0 0 1 0 0 1 1 0 1 1 0 0 1 1 0 1 1 0 0 1 0 0 1 0 0 0 8am-4pm Shift 31 Noon-8pm Shift 39 4pm-midnight Shift 43

0 0 0 0 0 0 0 0 1 1 10pm-6am Shift 15

Total Working 48 79 79 118 70 82 82 43 58 15

>= >= >= >= >= >= >= >= >= >=

Minimum Needed 48 79 65 87 64 73 82 43 52 15

Number Working

Total Cost $30,610

Algebraic Formulation
Let Si = Number working shift i (for i = 1 to 5),

Minimize Cost = $170S1 + $160S2 + $175S3 + $180S4 + $195S5 subject to Total agents 6AM8AM: S1 48 Total agents 8AM10AM: S1 + S2 79 Total agents 10AM12PM: S1 + S2 65 Total agents 12PM2PM: S1 + S2 + S3 87 Total agents 2PM4PM: S2 + S3 64 Total agents 4PM6PM: S3 + S4 73 Total agents 6PM8PM: S3 + S4 82 Total agents 8PM10PM: S4 43 Total agents 10PM12AM: S4 + S5 52 Total agents 12AM6AM: S5 15 and Si 0 (for i = 1 to 5)

Summary of Formulation Procedure for Cost-Benefit-Tradeoff Problems

1. Identify the activities for the problem at hand. 2. Identify an appropriate overall measure of performance (commonly cost).

3. For each activity, estimate the contribution per unit of the activity to the overall measure of performance.
4. Identify the benefits that must be achieved. 5. For each benefit, identify the minimum acceptable level and then the contribution of each activity to that benefit. 6. Enter the data in steps 3 and 5 into data cells. 7. Designate changing cells for displaying the decisions. 8. In the row for each benefit, use SUMPRODUCT to calculate the level achieved. Enter and the minimum acceptable level in two adjacent cells. 9. Designate a target cell. Use SUMPRODUCT to calculate this measure of performance.

The Big M Distribution-Network Problem

The Big M Company produces a variety of heavy duty machinery at two factories. One of its products is a large turret lathe. Orders have been received from three customers for the turret lathe.

Question: How many lathes should be shipped from each factory to each customer?

Some Data

Shipping Cost for Each Lathe To From Factory 1 Factory 2 Order Size $700 800 10 lathes $900 900 8 lathes $800 700 9 lathes Customer 1 Customer 2 Customer 3 Output 12 lathes 15 lathes

The Distribution Network

C1 10 lathes needed

$700/lathe
12 lathe produced F1

$900/lathe

$800/lathe
C2

$800/lathe
15 lathes produced

$900/lathe

8 lathes needed

F2

$700/lathe
C3 9 lathes needed

Spreadsheet Formulation

3 4 5 6 7 8 9 10 11 12 13 14 15

B Shipping Cost (per Lathe) Factory 1 Factory 2

C Customer 1 $700 $800

D Customer 2 $900 $900

E Customer 3 $800 $700

Units Shipped Factory 1 Factory 2 Total To Customer Order Size

Customer 1 10 0 10 = 10

Customer 2 2 6 8 = 8

Customer 3 0 9 9 = 9

Total Shipped Out 12 15

= =

Output 12 15 Total Cost $20,500

Algebraic Formulation

Let Sij = Number of lathes to ship from i to j (i = F1, F2; j = C1, C2, C3). Minimize Cost = $700SF1-C1 + $900SF1-C2 + $800SF1-C3 + $800SF2-C1 + $900SF2-C2 + $700SF2-C3 subject to Factory 1: SF1-C1 + SF1-C2 + SF1-C3 = 12 Factory 2: SF2-C1 + SF2-C2 + SF2-C3 = 15 Customer 1: SF1-C1 + SF2-C1 = 10 Customer 2: SF1-C2 + SF2-C2 = 8 Customer 3: SF1-C3 + SF2-C3 = 9 and Sij 0 (i = F1, F2; j = C1, C2, C3).

Continuing the Super Grain Case Study

David and Claire conclude that the spreadsheet model needs to be expanded to incorporate some additional considerations. In particular, they feel that two audiences should be targeted young children and parents of young children. Two new goals
The advertising should be seen by at least five million young children. The advertising should be seen by at least five million parents of young children.

Furthermore, exactly $1,490,000 should be allocated for cents-off coupons.

Benefit and Fixed-Requirement Data

Number Reached in Target Category (millions) Each TV Commercial Young children Parents of young children 1.2 0.5 Each Magazine Ad 0.1 0.2 Each Sunday Ad 0 0.2 Minimum Acceptable Level 5 5

Contribution Toward Required Amount Each TV Commercial Coupon redemption 0 Each Magazine Ad $40,000 Each Sunday Ad $120,000 Required Amount $1,490,000

Spreadsheet Formulation

B 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Exposures per Ad (thousands) Ad Budget Planning Budget

C TV Spots 1,300

D Magazine Ads 600 Cost per Ad ($thousands) 150 30

E SS Ads 500

300 90

100 40

Budget Spent 3,775 1,000 Total Reached 5 5.85 Total Redeemed 1,490

<= <=

Budget Available 4,000 1,000 Minimum Acceptable 5 5 Required Amount 1,490 Total Exposures (thousands) 16,175

Young Children Parents of Young Children

1.2 0.5

Number Reached per Ad (millions) 0.1 0.2 Magazine Ads 40

0 0.2 SS Ads 120

>= >=

Coupon Redemption per Ad ($thousands)

TV Spots 0

Number of Ads Maximum TV Spots

TV Spots 3 <= 5

Magazine Ads 14

SS Ads 7.75

Algebraic Formulation
Let TV = Number of commercials for separate spots on television M = Number of advertisements in magazines. SS = Number of advertisements in Sunday supplements. Maximize Exposure = 1,300TV + 600M + 500SS subject to Ad Spending: 300TV + 150M + 100SS 4,000 ($thousand) Planning Cost: 90TV + 30M + 30SS 1,000 ($thousand) Number of TV Spots: TV 5 Young children: Parents: 1.2TV + 0.1M 5 (millions) 0.5TV + 0.2M + 0.2SS 5 (millions)

Coupons:
and TV 0, M 0, SS 0.

