L.P.

APPLICATION AREAS AND EXAMPLE PROBLEMS

Linear Programming models and solution procedures have potential use in almost all industrial and service sectors. The widest and
most frequent usages are seen in the areas of
- production planning and/or scheduling,
- product composition, product mix decision,
- inventory planning,
- distribution and logistics planning,
- personnel planning and/or scheduling,
- investment planning,
- financial planning and budgeting.
- marketing,
- banking/insurance,
- health services

In this section, example problems and related L.P models from different industrial and service sectors are presented. These examples
are simplified and kept relatively small to enable easy comprehension and understanding. However, the presented models can easily
be expanded into their realistic and effective counterparts for real applications.

Optimization Tools 3.1 LP – Formulation Examples

1. Production Planning - Product Composition
A production facility manufactures 5 types of products (X1, X2, X3, X4, X5) using two basic processes (lathe and drilling operations).
Processing times per unit of each product through these operations, and company profitability per unit of each product are displayed
in the following table (it is assumed that all products manufactured can be sold and raw material costs and other
operating/manufacturing expenses are accounted for).
X1 X2 X3 X4 X5
Lathe (minutes/unit) 12 20 - 25 15
Drill (minutes/unit) 10 8 16 - -
Profit (TL/unit) 550 600 350 400 200
Furthermore, each unit manufactured needs 20 man-minutes of assembly work. There are 3 lathe and 2 drilling machines in the
facility, while the lathe and drilling departments are active 6 days per week and are on two eight hour shifts. The assembly line
employs 8 workers on a single 6 day, 8 hour shift.
Under these conditions, a weekly production policy to maximize profit can be determined through the following L.P. model:
The Objective:
Max Z = 550 x1+ 600 x2+ 350 x3+ 400 x4 + 200 x5 [3.1]

The Constraints:
12 x1 + 20 x2 + 25 x4 + 15 x5 ≤ 17280 [3.2]
10 x1 + 8 x2 + 16 x3 ≤ 11520 [3.3]
20 x1 + 20 x2 + 20 x3 + 20 x4 + 20 x5 ≤ 23040 [3.4]
x1 ≥ 0 [3.5]
x2 ≥ 0 [3.6]
x3 ≥ 0 [3.7]
x4 ≥ 0 [3.8]
x5 ≥ 0 [3.9]

Such models are frequently employed to help production planning in metal products, glass, electronics, pulp-paper, iron-steel,
forestry products industrial sectors.
Optimization Tools 3.2 LP – Formulation Examples
2. Distribution and Logistic Planning
A wheat products company has production facilities in Istanbul and Ankara, and wheat collection and storage facilities in Kırklareli,
Izmir, Balıkesir, Adana and Erzurum. The monthly production requirements of the production facilities, and collection and storage
capacities of the storage facilities are given as displayed below (in tons).
Istanbul Ankara Kırklareli Izmir Balıkesir Adana Erzurum
Requirements 7000 3000 - - - - -
Capacity 2000 2000 1500 3500 1500
Unit transportation costs between these city pairs are constant and given as displayed below (the values are in TL/ton, while a “-”
sign denotes the unavailability of direct transportation between the related city pair)
Istanbul Ankara Kırklareli Izmir Balıkesir Adana Erzurum
Istanbul 500 200 200 400 800 700
Ankara 500 - 400 300 350 600
Kırklareli 200 - - 500 - -
Izmir 200 400 500 300 300 -
Balıkesir 400 300 - 300 950 -
Adana 800 350 - 300 950 700
Erzurum 700 600 - - - 700

A distribution policy which will satisfy all demand and capacity requirements, while minimizing total distribution costs can be
determined through L.P. modeling.

Optimization Tools 3.3 LP – Formulation Examples

The Decision Variables:
KZ Amount of wheat to be transported from Kirklareli to Izmir each month,
KI Amount of wheat to be transported from Kirklareli to Istanbul each month,
IK Amount of wheat to be transported from Istanbul to Kirklareli each month,
IZ Amount of wheat to be transported from Istanbul to Izmir each month,
IB Amount of wheat to be transported from Istanbul to Balikesir each month,
ID Amount of wheat to be transported from Istanbul to Adana each month,
IA Amount of wheat to be transported from Istanbul to Ankara each month,
IE Amount of wheat to be transported from Istanbul to Erzurum each month,
BI Amount of wheat to be transported from Balıkesir to Istanbul each month,
BA Amount of wheat to be transported from Balıkesir to Ankara each month,
BZ Amount of wheat to be transported from Balikesir to Izmir each month,
BD Amount of wheat to be transported from Balikesir to Adana each month,
ZK Amount of wheat to be transported from Izmir to Kirklareli each month,
ZI Amount of wheat to be transported from Izmir to Istanbul each month,
ZA Amount of wheat to be transported from Izmir to Ankara each month,
ZB Amount of wheat to be transported from Izmir to Balikesir each month,
ZD Amount of wheat to be transported from Izmir to Adana each month,
AI Amount of wheat to be transported from Ankara to Istanbul each month,
AZ Amount of wheat to be transported from Ankara to Izmir each month,
AB Amount of wheat to be transported from Ankara to Balikesir each month,
AD Amount of wheat to be transported from Ankara to Adana each month,
AE Amount of wheat to be transported from Ankara to Erzurum each month,
DE Amount of wheat to be transported from Adana to Erzurum each month,
DA Amount of wheat to be transported from Adana to Ankara each month,
DI Amount of wheat to be transported from Adana to Istanbul each month,

