Linear Programming Models

Manufacturing Applications
• Product Mix Problem
• Fifth Avenue Industries
• Produce four types of ties – Silk, Polyester and 2 Ply-
cotton blends
• Maximize profit
• $0.75 per tie as standard labor cost per tie

Yards available
Material Cost per yard
per month
Silk $20 1,000
Polyester $ 6 2,000
Cotton $ 9 1,250
Product Mix Problem
Type of Tie
Silk Polyester Blend 1 Blend 2
Selling Price $6.70 $3.55 $4.31 $4.81
Monthly
6,000 10,000 13,000 6,000
Minimum
Monthly
7,000 14,000 16,000 8,500
Maximum
Total material 0.125 0.08 0.10 0.10
(yards per tie)
Product Mix Problem
Type of Tie
Material Blend 1 Blend 2
Silk Polyester
(50/50) (30/70)

Silk 0.125 0 0 0

Polyester 0 0.08 0.05 0.03

Cotton 0 0 0.05 0.07

Total yards per

0.125 0.08 0.10 0.10
tie
Product Mix Problem
• Decision Variables

S = number of silk ties to make per

month
P = number of polyester ties to make
per month
B1 = number of poly-cotton blend 1
ties to make per month
B2 = number of poly-cotton blend 2
ties to make per month
Product Mix Problem
Objective Function
Maximize profit = $3.45S + $2.32P + $2.81B1 + $3.25B2

subject to
0.125S ≤ 1,000 (yards of silk)
0.08P + 0.05B1 + 0.03B2 ≤ 2,000 (yards of polyester)
0.05B1 + 0.07B2 ≤ 1,250 (yards of cotton)
S ≥ 6,000 (contract minimum for all silk)
S ≤ 7,000 (maximum demand for all silk)
P ≥ 10,000 (contract minimum for all polyester)
P ≤ 14,000 (maximum demand for all polyester)
B1 ≥ 13,000 (contract minimum for blend 1)
B1 ≤ 16,000 (maximum demand for blend 1)
B2 ≥ 6,000 (contract minimum for blend 2)
B2 ≤ 8,500 (maximum demand for blend 2)
S, P, B1, B2 ≥ 0 (nonnegativity)
Make and Buy / Outsourcing Decision
• Outsourcing decision to exactly meet maximum
possible demand
• New problem formulation and decision variables
S = number of all-silk ties to make (in-house) per month
P = number of all-polyester ties to make (in-house) per month
B1 = number of poly-cotton blend 1 ties to make (in-house) per month
B2 = number of poly-cotton blend 2 ties to make (in-house) per month

So = number of all-silk ties to outsource (buy) per month

Po = number of all-polyester ties to outsource (buy) per month
B1o = number of poly-cotton blend 1 ties to outsource (buy) per month
B2o = number of poly-cotton blend 2 ties to outsource (buy) per month
Make-Buy Decision
Objective Function elements

Revenue = $6.70(S + So) +$3.55(P + Po)

+ $4.31(B1 + B1o) + $4.81(B2 + B2o)
Labor cost = $0.75(S + P + B1 +B2)
Material cost = $2.50S + $0.48P + $0.75B1 + $0.81B2
Outsourcing cost = $4.25So + $2.00Po + $2.50B1o + $2.20B2o

Objective Function

Maximize profit = revenue – labor cost – material cost

– outsourcing cost
Make-Buy Decision
Objective Function

Maximize profit = revenue – labor cost – material cost

– outsourcing cost
subject to

0.125S ≤ 1,000 (yards of silk)

0.08P + 0.05B1 + 0.03B2 ≤ 2,000 (yards of polyester)
0.05B1 + 0.07B2 ≤ 1,250 (yards of cotton)
S + So = 7,000 (required demand for all-silk)
P + Po = 14,000 (required demand for
all-polyester)
B1 + B1o = 16,000 (required demand for blend 1)
B2 + B2o = 8,500 (required demand for blend 2)
S, P, B1, B2, So, Po, B1o, B2o ≥ 0 (nonnegativity)
Media Selection Problem
• Win Big Gambling Club advertising
• Decision variables

T = number of 1-minute television spots taken each

week
N = number of full-page daily newspaper ads taken
each week
P = number of 30-second prime time radio spots
taken each week
A = number of 1-minute afternoon radio spots
taken each week
Media Selection Problem
Media Selection Problem
Objective:

