Intro

The essence of a business organization is the products and services it offers, and every aspect
of the organization and its supply chain are structured around those products and services. The
introduction of new products or services, or changes to product or services designs, can have
impacts throughout the organization as well as the entire supply chain. In this chapter you will
discover insights into the design process that apply to both product and service design.

What Does Product and Service Design Do?

The various activities and responsibilities of product and service design include the following
(functional interactions are shown in parentheses):
1. Translate customer wants and needs into product and service requirements. (marketing,
operations)
2. Refine existing products and services. (marketing)
3. Develop new products and/or services. (marketing, operations)
4. Formulate quality goals. (marketing, operations)
5. Formulate cost targets. (accounting, finance, operations)
6. Construct and test prototypes. (operations, marketing, engineering)
7. Document specifications.
8. Translate product and service specifications into process specifications. (engineering,
operations)
● Product and service design involves or affects nearly every functional area of an
organization. However, marketing and operations have major involvement.

Key Questions
From a buyer’s standpoint, most purchasing decisions entail two fundamental considerations;
one is cost and the other is quality or performance. From the organization’s standpoint, the key
questions are:
1. Is there demand for it? What is the potential size of the market, and what is the
expected demand profile (will demand be long term or short term, will it grow slowly or
quickly)?
2. Can we do it? Do we have the necessary knowledge, skills, equipment, capacity, and
supply chain capability? For products, this is known as manufacturability; for services,
this is known as serviceability. Also, is outsourcing some or all of the work an option?
3. What level of quality is appropriate? What do customers expect? What level of quality
do competitors provide for similar items? How would it fit with our current offerings?
4. Does it make sense from an economic standpoint? What are the potential liability issues,
ethical considerations, sustainability issues, costs, and profits? For nonprofits, is the cost
within budget?

(insert question)
Reasons for Product and Service Design or Redesign
Product and service design has typically had strategic implications for the success and
prosperity of an organization. Furthermore, it has an impact on future activities. Consequently,
decisions in this area are some of the most fundamental that managers must make.
Organizations become involved in product and service design or redesign for a variety of
reasons. The main forces that initiate design or redesign are market opportunities and threats.

● The factors that give rise to market opportunities and threats can be one or more
changes:
● Economic (e.g., low demand, excessive warranty claims, the need to reduce costs).
● Social and demographic (e.g., aging baby boomers, population shifts).
● Political, liability, or legal (e.g., government changes, safety issues, new regulations).
● Competitive (e.g., new or changed products or services, new advertising/promotions).
● Cost or availability (e.g., of raw materials, components, labor, water, energy).
● Technological (e.g., in product components, processes).

While each of these factors may seem obvious, let’s reflect a bit on technological changes,
which can create a need for product or service design changes in several different ways. An
obvious way is new technology that can be used directly in a product or service (e.g., a faster,
smaller microprocessor that spawns a new generation of personal digital assistants or cell
phones). Technology also can indirectly affect product and service design: Advances in pro-
cessing technology may require altering an existing design to make it compatible with the new
processing technology. Still another way that technology can impact product design is illus-
trated by new digital recording technology that allows television viewers to skip commercials
when they view a recorded program. This means that advertisers (who support a television
program) can’t get their message to viewers. To overcome this, some advertisers have adopted
a strategy of making their products an integral part of a television program, say by having
their products prominently displayed and/or mentioned by the actors as a way to call viewers’
attention to their products without the need for commercials.
The following reading suggests another potential benefit of product redesign.

(insert example) pwede twitter turns to x. WL foods. Tissue na dissolved sa water