Optimization Tools 3.4 LP – Formulation Examples

The Objective:
Min 500KZ+ 200KI+ 200IK+ 200IZ+ 400IB+ 800ID+ 500IA+ 400BI+ 300BA+ 300BZ+ 950BD+ 500ZK+ 200ZI+ 400ZA+ 300ZB+ 300ZD+
500AI+ 400AZ+ 300AB+ 350AD+ 600AE+ 600EA+ 700ED+ 700DE + 350DA+ 800DI+ 950DB+ 300DZ+ 700EI+ 700IE

The Constraints:
KI- IK- IZ- IB- ID- IA+ BI+ ZI + AI + DI+ EI- IE ≥ 7000
IA+ BA+ ZA- AI- AZ- AB- AD- AE+ EA+ DA ≥ 3000
KZ+ KI- IK- ZK ≤ 2000
- KZ- IZ- BZ+ ZK+ ZI+ ZA+ ZB+ ZD- AZ- DZ ≤ 2000
- IB+BI+ BA+ BZ+ BD- ZB- AB- DB ≤ 1500
- ID- BD- ZD- AD- ED+DE+ DA+DI+ DB+ DZ ≤ 3500
- AE+EA+ED- DE+ EI- IE ≤ 1500
KZ, KI, IK, IZ, IB, ID, IA, BI, BA, BZ ≥0
BD, ZK, ZI, ZA, ZB, ZD, AI, AZ, AB, AD ≥0
AE, EA, ED, DE, DA, DI, DB, DZ, EI, IE ≥0

Such models are used in transportation/distribution planning of food products, household appliances, cement, iron-steel and
petroleum products. They are also deployed in planning power transmission, natural gas distribution and in the management of
air/sea/land transportation companies.

Optimization Tools 3.5 LP – Formulation Examples

3. Currency Exchange Planning
An international company has operations in USA, Europe, China, Mexico and Japan and they have daily varying needs and surpluses
for cash in these countries currencies. Accordingly, the company needs to do large scale currency exchanges and cash transfers very
frequently. The decision of which surplus currencies to exchange for which demanded currencies, is a frequently faced decision that
needs a fast answer and considerably effects overall profitability.
On a specific day, Chinese operations have 8 Million Yuan and Japanese operations have 1280 million yen urgent cash need; while,
USA operations have $ 2 million, European operations have € 5 million and Mexican operation have 15 million peso cash surplus.
Exchange rates faced by the company are as follows.
1.Dollar 2.Euro 3. Yuan 4. Peso 5. Yen
1. Dollar ($) 1.00000 0.69980 8.07800 13.1350 224.700
2. Euro  (€) 1.42500 1.00000 11.5500 18.7700 320.700
3.Yuan (¥) 0.12340 0.08647 1.00000 1.62500 27.7600
4. Peso (MXN) 0.07586 0.05324 0.61460 1.00000 17.1020
5. Yen (¥) 0.00443 0.00310 0.03586 0.05815 1.00000

So, it is possible to buy € 0.69980 or 13.135 Peso with $ 1; while € 1 buys $1.425, and 1 Peso buys $0.07586. In other words, there is
a natural commission and buy/sell loss between buying and selling prices of each currency (while $ 1 buys € 0.69980, € 0.69980 buys
only 0.69980 x 1.425 = $0.99722). The levels of commissions and price differentials change from one currency pair to another.
Given this information, the problem of which currency need to satisfy by which currency surpluses, and which currency transactions
to undertake, in a way to maximize total remaining assets (or equivalently minimize overall exchange commissions) can be modeled
and solved through L.P.

The Decision Variables:

xij amount to be sold from currency "i", to buy currency "j"; i = 1,.., 5; j = 1,..., 5; j ≠ i
xii cash position in currency "i" at end of the day; i = 1,..., 5

Optimization Tools 3.6 LP – Formulation Examples

The Objective:
Max x11 + 1.427 x22 + 0.1236 x33 + 0.076 x44 + 0.00444 x55

The Constraints:
x11 + x12 + x13 + x14 + x15 - 1.4250 x21 - 0.12340 x31 - 0.0759 x41 - 0.00443 x51 = + 2
x21 + x22 + x23 + x24 + x25 - 0.6998 x12 - 0.08647 x32 - 0.0532 x42 - 0.00310 x52 = + 5
x31 + x32 + x33 + x34 + x35 - 8.0780 x13 - 11.5500 x23 - 0.6146 x43 - 0.03586 x53 = - 8
x41 + x42 + x43 + x44 + x45 - 13.135 x14 - 18.7700 x24 - 1.6250 x34 - 0.05815 x54 = + 15
x51 + x52 + x53 + x54 + x55 - 224.70 x15 - 320.700 x25 - 27.760 x35 – 17.102 x45 = -1280
xij ≥ 0 i = 1,..., 5 ; j = 1,..., 5

Such models are frequently used by banks, insurance companies, stock market companies and multinational corporations.