Maximize audience coverage = 5,000T + 8,500N + 2,400P + 2,800A

subject to

T ≤ 12 (max TV spots/week)
N ≤ 5 (max newspaper ads/week)
P ≤ 25 (max 30-second radio
spots/week)
A ≤ 20 (max 1-minute radio spots/week)
800T + 925N + 290P + 380A ≤ 8,000 (weekly advertising budget)
P+A ≥ 5 (min radio spots contracted)
290P + 380A ≤ 1,800 (max dollars spent on radio)
T, N, P, A ≥ 0 (nonnegativity)
Marketing Applications
• Marketing Research Problem
• Client (national press service) asked for political survey on issues of
widespread interest
• Survey decision variables – persons to be surveyed
• Categorized by age and whether bordering Mexico or not (as cost of
survey / interview varies)
B1 = number surveyed who are ≤ 30 years of age and live in a
border state
B2 = number surveyed who are 31–50 years of age and live in a
border state
B3 = number surveyed who are ≥ 51 years of age and live in a
border state
N1 = number surveyed who are ≤ 30 years of age and do not
live in a border state
N2 = number surveyed who are 31–50 years of age and do not
live in a border state
N3 = number surveyed who are ≥ 51 years of age and do not
live in a border state
Marketing Research Problem
Conditions:
• Survey at least 2300 people in total
• Survey at least 1000 people who are 30 years of age or younger
• Survey at least 600 people who are between 31 and 50 years of age
• At least 15% of those surveyed must be from bordering state
• At least 50% of those surveyed who are 30 years of age or younger
must be from states not bordering Mexico
• No more than 20% of those surveyed who are 51 years of age or older
must be from states bordering Mexico
Marketing Research Problem
• Cost data

COST PER PERSON SURVEYED

REGION AGE ≤ 30 AGE 31–50 AGE ≥ 51
State bordering Mexico $7.50 $6.80 $5.50
State not bordering Mexico $6.90 $7.25 $6.10
 Marketing Research Problem
Objective Function

total interview cost = $7.50B1 + $6.80B2 + $5.50B3

+ $6.90N1 + $7.25N2 + $6.10N3

subject to

B1 + B2 + B3 + N1 + N2 + N3 ≥ 2,300 (total number surveyed)

B 1 + N1 ≥ 1,000 (persons 30 years or younger)
B 2 + N2 ≥ 600 (persons 31–50 in age)
B1 + B2 + B3 ≥ 0.15(B1 + B2 + B3+ N1 + N2 + N3) (border states)
N1 ≥ 0.5(B1 + N1) (≤ 30 years, not border state)
B3 ≤ 0.2(B3 + N3) (51+ years and border state)
B1, B2, B3, N1, N2, N3 ≥ 0 (nonnegativity)
Finance Applications
• Portfolio Selection Problem
• International City Trust investment decisions
• ICT has $5 mill available & intends to maximize the
interest earned

INVESTMENT INTEREST EARNED RISK SCORE

Trade credits 7% 1.7
Corporate bonds 10% 1.2
Gold stocks 19% 3.7
Platinum stocks 12% 2.4
Mortgage securities 8% 2.0
Construction loans 14% 2.9
Portfolio Selection Problem

Conditions:
• No more than 25% of total investment may be in any single
type of investment
• At least 30% of total investment must be in precious metals
• At least 45% of total investment must be in trade credits and
corporate bond
• Average risk score cannot be more than 2
Portfolio Selection Problem
• Decision variables

T = dollars invested in trade credit

B = dollars invested in corporate bonds
G = dollars invested in gold stocks
P = dollars invested in platinum stocks
M = dollars invested in mortgage securities
C = dollars invested in construction loans
 Portfolio Selection Problem
Objective function
rs of interest earned = 0.07T + 0.10B + 0.19G
+ 0.12P + 0.08M + 0.14C
subject to
T + B + G + P + M + C ≤ 5,000,000
T ≤ 0.25(T + B + G + P + M + C)
B ≤ 0.25(T + B + G + P + M + C)
G ≤ 0.25(T + B + G + P + M + C)
P ≤ 0.25(T + B + G + P + M + C)
M ≤ 0.25(T + B + G + P + M + C)
C ≤ 0.25(T + B + G + P + M + C)
G+P ≥ 0.30(T + B + G + P + M + C)
T+B ≥ 0.45(T + B + G + P + M + C)
1.7T + 1.2B + 3.7G + 2.4P + 2.0M + 2.9C
≤2
T+B+G+P+M+C
T, B, G, P, M, C ≥0
Employee Staffing
• Worker Planning Problem
• Hong Kong Bank staffing requirements

TIME PERIOD NUMBER REQUIRED

9 a.m.–10 a.m. 10
10 a.m.–11 a.m. 12
11 a.m.–Noon 14
Noon–1 p.m. 16
1 p.m.–2 p.m. 18
2 p.m.–3 p.m. 17
3 p.m.–4 p.m. 15
4 p.m.–5 p.m. 10
Worker Planning Problem

Conditions & relevant data:

• Bank now employs 12 full-time tellers, but it has several people available on its
roster of part-time employees
• A full-timer works from 9 am to 5 pm with 1 hour lunch break. Half of full-timer
takes the lunch between 11 am to noon and other half from noon to 1 am.
• A part-timer must work exactly for 4 hours a day, but can start anytime between 9
am and 1 pm.
• The bank’s corporate policy limits part-time hours to a maximum of 50% of the
day’s total requirements
• Part-timers earn $7 per hour ($28 per day) and full-timers earn $90 per day in
salary and other benefits on average
Worker Planning Problem
• Decision variables

F = number of full-time tellers (all starting at 9 a.m.)

