Linear Optimization Modeling: Klein Industries

American Public University System

BUSN625: Applied Decision Making

Abstract

This memo has been provided to the production manager over Klein Industries

manufacturing facilities and the manufacturing of air compressors of three different types, with

the emphasis of an informing focus on linear programming optimization outlooks for each one of
Linear Optimization Modeling: Klein Industries 1

the air compressors and the generated data through the modeling methods. The three types

manufactured are large, medium, and small. These are created in a process starting at

forming/bending, welding, and then a finish with painting. In the memo, details are provided on

the linear programming optimization outlook with a model with explanations of results,

recommendations, and the distinct relations concerning both shadow pricing and cost reductions

related to the modeling experiments. 

Memo

As it is known three different types (small, medium, large) of portable air compressors

are produced by Klein industries (Evans, 2012). As these three portable air compressors are

unique in design, they all require different manufacturing needs (manufacturing times,
Linear Optimization Modeling: Klein Industries 2

facilitation, and materials), which in comparison to the market from which they are sold, the

valuation of each one is different in supply and demand. Variables with the applied linear

programming model (LPM) stem from these portable air compressors to generate values related

to the manufacturing sum of each one, which provides the overall possible profitable gains for

each one produced through the calculation model that was used.

From the utilization of the LPM, including the variables and constraints provided, this

questionable pursuit for the overall possible profitable gains for the sum of each produced

portable air compressor has been solved. The implementation of the model produced through

Microsoft Excel and other applications, provided results that can better support advisement and

decision-making effectiveness, obtaining the benefit of optimal profitable gains for the company.

Through this research, optimized manufacturing sums for each unit have been discovered to

provide the best course of action for production.

Proceeding with overview of this analysis, the Microsoft Excel data has also been provided along

with this memo for review and correlation. 

Microsoft Excel Solver Tool Part 1:

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Microsoft Excel Solver Tool Part 2:

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The three production values generated by the solver tool for each compressor are 1.

Small: 16,157.14286, 2. Medium: 6200, and 3. Large: 2,600, which includes both the minimum

and the maximum number of units that can be made, in a given month. From these values, the

company can have a max optimal financial gain of $651,221.4286. From the sensitivity report,

values of $3.39 and $4.07 of allowable price increase for the large and medium air compressor
Linear Optimization Modeling: Klein Industries 5

units are increasable with no change to the optimal resolution. There is also an opportunity for

cost savings that will not affect the optimal resolution with an allowable decrease of $1.53 in unit

price for the small air compressor units. 

Regarding constraints without variation to the optimum solution, the large, medium, and

small air compressor units are decrease able with the upper bound levels. Within the lower bound

levels for all three air compressor units can be set at an increase: 1. Small: 2,157, 2. Medium:

1,161, 3. Large: 974, yet for a decrease only the large and the medium air compressors hold

values at 2,187 and 2,607 within lower bounds without any change with the optimal resolution. 

Following up with additional testing with easing auxiliary variables to maximize any

other profitable gains, several results were identified with potential. Provided the bounded

constraints, if these are manipulated, then the profits discussed will be affected, which will also

affect the shadow prices listed in the sensitivity report. First reviewing painting requirement with

the manufacturing of all units, the shadow price level was retrieved at $14.6429, at the maximum

increased time value of 6,780 minutes, which equates to every minute saved in production is

attributed to that shadow price. Regarding the large air compressor units, it was determined, that

2,187.10 is the maximum allowed decrease. $-3.3929 is the shadow price for this unit, and with a

reduction of one large unit, this could lead to a profit of $3.3929 per unit. Lastly, the results for

the medium air compressor unit include a shadow price of $-4.0714, with the same applied

measures a reduction of one medium unit, could lead to a profit of $4.0714 per unit, with the

consideration of the noted 2607.69 maximum allowed decrease. 

For formulas used for this model please reference below:

*Sum-Product Function in Microsoft Excel Utilized*

To Maximize profit potential:

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$20.50Small + $34.00Medium + $42Large

Constraint Subjections: 

Bounds on unit potential profits with highest and lowest limits:

Large Air Compressor Unit (LACU): 4200 ≥LACU ≥2600

Small Air Compressor Unit (SACU): 21000 ≥SACU≥14000

Medium Air Compressor Unit (MACU): 12500≥MACU≥6200

Painting: 46800 ≥ sum product of all manufacturing time requirements for each unit type

(3.1large+1.4Small+2.6Medium)

B/F: 23400 ≥ sum product of all manufacturing time requirements for each unit type

(0.8large+0.4Small +0.7Medium)

Welding: 23400 ≥ sum product of all manufacturing time requirements for each unit type

(1.2large +0.6Small +1Medium)

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References

Evans, J. (2012, January 18). Statistics, Data Analysis, and Decision Modeling, 5th Edition.

Prentice-Hall.