Optimization Tools 3.7 LP – Formulation Examples

4. Personnel Scheduling
A large supermarket desires to vary its number of operational point of sales (POS) during the day in order to match the varying
customer demand. Studies undertaken have shown that the desirable number of POS at each hourly period of the day is as follows.

The supermarket has 12 full-time (F) cashiers and the management may ask each cashier to work either the 09-17 or the 13-21 shift.
Cashiers on the 09-17 shift have one hour lunch break between 12:00-14:00 (half between 12:00-13:00, the others between 13:00-
14:00) & get a daily gross salary of 90TL. Cashiers on the 13-21 shift don’t have a lunch break, but they get a daily gross salary of
105TL. In addition to the full-time personnel, the supermarket management has the option of employing part-time cashiers. Each
part-time cashier works 4 straight hours per day and may be asked to start at the beginning of any hour (9:00 being the earliest start
time and 17:00 being the latest start time). Part-time cashiers do not have lunch breaks and they get a daily gross salary of 60 TL.

Time Interval Number of POS Time Interval Number of POS

09:00 - 10:00 4 15:00 - 16:00 8
10:00 - 11:00 8 16:00 - 17:00 8
11:00 - 12:00 10 17:00 - 18:00 10
12:00 - 13:00 12 18:00 - 19:00 14
13:00 - 14:00 14 19:00 - 20:00 14
14:00 - 15:00 8 20:00 - 21:00 10

The number of full-time cashiers employed cannot exceed 12, but may be reduced, if desired. However, because of quality and
customer satisfaction considerations, the supermarket management would like to meet at most two thirds of its daily cashier-hour
needs through part-time personnel.

Under the above stated conditions, the supermarket’s cashier schedule, number and shifts of full-time and part-time cashiers to be
employed, in a way to minimize personnel costs may be determined through L.P.

Optimization Tools 3.8 LP – Formulation Examples

The Decision Variables:
F1: number of full-time cashiers to work in the 09:00 - 17:00 shift,
F2: number of full-time cashiers to work in the 13:00 - 21:00 shift,
P1: number of part-time cashiers to work in the 09:00 - 13:00 shift,
P2: number of part-time cashiers to work in the 10:00 - 14:00 shift,
P3: number of part-time cashiers to work in the 11:00 - 15:00 shift,
P4: number of part-time cashiers to work in the 12:00 - 16:00 shift,
P5: number of part-time cashiers to work in the 13:00 - 17:00 shift,
P6: number of part-time cashiers to work in the 14:00 - 18:00 shift,
P7: number of part-time cashiers to work in the 15:00 - 19:00 shift,
P8: number of part-time cashiers to work in the 16:00 - 20:00 shift,
P9: number of part-time cashiers to work in the 17:00 - 21:00 shift,

Optimization Tools 3.9 LP – Formulation Examples

The Objective:
Min 90F1+ 105F2+ 60P1+ 60P2+ 60P3 + 60P4 + 60P5+ 60P6 + 60P7+ 60P8 + 60P9

The Constraints:
F1 + P1 ≥4
F1 + P1 + P2 ≥8
F1 + P1 + P2 + P3 ≥10
0.5 F1 + P1 + P2 + P3 + P4 ≥12
0.5 F1 + F2 + P2 + P3 + P4 + P5 ≥14
F1 + F2 + P3 + P4 + P5 +P6 ≥8
F1 + F2 + P4 + P5 + P6 + P7 ≥8
F1 + F2 + P5 +P6 + P7 + P8 ≥8
F2 + P6 + P7 + P8 + P9 ≥ 10
F2 + P7 + P8 + P9 ≥ 14
F2 + P8 + P9 ≥ 14
F2 + P9 ≥ 10
P1 + P2 + P3 + P4 + P5 + P6 + P7 + P8 + P9 ≤ 20
F1 + F2 ≤ 12
F1, F2, P1, P2, P3, P4, P5, P6, P7, P8, P9 ≥ 0

Similar models may be employed in various personnel scheduling problems.