40M + 120SS = 1,490 ($thousand)

Types of Functional Constraints

Type Resource constraint

Form* LHS RHS

Typical Interpretation

Main Usage

For some resource, Amount used Amount available

For some benefit, Level achieved Minimum Acceptable For some quantity, Amount provided = Required amount

Resource-allocation problems and mixed problems

Cost-benefit-trade-off problems and mixed problems Distribution-network problems and mixed problems

Benefit constraint

LHS RHS

Fixed-requirement constraint

LHS = RHS

* LHS = Left-hand side (a SUMPRODUCT function). RHS = Right-hand side (a constant).

Save-It Company Waste Reclamation

The Save-It Company operates a reclamation center that collects four types of solid waste materials and then treats them so that they can be amalgamated into a salable product.

Three different grades of product can be made: A, B, and C (depending on the mix of materials used).

Question: What quantity of each of the three grades of product should be produced from what quantity of each of the four materials?

Product Data for the Save-It Company

Amalgamation Cost per Pound Selling Price per Pound

Grade

Specification Material 1: Not more than 30% of total Material 2: Not less than 40% of total Material 3: Not more than 50% of total Material 4: Exactly 20% of total

$3.00

$8.50

Material 1: Not more than 50% of total Material 2: Not less than 10% of the total Material 4: Exactly 10% of the total

2.50

7.00

Material 1: Not more than 70% of the total

2.00

5.50

Material Data for the Save-It Company

Material

Pounds/Week Available

Treatment Cost per Pound

Additional Restrictions

1
2 3 4

3,000
2,000 4,000 1,000

$3.00
6.00 4.00 5.00

1. For each material, at least half of the pounds/week available should be collected and treated.
2. $30,000 per week should be used to treat these materials.

Spreadsheet Formulation
B 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Unit Amalg. Cost Unit Selling Price Unit Profit C Grade A $3.00 $8.50 $5.50 D Grade B $2.50 $7.00 $4.50 E Grade C $2.00 $5.50 $3.50 F G H I J K $30,000 = $30,000 L M

Total Treatment Cost Treatment Funds Available

Material 1 Material 2 Material 3 Material 4 Total Products

Material Allocation (pounds of material used for each product grade) Grade A Grade B Grade C 412.3 2,587.7 0 859.6 517.5 0 447.4 1,552.6 0 429.8 517.5 0 2,149.1 5,175.4 0

Unit Treament Cost $3 $6 $4 $5

Minimum to Treat 1,500 1,000 2,000 500

<= <= <= <=

Total Material Treated 3,000 1,377 2,000 947

<= <= <= <=

Amount Available 3,000 2,000 4,000 1,000

Total Profit

$35,110

Mixture Specifications Grade A, Material 1 Grade A, Material 2 Grade A, Material 3 Grade A, Material 4 Grade B, Material 1 Grade B, Material 2 Grade B, Material 4 Grade C, Material 1

412.3 859.6 447.4 429.8 2,587.7 517.5 517.5 0.0

<= >= <= = <= >= = <=

Mixture Percents 644.7 30% 859.6 40% 1,074.6 50% 429.8 20% 2,587.7 517.5 517.5 0.0 50% 10% 10% 70%

of of of of

Grade A Grade A Grade A Grade A

of Grade B of Grade B of Grade B of Grade C

Algebraic Formulation
Let xij = Pounds of material j allocated to product i per week (i = A, B, C; j = 1, 2, 3, 4). Maximize Profit = 5.5(xA1 + xA2 + xA3 + xA4) + 4.5(xB1 + xB2 + xB3 + xB4) + 3.5(xC1 + xC2 + xC3 + xC4) subject to Mixture Specifications: xA1 0.3 (xA1 + xA2 + xA3 + xA4) xA2 0.4 (xA1 + xA2 + xA3 + xA4) xA3 0.5 (xA1 + xA2 + xA3 + xA4) xA4 = 0.2 (xA1 + xA2 + xA3 + xA4) xB1 0.5 (xB1 + xB2 + xB3 + xB4) xB2 0.1 (xB1 + xB2 + xB3 + xB4) xB4 = 0.1 (xB1 + xB2 + xB3 + xB4) xC1 0.7 (xC1 + xC2 + xC3 + xC4) Availability of Materials: xA1 + xB1 + xC1 3,000 xA2 + xB2 + xC2 2,000 xA3 + xB3 + xC3 4,000 xA4 + xB4 + xC4 1,000 Restrictions on amount treated: xA1 + xB1 + xC1 1,500 xA2 + xB2 + xC2 1,000 xA3 + xB3 + xC3 2,000 xA4 + xB4 + xC4 500 Restriction on treatment cost: 3(xA1 + xB1 + xC1) + 6(xA2 + xB2 + xC2) + 4(xA3 + xB3 + xC3) + 5(xA4 + xB4 + xC4) = 30,000 and xij 0 (i = A, B, C; j = 1, 2, 3, 4).