IDEA GENERATION
Ideas for new or redesigned products or services can come from a variety of sources,
including customers, the supply chain, competitors, employees, and research. Customer input
can come from surveys, focus groups, complaints, and unsolicited suggestions for improvement.
Input from suppliers, distributors, and employees can be obtained from interviews, direct or
indirect suggestions, and complaints.
One of the strongest motivators for new and improved products or services is
competitors’ products and services. By studying a competitor’s products or services and how
the competitor operates (pricing policies, return policies, warranties, location strategies, etc.), an
organization can glean many ideas. Beyond that, some companies purchase a competitor’s
product and then carefully dismantle and inspect it, searching for ways to improve their own
product. This is called reverse engineering. The Ford Motor Company used this tactic in
developing its highly successful Taurus model: It examined competitors’ automobiles, searching
for best-in-class components (e.g., best hood release, best dashboard display, best door
handle). Sometimes reverse engineering can enable a company to leapfrog the competition by
developing an even better product. Suppliers are still another source of ideas, and with
increased emphasis on supply chains and supplier partnerships, suppliers are becoming an
important source of ideas.
Research is another source of ideas for new or improved products or services.
Research and development (R&D) refers to organized efforts that are directed toward
increasing scientific knowledge and product or process innovation. Most of the advances in
semiconductors, medicine, communications, and space technology can be attributed to R&D
efforts at colleges and universities, research foundations, government agencies, and private
enterprises.
R&D efforts may involve basic research, applied research, or development.
● Basic research has the objective of advancing the state of knowledge about a subject,
without any near-term expectation of commercial applications.
● Applied research has the objective of achieving commercial applications.
● Development converts the results of applied research into useful commercial
applications.
Basic research, because it does not lead to near-term commercial applications, is
generally underwritten by the government and large corporations. Conversely, applied research
and development, because of the potential for commercial applications, appeals to a wide
spectrum of business organizations.
The benefits of successful R&D can be tremendous. Some research leads to patents,
with the potential of licensing and royalties. However, many discoveries are not patentable, or
companies don’t wish to divulge details of their ideas so they avoid the patent route. Even so,
the first organization to bring a new product or service to the market generally stands to profit
from it before the others can catch up. Early products may be priced higher because a
temporary monopoly exists until competitors bring their versions out.
The costs of R&D can be high. Some companies spend more than $1 million a day on
R&D. Large companies in the automotive, computer, communications, and pharmaceutical
industries spend even more. For example, IBM spends about $5 billion a year, Hewlett-
Packard about $4 billion a year, and Toshiba about $3 billion a year. Even so, critics say that
many U.S. companies spend too little on R&D, a factor often cited in the loss of competitive
advantage.
It is interesting to note that some companies are now shifting from a focus primarily on
products to a more balanced approach that explores both product and process R&D. Also,
there is increasing recognition that technologies often go through life cycles, the same way
that many products do. This can impact R&D efforts on two fronts. Sustained economic
growth requires constant attention to competitive factors over a life cycle, and it also requires
planning to be able to participate in the next-generation technology.
In certain instances, however, research may not be the best approach. The following
read9ing illustrates a research success.

Insert Example : Why do you think ni succeed(fail) ilahang redesigning

LEGAL AND ETHICAL CONSIDERATIONS

Designers must be careful to take into account a wide array of legal and ethical
considerations. Moreover, if there is a potential to harm the environment, then those issues also
become important. Most organizations are subject to numerous government agencies that
regulate them. Among the more familiar federal agencies are the Food and Drug Administration,
the Occupational Health and Safety Administration, the Environmental Protection Agency, and
various state and local agencies. Bans on cyclamates, red food dye, phosphates, and asbestos
have sent designers scurrying back to their drawing boards to find alternative designs that
were acceptable to both government regulators and customers. Similarly, automobile pollution
standards and safety features, such as seat belts, air bags, safety glass, and energy- absorbing
bumpers and frames, have had a substantial impact on automotive design. Much attention also
has been directed toward toy design to remove sharp edges, small pieces that can cause chok-
ing, and toxic materials. The government further regulates construction, requiring the use of
lead-free paint, safety glass in entranceways, access to public buildings for individuals with
disabilities, and standards for insulation, electrical wiring, and plumbing.
Product liability can be a strong incentive for design improvements. Product liability is
the responsibility of a manufacturer for any injuries or damages caused by a faulty product
because of poor workmanship or design. Many business firms have faced lawsuits related to
their products, including Firestone Tire & Rubber, Ford Motor Company, General Motors,
tobacco companies, and toy manufacturers. Manufacturers also are faced with the implied
warranties created by state laws under the Uniform Commercial Code, which says that prod-
ucts carry an implication of merchantability and fitness; that is, a product must be usable for
its intended purposes.
The suits and potential suits have led to increased legal and insurance costs, expensive
settlements with injured parties, and costly recalls. Moreover, increasing customer awareness of
product safety can adversely affect product image and subsequent demand for a product.
Thus, it is extremely important to design products that are reasonably free of hazards.
When hazards do exist, it is necessary to install safety guards or other devices for reduc-
ing accident potential, and to provide adequate warning notices of risks. Consumer groups,
business firms, and various government agencies often work together to develop industrywide
standards that help avoid some of the hazards.
Ethical issues often arise in the design of products and services; it is important for
managers to be aware of these issues and for designers to adhere to ethical standards.
Designers are often under pressure to speed up the design process and to cut costs. These
pressures often require them to make trade-off decisions, many of which involve ethical
considerations. One example of what can happen is “vaporware,” when a software company
doesn’t issue a release of software as scheduled as it struggles with production problems or
bugs in the software. The company faces the dilemma of releasing the software right away or
waiting until most of the bugs have been removed—knowing that the longer it waits, the more
time will be needed before it receives revenues and the greater the risk of damage to its
reputation.
Organizations generally want designers to adhere to guidelines such as the following:
● Produce designs that are consistent with the goals of the organization. For instance, if
the company has a goal of high quality, don’t cut corners to save cost, even in areas
where it won’t be apparent to the customer.
● Give customers the value they expect.
 ● Make health and safety a primary concern. At risk are employees who will produce
goods or deliver services, workers who will transport the products, customers who will
use the products or receive the services, and the general public, which might be
endangered by products or services