Optimization Tools 3.10 LP – Formulation Examples

5. Cash Flow Planning
A textile manufacturer has to plan its cash flow for the coming winter season. It is known that pre-season stocking would require
large cash outflows during the Sept-Nov. period, while in season sales usually lead to large cash inflows in the December-January
period. Expected cash flows are displayed in the following table (in units of 1,000 TL)
1. Aug. 2. Sept. 3. Oct. 4. Nov. 5. Dec. 6. Jan.
Notes Receivable 700 500 700 1000 1200 500
Purchasing (cash payments) 800 1000 1000 600 400 400
Cash Needs of Com. Activities - 300 600 900 - -
Cash Surplus of Com. Activities 200 - - - 300 1500
Three borrowing tools may be employed in meeting short term cash needs:
a) Open credit account with notes receivable as collateral: Through this method, the company may borrow from its bank, up to
75% of the coming months notes receivable total, by showing those notes receivable as collateral. The duration of the loan is
one month and its interest rate is 1.5 % per month.
b) Delayed payment (one month) in purchase of goods: This way, the company may pay the full cost of merchandise purchased in
one month, the next month. However, they will lose the 3 % price reduction associated with cash payments.
c) Six month, fixed term credit with company general assets as collateral: This way, the company may borrow from its bank, up to
800,000 TL, by showing its general assets as collateral. The duration of this loan is fixed at six months and its interest rate is
1.0 % per month. However, it can only be applied for and obtained at the beginning of August to€ be repaid at the beginning of
February; it cannot be increased or decreased during the planning period.
Each month, the company may invest its short term cash surplus, generated during the month, in government bonds, which have an
interest rate of 0.5 % per month and may be cashed in anytime. Assume that all monetary transactions (such as getting credit,
payment for purchases, payment of interest, surplus of or need for cash in commercial activities, investment in government bonds)
associated with any month occur at the beginning of the month.

Under these conditions, a cash flow management and planning system, which will minimize gross interest expenses (or, equivalently,
maximize end of period assets) can be set up through L.P.

Optimization Tools 3.11 LP – Formulation Examples

The Decision Variables:
Ai Amount of credit obtained from the open credit account, in month "i"; i = 1,..., 6
Vi Amount of delayed payment purchases made in month "i"; i = 1,..., 6
L Amount of fixed term credit obtained
Ii Cash position at the beginning of month "i"; i = 1,..., 6 (right before investment of surplus cash into government bonds and after
the completion of all other monetary transactions of that month)
I7 Cash position at the end of the planning
The Objective:
Max I7

The Constraints:
L + A1 + V1 - I1 = -100
1.005 I1 + A2 + V2 - 0.01 L - 1.015 A1 - 1.031 V1 - I2 = 800
1.005 I2 + A3 + V3 - 0.01 L - 1.015 A2 - 1.031 V2 - I3 = 900
1.005 I3 + A4 + V4 - 0.01 L - 1.015 A3 - 1.031 V3 - I4 = 500
1.005 I4 + A5 + V5 - 0.01 L - 1.015 A4 - 1.031 V4 - I5 = -1100
1.005 I5 + A6 + V6 - 0.01 L - 1.015 A5 - 1.031 V5 - I6 = -1600
1.005 I6 -1.01 L - 1.015 A6 - 1.031 V6 - I7 = 0
L ≤ 800
A1 ≤ 375 V1 ≤ 800
A2 ≤ 525 V2 ≤ 1000
A3 ≤ 750 V3 ≤ 1000
A4 ≤ 900 V4 ≤ 600
A5 ≤ 375 V5 ≤ 400
A6 ≤ 0 V6 ≤ 400
A1, A2, A3, A4, A5, A6, V1, V2, V3, V4, V5, V6, I1, I2, I3, I4, I5, I6, I7, L ≥ 0
Optimization Tools 3.12 LP – Formulation Examples
6. Production Planning - Production/Stock Balancing
XX is a production facility manufacturing electric motors for small home appliances. Model A type motors are being used in kitchen
robots, while Model B type motors are being used in kitchen mixers. The appliance manufacturer that buys these motors to use as
components in its products, gives monthly orders covering 4 month periods. These orders reflect the appliance manufacturers own
productionplan and may vary considerably. XX determines its 4 month production plan after getting a 4 month order from the
appliance manufacturer. The orders for the Jan.-April period are as follows.
Model 1. Jan 2. Feb 3. March 4. April
A 600 700 1200 1300
B 500 1800 1400 1800
In Jan. and Feb. the production costs of Model A & B motors are expected to be 10 TL/unit & 6 TL/unit, respectively. However,
because of a planned 10% wage increase, production costs for Model A & B motors are expected to be 11 TL/unit & 6.6 TL/unit,
respectively in March; and 12 TL/unit & 7.2 TL/unit, respectively in April.
Any motor not sold in the month it is manufactured incurs an inventory cost. This stocking cost is estimated to be 0.25 TL/unit-month
for Model A motors, and 0.20 TL/unit-month for Model B motors. The monthly storage capacity of the facility is 3000 units (capacity
estimates are based on Model B type motors, Model A type motors occupy twice as much space). Computation of inventory costs and
space requirements are based on end of month inventory levels. Inventory levels of both models are zero at the beginning of Jan.. It is
desired to have 450 and 300 units of Model A & B motors, respectively in stock at end of April (i.e. after April production and sales).
One unit of Model A and Model B motor needs 1.3 man-hr and 0.9 man-hr of labor, respectively. The available manpower level of
the facility is capable of providing up to 2000 man-hr of labor per month. To avoid layoffs, the management would like to keep the
manpower requirements of the monthly production above 90% of this base capacity (i.e. greater than 1800 man-hr). It is possible to
increase monthly manpower availability up to 3200 man-hr through overtime. The additional cost of overtime is estimated to be 3
TL/man-hr in Jan. and Feb., 3.3 TL/man-hr in March and 3.6 TL/man-hr in April.
The plant management would like to give consideration to the following four factors while preparing its four month production plan:
i) Keeping monthly production values as level as possible (to simplify material flow and the scheduling of manpower and
equipment),
ii) Keeping monthly production levels close to estimated sales (to reduce inv. costs),
iii) Not exceeding the physical storage capacities,

