PROD361 Operations Management-I

İlker AKGÜN
Assist.Prof.
Basic OR Concepts

OR is the representation of real-world systems by mathematical

models together with the use of quantitative methods
(algorithms) for solving such models, with a view to optimizing."

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Basic OR Concepts
Optimization is everywhere.
• It is embedded in language, and part of the way we
think.
– firms want to maximize value to shareholders
– people want to make the best choices
– We want the highest quality at the lowest price
– When playing games, we want the best strategy
– When we have too much to do, we want to optimize the
use of our time
– etc.

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Basic OR Concepts
We can also define a mathematical model as
consisting of:
– Decision variables, which are the unknowns to be
determined by the solution to the model.
– Constraints to represent the physical limitations of the
system.
– Objective function

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Basic OR Concepts
Linear Programming(LP) is our first and most important
mathematical optimization tool.
• minimize or maximize a linear objective
• subject to linear equalities and inequalities
maximize 3x + 4y
subject to 5x + 8y  24
x, y  0
A feasible solution satisfies all of the constraints.
x = 1, y = 1 is feasible; x = 1, y = 3 is infeasible.
An optimal solution is the best feasible solution.
The optimal solution is x = 4.8, y = 0. 5
 Terminology
• Decision variables: e.g., x and y.
– In general, there are quantities you can control to improve your
objective which should completely describe the set of decisions
to be made.

• Constraints: e.g., 5x + 8y  24 , x  0 , y  0
– Limitations on the values of the decision variables.

• Objective Function. e.g., 3x + 4y

– Value measure used to rank alternatives
– Seek to maximize or minimize this objective
– examples: maximize NPV, minimize cost
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Basic OR Concepts
• An optimal solution to the model is the identification of
a set of variable values which are feasible (satisfy all the
constraints) and which lead to the optimal value of the
objective function.
• An optimization model seeks to find values of the
decision variables that optimize (maximize or minimize)
an objective function among the set of all values for the
decision variables that satisfy the given constraints.

– Feasible Solution
– Infeasible Solution

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Mathematical Modeling

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 Mathematical Modeling
Guessing:
how many days per week to work and see how they turn out.
• work one day a week on X, one day a week on Y
This does not seem like a good guess as it results in only 7 tones a day
of high-grade, insufficient to meet the contract requirement for 12
tones of high-grade a day. We say that such a solution is infeasible.
• work 4 days a week on X, 3 days a week on Y
This seems like a better guess as it results in sufficient ore to meet
the contract. We say that such a solution is feasible. However it is
quite expensive (costly).
• What is the solution which supplies what is necessary under the
contract at minimum cost.

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Mathematical Modeling

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 Mathematical Modeling
Step 1 Determine the decision variables:

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 Mathematical Modeling
Step 2 Determine the objective function:

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 Mathematical Modeling
Step 3 Determine the constraints:

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 Mathematical Modeling
Step 3 Determine the constraints:
Inequality constraints rule: given a choice between an equality and an
inequality choose the inequality.
• For example - if we choose an equality for the ore production
constraints we have the three equations 6x+y=12, 3x+y=8 and
4x+6y=24 and there are no values of x and y which satisfy all three
equations (the problem is therefore said to be "over-constrained").
For example the values of x and y which satisfy 6x+y=12 and 3x+y=8
are x=4/3 and y=4, but these values do not satisfy 4x+6y=24.
• choosing an inequality rather than an equality gives us more flexibility
in optimizing (maximizing or minimizing) the objective (deciding
values for the decision variables that optimize the objective).

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 Mathematical Modeling
Complete mathematical model of the problem:

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 Mathematical Modeling
Complete mathematical model of the problem:

• Right Handside Values (RHS)

• Objective Function coefficients
• Technological coefficients
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 Mathematical Modeling
The mathematical problem given above has the form
• all variables continuous (i.e. can take fractional values)
• a single objective (maximize or minimize)
• the objective and constraints are linear i.e. any term is either a
constant or a constant multiplied by an unknown (e.g. 24, 4x, 6y
are linear terms but xy or x2 is a non-linear term)
• Any formulation which satisfies these three conditions is called a
linear program (LP).
• We have (implicitly) assumed that it is permissible to work in
fractions of days - problems where this is not permissible and
variables must take integer values will be dealt with under Integer
Programming (IP).

