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2 LP Models PDF
2 LP Models PDF
Operations Research
Applications
Building Linear
Programming Models
2
Linear Programming (LP) Problem
p Linear functions are functions in which each
variable appears in a separate term raised
to the first power and is multiplied by a
constant (which could be 0).
3
Importance of Linearity
p LP models can be solved more easily than
non-linear ones.
n There will always be an optimal solution that lies at
a vertex (extreme point)
n A local optimum is a global optimum
4
Possible Solutions to a LP
Any linear program falls in one of the
following three categories:
1. has an optimal solution
(unique optimal solution or alternate optimal solutions
may exist)
2. is infeasible
3. is unbounded
(it has an objective function that can be improved
without bound)
5
Defining Objectives
p Given a set of constraints, different objectives
will possibly lead to different optimal solutions
6
Single Objectives
p Minimizing cost
n In LPs typically variable cost is minimized
p Marginal cost, i.e. extra cost incurred for each extra
unit produced
n Fixed costs are included in some IPs when the
model decides whether a fixed cost should be
incurred or not
p For ex: if produce, then overhead costs
p Maximizing profit
n Profit contribution = unit income – variable cost
p In multi-period models, future costs or profits are
discounted at some rate of interest
7
Multiple and Conflicting Objectives
p As a starting point, solve the model with
each objective separately
p Pick one objective and define constraints
on the others
n Infeasibility is an issue
p Define a single objective by taking a linear
combination of all the objectives
n changing the weights yields a set of solutions
8
MiniMax Objectives
p Minimax
Minimize ( Maximum å aij xij )
i
j
Minimize z
subject to åa x
j
ij ij -z£0 for all i
10
Defining Constraints
p Chance constraints
é ù
P êå a j x j £ b ú ³ b
ë j û
If β does not appear in the objective, a
deterministic equivalent may be used
åa x
j
j j £ b'
where b’ is larger than b s.t. the original
constraint is implied
11
Detecting Redundancy
p Example to problem reduction
Maximize 2x1 + 3x2 – x3 – x4
subject to x1 + x2 + x3 – 2x4 ≤ 4
-x1 – x2 + x3 – x4 ≤ 1
x1 + x4 ≤ 3
x1 , x2 , x3 , x4 ≥ 0
n Can eliminate x3 and then the 2nd constraint
13
xj 0 ( j = 1, 2, . . . , n).
Observe that the variables x1 , x2 , . . . , xr , the variables xr +1 , xr +2 , . . . , xs , and the variables xs+1 , xs
ot appear in common constraints. Consequently, these variables are independent, and the problem c
Multi-plant Models
oached by solving one problem in the variables x1 , x2 , . . . , xr , another in the variables xr +1 , xr +2 , .
a third in the variables xs+1 , xs+2 , . . . , xn . This separation into smaller and independent subpro
several important implications.
When
First, itpprovides resources
significant computational are allocated
savings, between
since the computations n
for linear programs are
itive to m, the number of constraints, in practice growing proportionally to m 3 . If each subproblem
plants and other decisions are made within
ains 13 of the constraints, then the solution to each subproblem requires on the order of (m/3)3 = m
putations.the plants
All three subproblems then require about 3(m 3 /27) = m 3 /9 computations, or approxim
e amount for an m-constraint problem without structure. If the number of subsystems were
p The coefficient matrix has a block angular
ulations would be only 1/k 2 times those required for an unstructured problem of comparable size.
structure
14
Example: A Multi-plant Model
p A company operates two factories, A and B.