Optimization Tools 3.13 LP – Formulation Examples

 iv) Keeping each months production above a certain minimum level (to avoid layoffs and maintain workplace harmony and worker
satisfaction).
A 4 month production plan of the facility, that will minimize all stated costs, while satisfying all stated requirements can be
determined through LP as follows.
The Decision Variables:
Ai Amount to be produced of Model A motor in month "i"; i = 1,..., 4
Bi Amount to be produced of Model B motor in month "i"; i = 1,..., 4
IAi End of month inventory level of Model A motor in month "i"; i = 1,..., 4
IBi End of month inventory level of Model B motor in month "i"; i = 1,..., 4
Mi Level of overtime in month "i"; i = 1,..., 4
The Objective:
Min 10 A1 + 10 A2 + 11 A3+ 12 A4 + 6 B1 + 6B2 + 6.6 B3 + 7.2 B4 +
0.25 IA1 + 0.25 IA2 + 0.25 IA3 + 0.25 IA4 + 0.2 IB1 + 0.2 IB2 + 0.2 IB3 + 0.2 IB4 +
3 M1 + 3 M2 + 3.3 M3 + 3.6 M4

The Constraints:
A1 - IA1 = 600
B1 - IB1 = 500
A2 + IA1 - IA2 = 700
B2 + IB1 - IB2 = 1800
A3 + IA2 - IA3 = 1200
B3 + IB2 - IB3 = 1400
A4 + IA3 - IA4 = 1300
B4 + IB3 - IB4 = 1800
2 IA1 + IB1 ≤ 3000
2 IA2 + IB2 ≤ 3000
2 IA3 + IB3 ≤ 3000
IA4 = 450
Optimization Tools 3.14 LP – Formulation Examples
 IB4 = 300
1.3 A1 + 0.9 B1 ≥ 1800
1.3 A2 + 0.9 B2 ≥ 1800
1.3 A3 + 0.9 B3 ≥ 1800
1.3 A4 + 0.9 B4 ≥ 1800
1.3 A1 + 0.9 B1 - M1 ≤ 2000
1.3 A2 + 0.9 B2 - M2 ≤ 2000
1.3 A3 + 0.9 B3 - M3 ≤ 2000
1.3 A4 + 0.9 B4 - M4 ≤ 2000
M1 ≤ 1200
M2 ≤ 1200
M3 ≤ 1200
M4 ≤ 1200

A1, A2, A3, A4, B1, B2, B3, B4, IA1, IA2, IA3, IA4 ≥0
IB1, IB2, IB3, IB4, M1, M2, M3, M4 ≥0

Optimization Tools 3.15 LP – Formulation Examples

7. Investment Planning
A multinational corp is making 5 year investment plans regarding its MidEast operations. Investment alternatives are all well defined
and expected profits (in term of present values of net profits generated over the next five years), as well as precise estimations of cash
flows over the next five years are available for all alternatives. This data is presented in the following table (in units of 1000 TL).

Present Value Yearly Cash Flows

Alternatives of Profitability 1 2 3 4 5
1. Building a new production facility in İzmir 800 100 200 270 200 100
2. Expanding the distribution network in Turkey 400 100 50 200 100 -40
3. Expanding the production facility in Athens 600 300 200 100 100 100
4. Initiating a joint venture in Georgia 1000 200 100 400 200 200
5. Building a distribution network in Azerbaijan 500 50 100 100 50 -30
6. Expanding the production facility in Tel-Aviv 550 100 150 200 150 50
The investment budget of the corporation over the next five years is:
1.yr: 500,000 TL; 2.yr: 450,000 TL; 3.yr: 700,000 TL; 4.yr: 400,000 TL; 5.yr: 300,000 TL
In order to minimize the risks due to the political instability in the region, the corporation would like to undertake at most one of the
investment alternatives in Georgia and Azerbaijan. The expansion of the distribution network in Turkey is a prerequisite for the
building of the new production facility in İzmir. Another condition is a priority established by the top management: They would like
to see the undertaking of at least one plant expansion or building project.

An L.P. formulation, which is aimed to establish the best investment policy (i.e. the one with the highest expected total profitability
present value) among the given alternatives, while satisfying all stated conditions is as follows.

