FOUNDATION OF SERVICE SCIENCE

Lecture 2. INTRODUCTION TO SERVICE DESIGN AND PLANNING.

MATHEMATICAL PROGRAMMING MODELS OF OPTIMAL RESOURCE ALLOCATION.

Conf. Virginia Ecaterina Oltean

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MOTIVATION

 A service is an economic process which needs resources to be implemented and to achieve value co-creation

 In general, for the provider, value is obtained if the service provision brings profit, or if it can be realized with
minimum costs

 For the client, value is obtained if the service quality is such that satisfaction is achieved at a reasonable price
(~value in exchange)

 Both perspectives need a quantification of the goals: (profit, costs, quality, price), which is desired to be
maximized or minimized, respectively, that is to be optimized

 The mathematical expressions of the goals depends on parameters and involves decision variables, that have to
be computed

 As the needed resources are not unlimited, the optimization of the goals is submitted to constraints

 MATHEMATICAL PROGRAMMING MODELS (~CONSTRAINED OPTIMIZATION)

The main scientific domains involved in a service process lifecycle:

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 A High Level Description of a Generic Service Process Lifecycle
and associated scientific domains supporting the lifecycle’s stages
IT,
DATABASES,
1. A GENERIC MODEL OF A SERVICE PROCESS LIFECYCLE

STATISTICS

OPTIMAL
DECISIONS
on resource
allocation:
MATH.
PROGR.

WORKFLOW
DESIGN
(activities):
Business
Processes
(BPMN)

OPTIMAL
NEGOCIATION:
GAME THEORY

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 RESOURCE ALLOCATION in economic processes:

Note: optimal resource allocation is common both to production and service industry.

An introductory example: How does a supplier of medical devices decide on its production quantities?

 A manufactures of medical devices used in medical services wants to produce products of two types:
PROD1, PROD2, with maximal income in a time interval T[tu] % denote tu – time units
 The unknown quantities are: x1 units- for PROD1 and x2 units- for PROD2%denote pu-product units
 The unit income contributions of each product type are, respectively, c1  1 [mu/pu1], c2  1 [mu/pu2]
%denote mu – money units
 The manufacturing program requires, as resources, machines of two types, M1 and M2
 According to the manufacturing program:
o The machines of type M1 are occupied in T[tu]: a11  1[tu/pu1], a12  2 [tu/pu2],
o The machines of type M2 are occupied in T[tu]: a21  1 [tu/pu1], a22  0 [tu/pu2],

PROD1 PROD2
Unit income contributions of the products c1  1 [mu/pu1] c2  1 [mu/pu2]
Resource M1: time required for prod.units a11  1[tu/pu1] a12  2 [tu/pu2]
Resource M2: time required for prod.units a21  1 [tu/pu1] a22  0 [tu/pu2]
 In T[tu]: the machines of type M1 are available no more than 6 [tu] and those of type M2 are
available no more than 3 [tu]% these limits result from the structure of the manufacturing cell
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PROBLEM: what are the optimal quantities x1 units- for PROD1 and x2 units- for PROD2 in order to:

a) Maximize the total income in T[tu] and

b) Satisfy the constraints imposed by the time required to manufacture PROD1 and PROD2 and the
resources limitations expressed in time units

How to solve the problem?

STEP1: A mathematical model of the problem

x 
Decision variables: x1, x2  R , x   1 
 x2 

Objective function: f : R 2  R , f ( x)  c1x1  c2 x2 [money units]

Constraint function for M1,2: gi : R 2  R , gi ( x)  ai1x1  ai 2 x2 [time units], i  1, 2

b 
Limits of constraints in the time interval T[tu]: b1  6 [tu] for M1, b2  3 [tu] for M2, b   1 
b2 

REMARK: The objective always takes scalar values, because these values have to be compared (“ “or
“”).

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 This is a Mathematical Programming model:

GENERAL form PARTICULAR form

P : max f ( x) P : max( 1 x1  1 x2 )
Subject to g ( x)  b , x  0 , x  R n Subject to: 1 x1  2  x2  6
% n decision variables and 1 x1  0  x2  3 , x1 , 2  0
% m constraints % n  2 decision variables, as many as product types
 g1   b1   x1  % m  2 constraint inequalities, as many as types of
g    , b    , x     resources
     
 g m  bm   xn 
REMARK: the functions f and g are LINEAR in the variables x1 , 2  the Linear Programming (LP) model

GENERAL LP matrix-vector form PARTICULAR LP form

P : max cT x cT  [c1 c2 ]  cT  [1 1]
Subject to Ax  b , x  0 a a  b  1 2 6 
cT  [c1  cn ] A   11 12  , b   1   A    , b   3
a21 a22  b2  1 0  
 a11  a1n   b1 
A   , b    
   
am1  amn  bm 

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STEP 2. Geometric solution. Analysis: The problem is feasible because the feasibility set is nonempty,
X   , with X  {x  R 2 : x1  2 x2  6, x1  3} , so the problem has solutions ! Which solution is optimal?

x2

X  f 
x1  3
x1  2 x2  6  x  1
x f   1      c
 f  1
 x2 
C (3,1.5)

0 x1
x f

f ( x)  0

 The objective value (the income) increases in the direction of  x f

 The objective line is not allowed to leave the feasibility domain X
 The OPTIMAL SOLUTION: in point C , x1*  3 units of PROD1, x2*  1.5 units of PROD2 and the maximal
income is f ( x*)  cT x*  1 3  11.5  4.5 money units
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STEP 2’. Numerical solution (for example in Octave)

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The result is the same as the one obtained using the geometric approach:

the optimal decision variables are x1*  3 units of PROD1, x2*  1.5 units of PROD2 and

the maximal income is f ( x*)  cT x*  1 3  11.5  4.5 money units

Remark: a different result is obtained if our products PROD1 and PROD2 are pieces and the decision
variables are imposed to be integer, x1, x2  Z 
x1*int  2 , x2* int  2 and f ( xint
*
)  1 2  1 2  4  4.5  f ( x*) [mu],

so an integer solution drives to a an optimal income with a lower value than in the continuous case. This
will be detailed later, in the chapter dedicated to Integer Programming (IP).

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In next lesson: what is the decision model if the manufacturer wants to produce at minimum cost of
resources ? Answer: the DUAL problem of the PRIMAL LP problem.

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