p Each factory makes two products, standard
and deluxe, with unit profit contributions $10
and $15, respectively
15
Example: A Multi-plant Model
p Each factory uses two processes, grinding
and polishing, for producing the two products
n In factory A
p Standard product requires
§ 4 minutes of grinding
§ 2 minutes of polishing
p Deluxe product requires
§ 2 minutes of grinding
§ 5 minutes of polishing
n In factory B
p Standard product requires
§ 5 minutes of grinding
§ 5 minutes of polishing
p Deluxe product requires
§ 3 minutes of grinding 16
§ 6 minutes of polishing
Example: A Multi-plant Model
p Each unit of standard and deluxe uses 4 kgs
of a raw material that the company has 120
kgs available per week
p Company allocates 75 kgs of the raw material
to factory A and 45 kgs to factory B
Factory A Factory B
Standard Deluxe Capacity Standard Deluxe Capacity
Grinding 4 2 80 5 3 60
Polishing 2 5 60 5 6 75
hours/unit hrs/week hours/unit hrs/week
17
Example: A Multi-plant Model
Factory A’s Model:
Max: !" #$ + !& '$
st: ( #$ + ) '$ ≤ +"
) #$ + & '$ ≤ ,"
( #$ + ( '$ ≤ -&
#$ , '$ ≥ "
18
Example: A Multi-plant Model
Factory B’s Model:
Max: !" #$ + !& '$
st: & #$ + ( '$ ≤ *"
& #$ + * '$ ≤ +&
, #$ + , '$ ≤ ,&
#$, '$ ≥ "
19
Example: A Multi-plant Model
21
Example: A Multi-plant Model
p Optimal solution to the company’s model:
n Produce 9.17 units of standard in A
8.33 units of deluxe in A
12.5 units of deluxe in B
n Profit is $404.17
n Surplus grinding capacity of 26.67 hrs in A, 22.5 in B
n Factory A uses 70 kgs of raw material and B uses 50
22
Decomposing a Large Model with
Structure
p Decomposition could provide an efficient
solution procedure
p Decomposition corresponds to decentralized
planning
p Decomposition by allocation
n Recall the multi-plant example
n The optimal allocation of the raw material between
the two plants was 70:50. Once this is known,
problem decomposes for each plant
p Decomposition by pricing (Dantzig-Wolfe
reformulation)
n Set prices on the common resources
n Reformulate the problem considering the vertexes 23
of the optimal solution
Decomposition by Pricing
p Consider the multi-plant example
p Submodels without the raw material
constraint:
Model-A Model-B
Max: !" #$ + !& '$ Max: !" #/ + !& '/
st: ( #$ + ) '$ ≤ +" st: & #/ + 0 '/ ≤ ,"
) #$ + & '$ ≤ ," & #/ + , '/ ≤ 1&
#$ , '$ ≥ " #/, '/ ≥ "
24
Decomposition by Pricing -
Example
p Suppose the raw material has a price of $p
per kg
p Profits for plants A and B:
Max: ("# − %&)() +("+ − %&) ,) Max: ("# − %&) (3 +("+ − %&) ,3
st: % () + - ,) ≤ /# st: + (3 + 4 ,3 ≤ 0#
- () + + ,) ≤ 0# + (3 + 0 ,3 ≤ 5+
() , ,) ≥ # (3, ,3 ≥ #
25
Decomposition by Pricing -
Example
p Factory A’s optimal solution with p=0
n Profit is $250, produce 17.5 standard, 5 deluxe
26
Decomposition by Pricing -
Example
p When the price is p, A and B will have
solutions that are the extreme points of their
feasible regions
st:
3 ;4 4 ≤ =>?
4∈67∪69
3 4 ≤=
4∈67
3 4 ≤=
4∈69
28
4 ≥? ∀ 4 ∈ 67 ∪ 69
Decomposition by Pricing -
Example
p The master model finds the optimum mix of
the vertex solutions of each submodel
n It has fewer constraints but too many variables
n Resort to column generation
p Add columns (vertex solutions) in the course of
optimization
p Recall that we have !" = 10 &' + 15&* and +" = 4(&' + &* )
p Then we can rewrite /" as:
p Common constraints
n Inventory balance equations
p Subproblems
n Operational decisions in each period
32
Example: Multi-period Production
Planning
p Products are scheduled to be produced at
different periods
p Demand for every product in each period is
specified
p There are limitations on: production
capacity, labor, storage, etc.
p Products may be stored from one period to
the next at a known cost/unit.
p Assumption: no shortages
33
Example
p The Silver Star Bicycle Company will be
manufacturing men’s and women’s models for
its 10 speed bicycles during the next 2
months.
p Management wants to develop a production
schedule indicating how many bicycles of
each model should be produced in each
month.