The Decision Variables:

xi Realization percentage of investment "i"; i = 1,..., 6
(xi = 1 ⇒ "i" investment realized %100; xi = 0 ⇒ "i" investment realized %0)

Optimization Tools 3.16 LP – Formulation Examples

The Objective:
Max 800 x1 + 400 x2 + 600 x3+ 1000 x4+ 500 x5+ 550 x6

The Constraints:
100 x1 + 100 x2 + 300 x3 + 200 x4+ 50 x5+ 100 x6 ≤ 500
200 x1 + 50 x2 + 200 x3 + 100 x4+ 100 x5+ 150 x6 ≤ 450
270 x1 + 200 x2 + 100 x3 + 400 x4+ 100 x5+ 200 x6 ≤ 700
200 x1 + 100 x2 + 100 x3 + 200 x4+ 50 x5+ 150 x6 ≤ 400
100 x1 - 40 x2 + 100 x3 + 200 x4 - 30 x5 + 50 x6 ≤ 300
x4 + x5 ≤1
x1 - x2 ≤0
x1 + x3 +x6 ≥1
1≥ xi ≥ 0 i = 1,..., 6

Optimization Tools 3.17 LP – Formulation Examples

8. Job Assignment
The Management of a multinational corporation, has undertaken a major reorganization, during which operations have been grouped
under six regions. These regions are, North America, North Africa, Middle East, Western Europe, Eastern Europe, and Far East,
whose regional centers are determined to be New York, Tunis, Antalya, Paris, Moscow and Hong Kong respectively.
Seven candidates have been designated for the six regional manager positions at these regional centers. However, there are doubts
regarding the fit and effectiveness of individual assignments (of candidates to regions). In order to minimize these doubts, it has been
determined to base each assignment on the candidates’ knowledge of the regions’ culture and language, which would be measured
through a small multiple choice test. The seven candidates’ test results for each region (in terms of the percentage of wrong answers)
are displayed below.
1. N.York 2. Tunis 3.Antalya 4. Paris 5. Moscow 6.H.Kong
1. Candidate 17 30 15 13 15 21
2. Candidate 28 14 23 20 25 18
3. Candidate 25 22 18 19 20 27
4. Candidate 20 16 13 18 22 20
5. Candidate 26 27 13 29 22 26
6. Candidate 11 25 9 37 42 12
7. Candidate 15 23 29 11 12 19
The problem of which candidate to assign to which region (and which will stay in the headquarters), based on the aim of maximizing
overall fit (as measured by the minimization of total wrong answer percentage), can be modeled as follows.
The Decision Variables:
xij having "ith" candidate assigned to "jth" region; i = 1,..., 7; j = 1,...,6
(Decision variable taking value 1 in case of assignment, 0 otherwise)

The Objective:
Min 17 x11+ 30 x12+ 15 x13+ 13 x14+ 15 x15+ 21 x16+28 x21+ 14 x22+ 23 x23+ 20 x24+ 25 x25+ 18 x26+ 25 x31+ 22 x32+ 18 x33+ 19
x34+ 20 x35+ 27 x36+ 20 x41+ 16 x42+ 13 x43+ 18 x44+ 22 x45+ 20 x46+ 26 x51+ 27 x52+ 13 x53+ 29 x54+ 22 x55+26 x56+ 11
x61+ 25 x62+ 9 x63+ 37 x64+ 42 x65+ 12 x66+ 15 x71+ 23 x72+ 29 x73+ 11 x74+ 12 x75+ 19 x76

Optimization Tools 3.18 LP – Formulation Examples

The Constraints:
x11+ x12+ x13+ x14+ x15+ x16 ≤1
x21+ x22+ x23+ x24+ x25+ x26 ≤1
x31+ x32+ x33+ x34+ x35+ x36 ≤1
x41+ x42+ x43+ x44+ x45+ x46 ≤1
x51+ x52+ x53+ x54+ x55+ x56 ≤1
x61+ x62+ x63+ x64+ x65+ x66 ≤1
x71+ x72+ x73+ x74+ x75+ x76 ≤1
x11+ x21+ x31+ x41+ x51+ x61+ x71= 1
x12+ x22+ x32+ x42+ x52+ x62+ x72= 1
x13+ x23+ x33+ x43+ x53+ x63+ x73= 1
x14+ x24+ x34+ x44+ x54+ x64+ x74= 1
x15+ x25+ x35+ x45+ x55+ x65+ x75= 1
x16+ x26+ x36+ x46+ x56+ x66+ x76= 1
xij ≥ 0 i = 1,..., 7; j = 1,...,6

Such models may se employed in similar job assignment, or object assignment problems. In these models, having non-integer (i.e.
other than 0 or 1) values for the decision variables is meaningless. On the other hand, the structure of these models (i.e. the make up
of the constraints), enables integer optimal solutions (in the sense that, if there is any optimal solution, there must be at least one
integer optimal solution) and the Simplex solution procedure permits only the generation of integer optimal solutions. Accordingly,
the existence of non-integer feasible solutions is not a major issue and additional constraints to rule out such feasible solutions
becomes unnecessary.