Insert Example (Not FDA approved cosmetics) (Presence of trans fat na maka cause ug
cancer diay)

HUMAN FACTORS
Human factor issues often arise in the design of consumer products. Safety and liability
are two critical issues in many instances, and they must be carefully considered. For example,
the crashworthiness of vehicles is of much interest to consumers, insurance companies,
automobile producers, and the government.
Another issue for designers to take into account is adding new features to their products
or services. Companies in certain businesses may seek a competitive edge by adding new
features. Although this can have obvious benefits, it can sometimes be “too much of a good
thing,” and be a source of customer dissatisfaction. This “creeping featurism” is particularly
evident in electronic products such as handheld devices that continue to offer new features,
and more complexity, even while they are shrinking in size. This may result in low consumer
ratings in terms of “ease of use.”

CULTURAL FACTORS
Product designers in companies that operate globally also must take into account any
cultural differences of different countries or regions related to the product. This can result in
different designs for different countries or regions, as illustrated by the following reading.

Insert Example: Jollibee offering different features in countries

Questions: 1. What effects do cultural differences have on the design of fast food offerings in
this reading?
2. What functions in the organization are impacted by the differences in product offerings
among different countries?

GLOBAL PRODUCT AND SERVICE DESIGN

Traditionally, product design has been conducted by members of the design team who
are located in one facility or a few nearby facilities. However, organizations that operate glob-
ally are discovering advantages in global product design, which uses the combined efforts of
a team of designers who work in different countries and even on different continents. Such
virtual teams can provide a range of comparative advantages over traditional teams such
as engaging the best human resources from around the world without the need to assemble
them all in one place, and operating on a 24-hour basis, thereby decreasing the time-to-market.
The use of global teams also allows for customer needs assessment to be done in
more than one country with local resources, opportunities, and constraints to be taken into
account. Global product design can provide design outcomes that increase the marketability
and utility of a product. The diversity of an international team may yield different points
of view and ideas and information to enrich the design process. However, care must be
taken in managing the diversity, because if it is mismanaged, that can lead to conflicts and
miscommunications.
Advances in information technology have played a key role in the viability of global
product design teams by enabling team members to maintain continual contact with each other
and to instantaneously share designs and progress, and to transmit engineering changes and
other necessary information.
CHAPTER 6: The Philippine Financial System

Structure of The Philippine Financial System

I. Banko Sentral ng Pilipinas- is the country’s central monetary authority. The Banko
Sentral ng Pilipinas provides policy directions in the areas of money, banking, and credit.

