ECS716 OPERATIONAL RESEARCH PN PAEZAH HAMZAH

Linear Programming: Sensitivity Analysis

Learning Outcomes Students should be able to: Investigate the effect of changing the objective function coefficient on the optimal solution. Investigate the effect of changing a right-hand-side (RHS) value and determine shadow prices from an optimal tableau.

using both graphical and computer analysis. Sensitivity Analysis In LP, the parameters (input data) of the model can be changed within certain limits without causing the optimum solution to change. Making changes in the parameters to see the effect on optimal solution is known as sensitivity analysis, or postoptimality analysis. The general idea of sensitivity analysis will be performed on 2 cases. I. Sensitivity of the optimum solution to changes in the availability of resources (the right-hand-side of the constraint) II. Sensitivity of the optimum solution to changes in unit profits or unit cost (coefficients of the objective function)

I.

Changes in the Right-Hand-Side Example: Consider the Wyndor Glass problem Maximize subject to: Z = 3X1 + 5X2 4 2X2 12 3X1 + 2X2 18 X1 , X2 0 where ` X1 (Plant 1 hours) (Plant 2 hours) (Plant 3 hours)

X1 = batches of doors to produce per week, X2 = batches of windows to produce per week.

The graphical solution will be used to explain the basis for sensitivity analysis.

The graphical solution is as follows: X2 9 X1 4 3X1 +2X2 18 (2, 6) 6

Corner Point Feasible (CPF) solution CPF solution (0,0) (0,6) (2,6) (4,3) (4,0) Z=3X1+5X2 0 30 36 27 12

Zmax =12

2X212

Feasible region

(4,3)

Optimal solution: X1=2, X2=6 Produce 2 batches of doors and 6 batches of windows per week X1 Maximum Profit =3(2)+5(6)=$36 thousand

If Plant 3 capacity is increased by 1 hour, then the RHS of the third constraint changes from 18 to 19 hours. Accordingly, the feasible region becomes slightly bigger and the optimal solution will change accordingly. Maximize subject to: Z = 3X1 + 5X2 (profit, $000) 4 2X2 12 3X1 + 2X2 19 X1 , X2 0 X1 (Plant 1 hours) (Plant 2 hours) (Plant 3 hours)

Increase the RHS of Plant 3 constraint by 1 hour

. X2 9

Corner Point Feasible (CPF) solution X1 4 3X1 +2X2 18 3X1 +2X2 19 (2.33, 6) CPF solution (0,0) (0,6) (2.33,6) (4,3) (4,0) Z=3X1+5X2 0 30 37 27 12

Zmax =12

2X2 12

Optimal solution: X1=2.33, X2=6 Maximum Profit =3(2.33)+5(6)=$37 thousand

Feasible region

(4,3)

X1

The shadow price is the value of 1 additiona l unit of a scarce resource

Effect of Changing RHS on the Objective Function Value Increasing the RHS value of the second constraint by 1 unit, or equivalently, making 1 additional production hour in Plant 3 available (at no additional cost), causes the total profit to increase by $1,000 from $36,000 to $37,000. The $1,000 increase is also known as the shadow price or the dual price for Plant 3 production capacity. The shadow price can be used as a guideline for Wyndor Glass Inc. in determining the amount of money to spend to increase its capacity. If the production time at Plant 3 were to be increased, the maximum amount of money to spend is $1,000 per hour. In general, a shadow price is the worth of 1 additional unit of a scarce resource. the marginal value of 1 additional unit of a scarce resource. the maximum amount to pay for 1 additional unit of a scarce resource.