A point which needs to be emphasized is the issue of what is being measured through the declared objective function. While the
original objective is to maximize “overall fit and effectiveness of the assigned regional managers”, the objective function deployed
only measures their overall performance in the language and culture tests. The original objective is almost unmeasurable and the
declared objective provides a “proxy” measurable alternative to it. However, the fact that the original objective is only partially being
reflected in this proxy should be kept in mind in making the final decisions.

Optimization Tools 3.19 LP – Formulation Examples

9. Advertising Planning
A large food manufacturer is planning an advertising campaign for a new product being prepared for marketing. The company’s
expectation is to increase sales through this campaign. They want to reach to the maximum possible number of potential customers
while keeping the overall campaign within a predetermined budget of 50,000 TL. The company’s advertising agency has suggested
the employment of two TV Channels, two daily newspapers, two weekly magazines and one radio station during this campaign. It has
also emphasized the additional importance of reaching high income potential customers.
The research department of the advertising agency has carefully estimated the cost of each ad, the number of potential customers and
the number of high income potential customers it will reach, as follows. In TV ads a 30 second spot is considered as a one unit, and
prime-time (PT) and non prime time (non PT) ads are treated separately, since they differ both in cost and in reachability. At the
suggestion of the agency, the company would like to reach at least 2,000,000 high income potential customers during this campaign.
They would also like to spend at most 30,000 TL on TV ads, and at most 20,000 TL on printed media. Furthermore, the manager
would like to give at least three ads to each TV Channel and each newspaper to keep up the good relations with these organizations.
On the other hand, since the duration of the campaign is three weeks, there is time to place at most 3 ads in each of the magazines.
Cost # of Potential # of High Income
Media Type per Ad Cust. Reached Potential Cust. Reached
TV 1 (PT) 3,000 TL 5,000,000 75,000
TV 1 (non PT) 2,000 TL 3,000,000 60,000
TV 2 (PT) 2,700 TL 4,000,000 100,000
TV 2 (non PT) 1,800 TL 2,500,000 75,000
Radio 500 TL 400,000 24,000
Paper 1 1,600 TL 2,300,000 50,000
Paper 2 1,200 TL 1,300,000 49,000
Magazine 1 750 TL 500,000 60,000
Magazine 2 700 TL 600,000 55,000

An L.P. model of the company’s advertising problem is as follows.

The Decision Variables:

TP1 Number of prime-time spots to be aired on TV Channel 1,

Optimization Tools 3.20 LP – Formulation Examples

 T1 Number of non prime-time spots to be aired on TV Channel 1,
TP2 Number of prime-time spots to be aired on TV Channel 2,
T2 Number of non prime-time spots to be aired on TV Channel 2,
R1 Number of spots to be aired on the radio channel,
G1 Number of ads to be placed in Newspaper 1,
G2 Number of ads to be placed in Newspaper 2,
M1 Number of ads to be placed in Magazine 1,
M2 Number of ads to be placed in Magazine 2.
The Objective (in units of 1000 persons):
Max 5000 TP1+ 3000 T1+ 4000 TP2+ 2500 T2+ 400 R1+ 2300 G1+ 1300 G2+ 500 M1+ 600 M2
The Constraints:
3.0 TP1+ 2.0 T1+ 2.7 TP2+ 1.8 T2+ 0.5 R1+ 1.6 G1+ 1.2 G2+ 0.75M1+ 0.7 M2 ≤ 50
75 TP1+ 60 T1+ 100 TP2+ 75 T2+ 24R1+ 50 G1+ 49 G2+ 60 M1+ 55 M2 ≥ 2000
3.0 TP1+ 2.0 T1+ 2.7 TP2+ 1.8 T2 ≤ 30
1.6G1+ 1.2 G2+ 0.75 M1+ 0.7 M2 ≤ 20
TP1+ T1 ≥3
TP2+ T2 ≥3
G1 ≥3
G2 ≥3
M1 ≤3
M2 ≤ 3
TP1, T1, TP2, T2, R1, M1, M2 ≥ 0
Such models may be employed in similar problems faced in marketing and advertising activities in various sectors. However, it
should be noted that the constructed objective function (i.e. total number of potential customers reached through the campaign) is
again at most a “proxy” for the real objective the managers have in mind, which is to increase sales and and/or profits through such a
campaign.

Optimization Tools 3.21 LP – Formulation Examples

10. Production Planning - Assembly Line Balancing
A manufacturing company produces a final product that is assembled from 3 different parts. The parts are manufactured within the
company by two different departments. Because of the specific setup of the machines, each department produces the 3 parts at
different rates.
The production rates and capacities (i.e. the maximum number of hours per week each department can allocate to the manufacture of
the parts) of these departments are as follows:
Dept. Max. Capacity Part Part Part
(hr/week) 1 2 3
1 100 hr. 8 5 10
2 80 hr. 6 12 4

A production policy (i.e. weekly production hours allocated by each department to each part) to maximize the weekly production of
final assembly units, while not exceeding the capacities of the departments, can be determined through the following LP model:
The Decision Variables:
xij : Number of hours per week assigned by dept. i to part j

The Objective:
Max Z = [min{8 x11 + 6 x21 , 5 x12 +12 x22 , 10x13 + 4 x23 }]
which is equivalent to
Max Z = y