II. BANKING INSTITUTION

A. Private Banking Institutions
1. Expanded Commercial Banks/ Universal Banks
- Is any commercial bank, which performs the investment house function
in addition to its commercial banking authority. It may invest in the
equities of allied and non-allied enterprises. Allied enterprises may either
be financial or non-financial.
- Example: AUB and BDO
2. Commercial Banks - Is any commercial bank that is confined only to
commercial bank functions such as accepting drafts and issuing letters of
credit, discounting and negotiating promissory notes, drafts, and bills of
exchange, and other evidences of debt, accepting or creating demand
deposits, receiving other types of deposits and deposit substitutes, buying
and selling foreign exchange, and gold or silver bullions, acquiring
marketable bonds and other debt securities, and extending credit subject
to such rules that the Monetary Board may promulgate.
-Example: BPI and Metrobank
3. Thrift Bank- it includes savings and mortgage banks, stock savings and
loan associations ‘and private development banks. Their function is to
accumulate the savings of depositors and invest them together with their
capital.
a) Stock Savings and Mortgage Bank- - Is any corporation organized
for the purpose of accumulating the savings of depositors and
investing them, together with its capital.
b) Stock Savings and Loan Associations - is any corporation
engaged in the business of accumulating the savings of its
members or stockholders and using such accumulated funds,
together with its capital for loans and investment in securities of
productive enterprises, or in securities of the government and its
instrumentalities, provided that they are primarily engaged in
servicing the needs of households by providing personal finance
and long term financing for home building and development.
c) Private Development Bank - Is a bank that exercises all the
powers and assumes all the obligations of the savings and
mortgage bank as provided in the General Banking Act except as
otherwise stated. The private development bank helps construct,
expand and rehabilitate agricultural and industrial sectors. The
Development Bank of the Philippines is the government
counterpart of the private development banks and helps the
private development banks augment their capitalization as
provided under R.A.4093 as amended.
4. Rural Banks - Is any bank authorized by the Central Bank to accept
deposits and make credit available to farmers, businessmen and cottage
industries in the rural areas. Loans may be granted by the rural banks on
the security of land without Torrens title where ‘the owner of private
property can show five (5) years or more of peaceful continuous and
uninterrupted possession of the land in the concept of ownership. This will
include portions of friar land estates or other lands administered by the
Bureau of Lands that are covered by sale contracts and purchases and
have paid at least five (5) years instalment thereon, without the necessity
of prior approval and consent of the Director of Lands or portions of other
estates under the administration of the Department of Agrarian Reform.
- Example: Tanay Rural Bank and Tiaong Rural Bank Inc.
 5. Cooperative Banks - Are banks established to assist the various
cooperatives by lending those funds at reasonable interest rates.

B. GOVERNMENT BANKING INSTITUTIONS

1. Development Bank of the Philippines - Provides loans for developmental
purposes, gives loans to the agricultural sector, commercial sector and
the industrial sector.
2. Land Bank of the Philippines - Is a government bank, which provides
financial support in the implementation of the Agrarian Reform Program of
the government.
3. Al-Amanah Islamic Investment Bank - Republic Act No. 6048 provides for
the charter of the Al-Amanah Islamic Investment Bank. This Act
authorizes the bank to promote and accelerate the socio-economic
development of the Autonomous Region of Muslim Mindanao by
performing banking, financing and investment operations, and to establish
and participate in agriculture, commercial and industrial ventures based
on the Islamic concept of banking.

III. NON-BANK FINANCIAL INSTITUTION

A. Private Non-Banking Institutions
1. Investment House- Is any enterprise, which engages in underwriting
securities of other corporations. It also generates income from sale of
investments in securities. Examples: CLSA, AB Capital Group
2. Investment Banks- They provide advice to firms issuing stocks and bonds
or considering mergers with other firms. They also engage in
underwriting, in which they guarantee a price to a firm issuing stocks or
bonds and then make a profit by selling the stocks or bonds at a higher
price. Examples: Asian Alliance, BPI Capital Corporation
3. Financing Companies - Is any business enterprise where the primary
purpose is to extend credit facilities to consumers and to industrial,
commercial or agricultural entities either by discounting or factoring
commercial papers or accounts, or by buying instalment contracts,
leases, chattel mortgages, or other evidences of indebtedness, or by
leasing motor vehicles, heavy equipment and industrial machineries and
business and office equipment, appliance and other movable properties.
Example: JPMorganChase
4. Securities Dealer - Is any person or entity engaged in the business of
buying and selling securities for his own or its client’s account thereby
making a profit from the difference between the purchase prices and
selling price of securities. Examples : Bank of Commerce
5. Savings and Loan Associations - Which have traditionally served
individual savers and residential and commercial mortgage borrowers,
accumulate the funds of many small savers and then lend this money to
home buyers and other types of borrowers. Because the savers obtain a
degree of liquidity that would be absent if they bought the mortgages or
other securities directly, perhaps the most significant economic function of
the S&Ls is to “create liquidity”. Also, the S&Ls have more expertise in
analyzing credit, setting up loans, and making collections than individual
savers, so they reduce the transaction costs and increase the availability
of real estate loans.
6. Mutual Funds - Accepts money from savers and then use these funds to
buy stocks, long-term bonds, or short term debt instruments issued by
businesses or government units. These organizations pool funds and thus
reduce risks by diversification. They also achieve economies of scale,
which lower the costs of analyzing securities, managing portfolio, and
buying and selling securities.
7. Pawnshops - Refer to persons or entities engaged in the business of
lending money with personal property, jewelry, and other durable goods
as collateral for the loans given.
 8. Lending Investor - Is any person or entity engaged in the business of
effecting securities transactions, giving loans and earns interest from
them.
9. Pension Funds - Are retirement plans funded by corporations or
government agencies for their workers and administered primarily by the
trust departments of commercial banks or by life insurance companies.
Pension funds invest primarily in bonds, stocks, mortgages, and real
estate.
10. Insurance Companies - Take savings in the form of annual premiums,
then invest these funds in stocks, bonds, real estate, and mortgages, and
finally make payments to the beneficiaries of the insured parties. In recent
years, life insurance companies have also offered a variety of
tax-deferred savings plans designed to provide benefits to the participants
when they retire.
11. Credit Union - Are cooperative associations whose members have a
common bond, such as being employees of the same firm. Members’
savings are loaned only to other members, generally for auto purchases,
home improvement loans, and even home mortgages. Credit unions often
are the cheapest source of funds available to individual borrowers.