How to determine the shadow price from a simplex solution? The shadow prices for all the resources can be obtained from the optimal simplex tableau. These are the numbers in the Zj row or the absolute value of the Cj-Zj of the slack variable columns. X1 3 0 0 1 3 0 X2 5 0 1 0 5 0 S1 0 1 0 0 0 0 S2 0 1/3 0.5 -1/3 1.5 -1.5 S3 0 -1/3 0 1/3 1 -1

Cj 0 5 3

Basic S1 X2 X1 Zj Cj-Zj

RHS 2 6 2 36

The shadow price of Plant 1 production time =$0/hr The shadow price of Plant 2 production time =$1,500 /hr The shadow price of Plant 3 production time =$1,000 /hr Question 1: What is meant by $0 shadow price? Why does Plant 1 have $0/hr shadow price? The shadow price of $0 means that it is worth nothing to pay money for additional resource. The shadow price of Plant 1 production is $0/hr because the hours in this plant are still available

Question 2: If Wyndor Glass can increase the capacity of the plants, which plant should receive higher priority? Plant 2, since the dual price is the highest. (Each additional hour of Plant 1 production time will not increase the weekly profit, each additional hour of Plant 2 and Plant 3 production time will increase the weekly profit by $1,500 and $1,000, respectively.)

Question 3: Is it worthwhile to increase the capacities of Plant 2 and 3 at the additional cost of $1,200/hr in each plant? Plant 2: Yes, since the $1,500. shadow price for production time is worth

Plant 3: No, since the shadow price for production time in Plant 3 is worth $1,000. Determination of Range of Feasibility There is a limit on the RHS change in order for the dual values to remain valid. The valid range is termed the range of feasibility.

Example: Consider the optimal simpex tableau for Wyndor Glass Co.
Cj 0 5 3 Basic S1 X2 X1 Zj Cj-Zj X1 3 0 0 1 3 0 X2 5 0 1 0 5 0 S1 0 1 0 0 0 0 S2 0 1/3 0.5 -1/3 1.5 -1.5 S3 0 -1/3 0 1/3 1 -1 RHS 2 6 2 36

Determine the range of feasibility for Plant 2.

II.

Changes in the Objective Function Coefficients Making a change in the coefficient of the objective function (unit profit or unit cost ) will change the slope of Z. Use QM for Windows software to investigate the effect of changing objective coefficients. Example: Change the unit profit of doors to $4,000 per batch. Corner Point Feasible (CPF) solution X1 4 3X1 +2X2 18 (2, 6)

X2 9

X1
0 0 6 6 3 0 0 2 4 4

X2

Z=4X1+5X2 0 30 38 31 16

Zmax =12

2X212

qs

Feasible region

(4,3)

Optimal solution: X1=2, X2=6 Produce 2 batches of doors and 6 batches of windows per week 6 X1 Maximum Profit =4(2)+5(6)=$38 thousand

Change the unit profit of each batch of door to $4,000

Maximize subject to:

Z = 4X1 + 5X2 4 2X2 12 3X1 + 2X2 18 X1 , X 2 0 X1

(profit, $000) (Plant 1 hours) (Plant 2 hours) (Plant 3 hours)

X2 9 X1 4 3X1 +2X2 18 (2, 6) 6

Zmax =12

2X212

Feasible region

(4,3)

X1

Range of Optimality If the change in an objective function coefficient is within a specific range of values, called the range of optimality, the current basic feasible solution will remain optimal. However, current optimal solution will remain optimal for certain changes in the values only. a) The range of optimality for a basic variable: determines the values of objective function coefficient for which the basic variables will remain in the current basic feasible solution. Note: the value of the variables may change. b) The range of optimality for a non-basic variable: determines the objective function coefficient values for which variables will remain non-basic

Example: Consider the optimal simpex tableau for Wyndor Glass Co.
Cj 0 5 C1 Basic S1 X2 X1 Zj Cj-Zj X1 C1 0 0 1 X2 5 0 1 0 S1 0 1 0 0 S2 0 1/3 0.5 -1/3 S3 0 -1/3 0 1/3 RHS 2 6 2 36

i) Determine the range of optimality for X1 ii) Determine the range of optimality for S2

QM for Windows Output for Wyndor Glass Co Ranging---------Variable X1 X2 Value 1. 6. Reduced Cost 0 0 Slack/ Surplus 3 0 0 Original Val 3. 5. Original Val 4 12 18 Lower Bound 0. 2. Lower Bound 2. 6. 12. Upper Bound 7.5 Infinity Upper Bound Infinity 18. 24.