34
Example
p Demand forecasts call for 150 men’s and
125 women’s models to be shipped during
the first month and 200 men’s and 150
women’s during the second month.
35
Example
p Last month the company used a total of
1000 hours of labor. Company’s policy will
not allow the total hours of labor to
increase or decrease by more than 100
hours from month to month.
p The company charges 2% of the production
cost for inventory holding. The company
would like to have at least 25 units of each
model at the end of the 2 months.
What is the minimum cost production
schedule?
36
Multi-period Planning Example
p Decision variables:
n ! " : number of women’s bicycle to produce in time
period $ ∈ & = {1,2}
n -" : number of men’s bicycle to produce in time
period $ ∈ & = {1,2}
"
n ./ : number of women’s bicycle to have in the
inventory at the end of the time period $ ∈ {0, 1, 2}
n " : number of men’s bicycle to have in the
.1
inventory at the end of the time period $ ∈ 0, 1, 2
n ℓ" : labor used at time period $ ∈ 0, 1, 2
37
Multi-period Planning Example
p Objective function:
n !"# ∶ ∑&∈((90 , & + 120 0& ) + ∑&∈( 1.8 45
& &
+ 2.4 47
38
Multi-period Planning Example
p Constraints
Inventory Balance:
n Women’s bicycles
# = ! #%& + ( # − * # ,
!" ∀- ∈ /
" "
0 = 0,
!"
2
!" ≥ 25,
n Men’s bicycles
# = ! #%& + 7# − * # ,
!6 ∀- ∈ /
6 6
0 = 0,
!6
2
!6 ≥ 25, 39
Multi-period Planning Example
p Constraints
Labor Hours:
ℓ" ≤ ℓ"$% + 100 , ∀+ ∈ -
ℓ" ≥ ℓ"$% − 100 , ∀+ ∈ -
ℓ" = 2.6 4 " + 3.5 7" , ∀+ ∈ -
40
Example: Kellog Company’s
Planning System
p Kellog Company
n produces breakfast cereal and other foods
p Kellog Planning System (KPS)
n Based on a large-scale multi-period linear program
p At operational (weekly) level
n Production, inventory and distribution decisions
p At tactical level
n Budgeting, capacity expansion, capacity
reassignment decisions
p US and Canada operations
n Used for more than a decade
41
Kellog Planning System
p KPS
n complements the ERP system by optimization
n suited to evaluate alternate scenarios
n took one year to develop the prototype, several
years to develop it further
p Kellog produces hundreds of products and
sells them as thousands of SKUs
p Geographically dispersed production facilities
p Systematic global coordination and
optimization was needed
42
Kellog’s Operations
p Operates five plants in US and Canada
p Has seven core DCs, 15 contracted co-
packers
p In cereal business alone,
n Production of 80 products
n Packaging, storing and distribution of over 600
SKUs
n A given product and package combination may be
packed into several different case sizes, yielding a
different SKU
43
Basic Operational LP
p Single product inventory balance equation is
extended to
n Multiple products and SKUs
n Multiple stages of production
n Multiple plants and DCs
n Shipping lanes between the plants and DCs
n Various capacity constraints
44
Basic Operational LP
p Each Kellog plant or co-packer is modeled as
a processing line
p Each packaging line packs finished SKUs
p Finished SKUs are kept in inventory or are
used to meet demand assigned to the plant
or are shipped to another plant or DC
p All demand is aggregated by SKU and
location
p Production of a product on a processing line
and other facilities form a production process
45
Discussion
p Decision variables associated with a plant
n MAKE, PACK, HOLD, SHIP
p Decision variables associated with a DC
n HOLD, SHIP
47
Typical Linear Programming
Applications
p Petroleum industry
n where to buy crude oil, how to ship it, which
products to produce out of it, refinery
optimization
p Chemical industry
n blending, resource allocation
p Manufacturing
n Product mix, aggregate production planning,
scheduling, blending
48
Typical Linear Programming
Applications
49