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Mathematical Modeling
Linear Programs
• A linear function is a function of the form:
f(x1, x2, . . . , xn) = c1x1 + c2x2 + . . . + cnxn
= i=1 to n cixi
E.g., 3x1 + 4x2 - 3x4.
• A mathematical program is a linear program (LP) if the objective is
a linear function and the constraints are linear equalities or
inequalities.
E.g. 3x1 + 4x2 - 3x4  7
x1 - 2x5 = 7
• Typically, an LP has non-negativity constraints.
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Mathematical Modeling
A non-linear program is permitted to have a non-linear objective
and constraints.

• maximize f(x,y) = xy
• subject to x - y2/2  10
3x – 4y  2
x  0, y  0

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 Mathematical Modeling

An integer program is a linear program plus constraints

that some or all of the variables are integer valued.

• Maximize 3x1 + 4x2 - 3x3

3x1 + 2x2 - x3  17
3x2 - x3 = 14
x1  0, x2  0, x3  0
and
x1 , x2, x3 are all 20
 Mathematical Modeling
LP's are important because:
• many practical problems can be formulated as LP's
• there exists an algorithm (called the simplex algorithm) which
enables us to solve LP's numerically relatively easily

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Mathematical Modeling
Dealing with very large versions of the problem
• Suppose that there are 10,000 products and 100
raw materials and processes that lead to
constraints.
• Write an “algebraic version of the model”

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 Mathematical Modeling
An Algebraic Formulation
• n = number of items that are manufactured
– e.g., in the previous example, n = ?, {1,..,j,..n}
• m = number of resource constraints
– e.g., m = ?, {?, and ?}, {1,..,i,..m}

• pj or cj = unit profit/cost from item j, e.g., p1 = ?;

• dj = maximum demand for item j; e.g.,
• xj = number of units of item j manufactured

• bi = amount of resource i available

• aij = amount of resource i used in making item j
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Mathematical Modeling
An Algebraic formulation
n
Maximize p x
j 1
j j

subject to a x
j 1
ij j bi for i 1 to m

x j d j for j 1 to n

x j 0 for j = 1 to n 24
Mathematical Modeling
An Algebraic formulation
n
Minimize c x
j 1
j j

subject to a x
j 1
ij j bi for i 1 to m

x j d j for j 1 to n

x j 0 for j = 1 to n 25
Mathematical Modeling
An Algebraic formulation with equality constraints
n
Max or min c x
j 1
j j

n
subject to a x
j 1
ij j bi for i 1 to m

x j 0 for j 1 to n
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Linear Programming(LP)
Major application areas:
• Work scheduling
• Production planning & Production process
• Capital budgeting
• Financial planning
• Blending (e.g. Oil refinery management)
• Farm planning
• Distribution
• Multi-period decision problems
 Inventory model
 Financial models
 Work scheduling
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Linear Programming(LP)
Assumptions:
• Proportionality
• Additivity
• Divisibility
• Certainty

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Linear Programming(LP)
Maximize 4W + 3P
1.5W + P  15
….
Proportionality Assumption Contribution from W is proportional to W

Additivity Assumption Contribution to objective function from P is

independent of W.
Divisibility Assumption Each variable is allowed to assume fractional
values.
Certainty Assumption. Each linear coefficient of the objective function
and constraints is known (and is not a random variable).

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Linear Programming(LP)
Assumptions: Proportionality
• The contribution to the objective function from each
decision variable is proportional to the value of the
decision variable (The contribution to the objective
function from making four soldiers (4x$3=$12) is exactly
four times the contribution to the objective function from
making one soldier ($3))
• The contribution of each decision variable to the LHS of
each constraint is proportional to the value of the decision
variable (It takes exactly three times as many finishing
hours (2hrsx3=6hrs) to manufacture three soldiers as it
takes to manufacture one soldier (2 hrs))
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Linear Programming(LP)
Assumptions: Additivity
• The contribution to the objective function for any decision variable
is independent of the values of the other decision variables (No
matter what the value of train (x2), the manufacture of soldier (x1)
will always contribute 3x1 dollars to the objective function)
• The contribution of a decision variable to LHS of each constraint is
independent of the values of other decision variables (No matter
what the value of x1, the manufacture of x2 uses x2 finishing hours
and x2 carpentry hours)
• 1st implication: The value of objective function is the sum of the
contributions from each decision variables.
• 2nd implication: LHS of each constraint is the sum of the contributions from
each decision variables.

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