Dual Constraint Value Constraint 1 0 Constraint 2 1.5 Constraint 3 1

Supplementary Exercises 1. a) Explain the meaning of shadow price. Describe how a firm would use the shadow price associated with a given constraint. b) The operations department of a large company makes three products (A, B, and C). The department is preparing for its final run next week, which is just before the annual two-week vacation during which the entire department shuts down. The manager wants to use up existing stocks of the three raw materials used to fabricate products A, B, and C. She has formulated the linear programming model and obtained an optimal solution given below. A= quantity of product A B= quantity of product B C= quantity of product C Max Z = 12A + 15B + 14C (Profit, RM) subject to Material 1 Material 2 Material 3 3A +5B + 8C 720 kilograms 2A + 3C 600 kilograms 4A +6B + 4C 640 kilograms

A, B, and C 0

The optimal simplex tableau and ranging are as follows:

Basis C S2 A

CB 14 0 12 Zj Cj - Zj

A 12 0 0 1 12 0

B 15 0.1 -3.1 1.4 18.2 -3.2

C 14 1 0 0 14 0

s1 0 0.2 -0.2 -0.2 0.4 -0.4

s2 0 0 1 0 0 0

s3 0 -0.15 -0.35 0.4 2.7 -2.7

RHS 48 232 112 2016

Variable A B C Constraint Constraint 1 Constraint 2 Constraint 3

Value 112 0 48 Dual Value 0.4 1.25 2.7

Reduced Cost 0 3.2 0 Slack/Surplus 0 232 0

Original Value 12 15 14 Original Value 720 600 640

Lower Bound 9.71 -infinity --Lower Bound 480 368 360

Upper Bound 14 18.2 --Upper Bound 1280 Infinity 960

Based on the solution given, answer the following questions: i) If Bs profit per unit could be increased to RM18, how much would B be produced?

ii) What is the range of optimality of C? iii) What is the range of feasibility for Material 3? iv) By how much would profit increase if an additional 100 kilograms of Material 3 could be obtained? v) If the manager can obtain additional 20 kilograms of Material1 and Material3, what would be the effect to the optimal solution and the total profit?

2. Consider the following profit maximization linear programming problem. X 1, X2, and X3 are the units of easy cupcakes, chocolate cupcakes, and vanilla cupcakes to be produced by Diana Bakery. Maximize Z= Subject to Multipurpose flour: Sugar : Milk : 2.25X1 + 2X2 + 2.5X3 1,000 cups 1.5X1 + 2X2 + 2X3 900 cups X1 + 0.75X2 + X3 800 cups X1, X2, X3 0 1.0X1 +1.2X2 + 1.4X3 (Ringgit)

The incomplete final simplex tableau for the above problem is shown below. S 1, S2, and S3 are the slack variables for multipurpose flour, sugar, and milk, respectively. Cj Basis X3 X2 S3 Zj Cj-Zj a) b) c) Complete the above simplex tableau. What are the optimal production quantities? What is the maximum total profit? Which ingredient is not fully utilized? How much is used in the optimal production? If the objective function coefficient for X 2 is changed to 1.5, will the optimal solution change? Justify your answer. State the dual price for the multipurpose flour. price valid? For what values is this dual 1.0 X1 1.5 -0.75 0.0625 1.2 X2 0 1 0 1.4 X3 1 0 0 0 S1 2 -2 -0.5 0 S2 -2 2.5 0.125 0 S3 0 0 1 RHS 200 250 412.5

d) e)

g)

Diana just realized that there were 120 more cups of multipurpose flour available on hand to be used in making the cupcakes. What would be effect on the total profit if these were used in the production?