B. Government Non-Banking Financial Institutions

1. Government Service Insurance System (GSIS) - Provides retirement
benefits, housing loans, personal loans, emergency and calamity loans to
government employees.
2. Social Security - Provides retirement benefits, funeral benefits, housing
loans, personal loans and calamity loans to employees who are working
in private companies and others.
3. Pag-Ibig - Provides housing loans to both government and private
employees.

THE EVOLVING PHILIPPINE FINANCIAL SYSTEM

1. Banko Sentral ng Pilipinas (BSP) – the central bank of the Philippines.
2. Securities and Exchange Commission (SEC) - is the agency of the Government of the
Philippines responsible for regulating the securities industry in the Philippines.
3. Insurance Commission (IC) - to promulgate and implement policies, rules and
regulations governing the operations of entities engaged in insurance and pre-need
activities.
4. Philippine Deposit Insurance Commission (PDIC) - protects depositors by providing
deposit insurance coverage for the depositing public and help promote financial stability.

SIGNS OF GROWTH IN THE DOMESTIC MARKET

The Philippine banking system: has been consistently posting double digit asset growth
since January 2016. Latest data show that total resources of the banking system amounted to
PHP15.3 trillion as of end March, 2018, an 11.3 percent increase from the previous year’s level
of PHP13.8 trillion. This asset growth trend is mirrored by the growth in liabilities.
Meanwhile, total assets of the insurance industry. more than doubled from 2008 to 2016
(see Figure B). Although there was a two-year slowdown after 2013, the growth rebounded in
2016, posting an 11.2 percent increase. Moreover, there has been a steady increase in the
industry’s revenues relative to GDP after the GFC, with a break in the year proceeding typhoon
Yolanda in 2013. The life insurance segment continues to be the driver of the insurance
companies’ revenues.
The securities market has also exhibited growth. The bond market, in particular, is
comprised mostly of peso-denominated government issued securities, to which outstanding
amount as of end-March 2018 grew by 7.1 percent to reach USDI17.2 billion (see Figure C).
The equities market, on the other hand, registered 12 additional companies with the PSE in the
past three years, bringing the total listed companies to 268, equivalent to PHP17.31 trillion
market capitalization as of end-October 2017.
REGULATORY LANDSCAPE
A. Alignment with global standards
a. The BSP has released Circular No. 975 in October 2017 to streamline the
requirements on the issuance of bonds and commercial papers by banks and
quasi-banks and Circular Nos. 984 and 985 in December 2017 in furtherance of
liberalizing the foreign exchange (FX) regulatory framework.
b. A key priority of the Insurance Commission (IC) is the adoption of international
reporting practices.
c. The SEC approved amendments to the Securities Regulation Code (SRC) and
the Corporation Code as well as supporting the bills on regulating Collective
Investment Schemes to enhance local regulations and conform to international
best practices.
d. For its part, the PDIC has entered into a cross-border partnership by way of a
Memorandum of Understanding (MOU) with eight deposit insurance agencies
from Asia, the UK and the US.
B. Deepening Capital Markets
a. Various financial products have been introduced to the different segments of the
domestic market aimed at providing alternative options for raising funds or for
investing money.
b. The SEC has initiated reforms on minimum public ownership, repurchase
agreements and shelf registration that underscore the need for improved liquidity
in the market and the importance of price discovery. The SEC is also finalizing its
rules governing the crowd funding market.
c. The BSP, Bureau of the Treasury and SEC, with the support of the DOF, rolled
out in August 2017 the roadmap to accelerate the development of the Philippine
debt market.
C. Strengthening surveillance
a. The BSP has recently completed the requirements of becoming a BIS-reporting
country. This will allow access to detailed information on cross-border exposures
of other countries to the Philippines. The BSP through the FSCC has also
initiated collaborations with the Housing and Land Use Regulatory Board to
develop a maiden reportorial template targeted to real estate companies.
b. Currently, the SEC Is proposing the creation of a unit for handling the rules,
regulations, policies, and guidelines concerning anti-money laundering (AML)
and counter terrorist financing (CTF) for-covered entities.