The Constraints:
8 x11 + 6 x21 -y ≥ 0
5 x12 + 12 x22 -y ≥ 0
10 x13 + 4 x23 - y ≥ 0
x11+ x12+ x13 ≤ 100
x21 + x22 + x23 ≤ 80

Optimization Tools 3.22 LP – Formulation Examples

 x11 ≥ 0
x12 ≥ 0
x13 ≥ 0
x21 ≥ 0
x22 ≥ 0
x23 ≥ 0
y ≥0

Optimization Tools 3.23 LP – Formulation Examples

11. Agricultural Planning - A Feed Mix Problem
The Ozan Poultry Farm has 20000 broilers that are fed for 8 weeks before being processed and marketed. Although the feed
consumption varies with age, the average weekly consumption during the 8 weeks is 1 lb.

In order to reach a certain weight gain in 8 weeks, the feed must meet specific nutritional needs. These needs can be satisfied by
mixing foodstuffs or ingredients; suppose there are just three ingredients: limestone, corn, soybean meal. Further suppose that
nutritional needs are just calcium, protein and fiber. The nutritive content of the selected ingredients can be summarized as follows:

Pound of Nutrient Content per Pound of Ingredient

Ingredient Calcium Protein Fiber Cost/lb
Limestone 0.38 - - 0.04
Corn 0.001 0.09 0.02 0.15
Soybean 0.002 0.50 0.08 0.40

The nutritional requirements of the feed are

a) At least 0.8% but no more than 1.2% calcium
b) At least 22% protein
c) No more than 5% fiber

A feed mix policy (i.e. the number of pounds of the three ingredients), to provide the nutritional needs of the feed mix at minimum
cost, can be determined through the following L.P. model:

The Decision Variables:

x1 : Lb. of limestone in mix
x2 : Lb. of corn in mix
x3 : Lb. of soybean in mix

The Objective:

Optimization Tools 3.24 LP – Formulation Examples

 Mn 0.04 x1 + 0.15 x2 + 0.4 x3

The Constraints:
x1 + x2 + x3 ≥ 20000 (Total feed required)
0.38 x1 + 0.001 x2 + 0.002 x3≥ 0.008 (x1 + x2 + x3 ) (At least .8% calc)
0.38 x1 + 0.001 x2 + 0.002 x3 ≤ 0.012 (x1 + x2 + x3 ) (At most 1.2% calc)
0.09 x2 + 0.50 x3 ≥ 0.22 (x1 + x2 + x3 ) (At least 22% prot)
0.02 x2 + 0.08 x3 ≤ 0.05 (x1 + x2 + x3 ) (At most 5% fiber)
x1 ≥ 0
x2 ≥ 0
x3 ≥ 0

References to Papers Describing Real Applications

The papers listed below contain real life applications of L.P and Mixed Integer Programming optimization models to various
production and/or service systems in a variety of sectors around the world.

In general, these papers describe the problem environment, undertaken assumptions, data collection issues, the model development
phase, the difficulties faced, the results obtained and the implementation.

Transportation and Logistics

- “Coldstart: Fleet Assignment at Delta Air Lines", R. Subramanian, R.P. Scheff, J.D. Quillinan, D.S. Wiper, R.E. Marsten,
Interfaces, V.24, No.1, pp.104-120, 1994.
- “Maximizing Profits for North American Van Lines Truckload Division: A New Framework for Pricing and Operations”,
W.P.Powell, Y. Sheffi, K.S.Nickerson, Interfaces V.18, No.1, pp.21-41, 1988.

Optimization Tools 3.25 LP – Formulation Examples

Marketing and Sales
- "Sales Force Sizing and Deployment Using a Decision Calculus Model at Syntax Laboratories", L.M. Lodish, E. Curtis, M.
Ness, M.K. Simpson, Interfaces, V. (also in “Excellence in Management Science Practice”)

Agriculture
- “Integrated Production and Distribution Facility Planning at Ault Foods", J. Pooley, Interfaces, V.24, No. 4, pp. 113-121,
1994.

Production Planning
- “Strategic and Operational Management with Optimization at Tata Steel", G.P. Sinha, N. Mitter, G. Dutta, S.B. Singh, A.R.
Choudhury, P.N. Roy, Interfaces, V.25, No.1, pp. 6-19, 1995.

- “Lower In-Process Inventories and Better On-Time Performance at Tanner Companies, Inc.”, M.R. Bowers, A. Agarwal,
Interfaces, V.25, No. 4, pp. 30-43, 1995.

- A Linear Programming Approach to Planning the Production of Mainframe Computers", C. Monvoisin, Optimization in
Industry, Ed. T.A. Ciriani, R.c. Leachman, John Wiley, 1993.

- "Development and Implementation of an Integrated Inventory Management Program at Pfizer Pharmaceuticals", P.P.
Kleutghen, J.C.McGee, Interfaces V.15, No.1, pp.69-87, 1985.

Optimization Tools 3.26 LP – Formulation Examples