FINANCIAL STABILITY ASSESSMENT OF THE PHILIPPINE FINANCIAL SYSTEM

● Financial stability is clearly understood to reflect a “‘well-functioning” financial market
addressing the financial needs of stakeholders and avoiding distortions.
● The market landscape is a useful baseline, the focus is on risks and vulnerabilities that
may derail further growth as well as raise issues that may potentially have systemic
implications.
● Financial stability risk are limited but this is also premised on the understanding that
fintech remains a small portion of market activity
● Regulatory sandboxes and constant dialogues among stakeholders are critical to ensure
that one remains vigilant of the downside risks from the “disruptive” side of fintech.
● The region continues to outpace global growth it saves at a higher rate than the rest of
the world and it is home to a vast base of millennials who are tech-savvy and drive retail
markets.

CURRENT RISK IN THE PHILIPPINE FINANCIAL SYSTEM

A. Repricing, refinancing, and repayment risk
B. Developments in the credit market
C. Continuous demand for credit by corporate enterprises and households is evident in the
domestic economy.
LINEAR PROGRAMMING – Simplex Method

Summary of the Steps in solving Simplex Method:

1. Set up the expression by describing the problem constraints ( ≥, ≤ ) inequalities.
2. Convert any inequalities to equations.
3.
For Maximization Problem:
a. If the symbol is “≤”, then add Slack variable Sj to the left side then change the sign to
equality “=”.
b. If the symbol is “=”, then add Slack variable Sj to the left side then change the sign to
equality “=”.
c. If the symbol is “≥”, then multiply both sides by (-1), add slack variable Sj to the left side
then change the sign to equality “=”.
For Minimization Problem:
a. If the symbol is “≤”, then add Slack variable Sj to the left side then change the sign to
equality “=”.
b. If the symbol is “=”, then add Artificial variable Aj to the left side then change the
sign to equality “=”.
c. If the symbol is “≥”, then Subtract Slack variable Sj, and add Artificial variable Aj,
to the left side then change the sign to equality “=”.
4. Enter the resulting equations in the simplex tableau.
5. Calculate the Zj and Cj – Zj values for this solution.
6. Determine the entering variable (optimal column) by choosing the one with the most
negative Cj – Zj value in minimization problems and the largest positive Cj – Zj value in
maximization problems.
7. Determine the row to be replaced by dividing quantity-column values by their corresponding
optimal-column values and choosing the smallest non-negative quotient. (That is, only
compute the ratios for rows whose elements in the optimal column are greater than zero;
for example; omit ratios like 160/0 and 15/-5.)
8. Compute the values for the replacing row.
9. Compute the value for the remaining row.
10. Calculate the Zj and Cj – Zj values for this solution.
11. If there is still no negative Cj – Zj in a minimization problem, or a positive Cj – Zj in a
maximization problem, return to step 6.
12. If there is no negative Cj – Zj remaining in a maximization problem, the optimal
solution has been obtained.

Parts of the Simplex Tableau

1. Cj Column – column in the simplex tableau which contains the profit or cost per unit for the
variable in the solution.
2. Product Mix Column- column containing all the variables in a solution in the simplex tableau.
3. Quantity Column- column in the tableau indicating the quantities of the variables that is
in a solution.
4. Variable Column- column of entries under a heading valuable in the simplex tableau.
5. Zj Row- is the row containing the opportunity costs of bringing one unit of a variable into the
solution of a linear programming problem.
6. Cj-Zj Row- row containing the net benefit of loss accessioned by bringing one unit of a
variable into the solution of a linear programming problem.
7. Intersectional Elements- elements which are common to both the optimal column and
the rows representing variables in the solution.
8. Optimal Column- is the column in any solution to a maximizing problem which has the
largest Cj-Zj positive value in the row of which has the largest negative value in a minimizing
problem.
9. Replaced Row- a Row in the simplex tableau which is replaced by the variable
entering the new solution.