P1 = number of part-timers, starting at 9 a.m. (leaving at 1 p.m.)
P2 = number of part-timers, starting at 10 a.m. (leaving at 2 p.m.)
P3 = number of part-timers, starting at 11 a.m. (leaving at 3 p.m.)
P4 = number of part-timers, starting at noon (leaving at 4 p.m.)
P5 = number of part-timers, starting at 1 p.m. (leaving at 5 p.m.)
 Worker Planning Problem
Objective Function

otal daily personnel cost = $90F + $28(P1 + P2 + P3 + P4 + P5)

subject to

F + P1 ≥ 10 (9 a.m. – 10 a.m. requirement)

F + P1 + P 2 ≥ 12 (10 a.m. – 11 a.m. requirement)
0.5F + P1 + P2 + P3 ≥ 14 (11 a.m. – 12 noon requirement)
0.5F + P1 + P2 + P3 + P4 ≥ 16 (12 noon – 1 p.m. requirement)
F + P 2 + P 3 + P4 + P 5 ≥ 18 (1 p.m. – 2 p.m. requirement)
F + P 3 + P 4 + P5 ≤ 17 (2 p.m. – 3 p.m. requirement)
F + P 4 + P5 ≤ 17 (3 p.m. – 4 p.m. requirement)
F + P5 ≤ 17 (4 p.m. – 5 p.m. requirement)
F ≤ 12 (full time tellers available)
4P1 + 4P2 + 4P3 + 4P4 + 4P5 ≤ 56 (part time worker hours not
exceeding 50% of total requirements)
Blending Applications
• Diet Problem
• Whole Food’s Natural Cereal grain blending
data

COST PER POUND PROTEIN RIBOFLAVIN PHOSPHORUS MAGNESIUM

GRAIN (cents) (units/lb) (units/lb) (units/lb) (units/lb)
A 33 22 16 8 5
B 47 28 14 7 0
B 38 21 25 9 6
Diet Problem
• Decision variables

A = pounds of grain A to use in one 2-ounce serving of

cereal
B = pounds of grain B to use in one 2-ounce serving of
cereal
C = pounds of grain C to use in one 2-ounce serving of
cereal
Diet Problem
Objective Function

Minimize total cost of mixing

a 2-ounce serving of cereal = $0.33A + $0.47B + $0.38C

subject to

22A + 28B + 21C ≥ 3 (protein units)

16A + 14B + 25C ≥ 2 (riboflavin units)
8A + 7B + 9C ≥ 1 (phosphorus units)
5A + 6C ≥ 0.425 (magnesium units)
A+B+C = 0.125 (total mix)
A, B, C ≥ 0 (nonnegativity)
Blending Problem
• Low Knock Oil data
CRUDE OIL COMPOUND COMPOUND COMPOUND COST/ AVAIL.
TYPE A (%) B (%) C (%) BARREL (barrels)
X100 35 25 35 $86 15,000
X200 50 30 15 $92 32,000
X300 60 20 15 $95 24,000

Table 3.9

GASOLINE COMPOUND COMPOUND COMPOUND DEMAND

TYPE A B C (barrels)
Premium ≥ 55% ≤ 23% 14,000
Regular ≥ 25% ≤ 35% 22,000
Economy ≥ 40% ≤ 25% 25,000

Table 3.10
Blending Problem
• Decision variables

P1 = barrels of X100 crude blended to produce the premium grade

P2 = barrels of X200 crude blended to produce the premium grade
P3 = barrels of X300 crude blended to produce the premium grade
R1 = barrels of X100 crude blended to produce the regular grade
R2 = barrels of X200 crude blended to produce the regular grade
R3 = barrels of X300 crude blended to produce the regular grade
E1 = barrels of X100 crude blended to produce the economy grade
E2 = barrels of X200 crude blended to produce the economy grade
E3 = barrels of X300 crude blended to produce the economy grade
Blending Problem
Objective Function

Minimize total cost = $86(P1 + R1 + E1) + $92(P2 + R2 + E2)

+ $95(P3 + R3 + E3)
subject to

P1 + R1 + E1 ≤ 15,000 (availability of X100 crude oil)

P2 + R2 + E2 ≤ 32,000 (availability of X200 crude oil)
P3 + R3 + E3 ≤ 24,000 (availability of X300 crude oil)
P1 + P2 + P3 ≥ 14,000 (demand for premium gasoline)
R1 + R2 + R3 ≥ 22,000 (demand for regular gasoline)
E1 + E2 + E3 ≥ 25,000 (demand for economy gasoline)
P1, R1, E1,
P2, R2, E2,
P3, R3, E3 ≥ 0 (nonnegativity)
Multiperiod Applications
• Production Scheduling Problem
• Greenberg Motors order schedule

MODEL JANUARY FEBRUARY MARCH APRIL

GM3A 800 700 1,000 1,100
GM3B 1,000 1,200 1,400 1,400
Production Scheduling
• Greenberg Motors data

UNIT COST UNIT COST HOLDING ENDING LABOR

MODEL (Jan – Feb) (Mar - Apr) COST INVENTORY HOURS
GM3A $10 $11 $0.18 450 1.3
GM3B $6 $6.60 $0.13 300 0.9

Maximum inventory = 3,300 units

No layoff policy
2,240 labor regular hours available each month
320 maximum additional labor hours available each month
Production Scheduling
Decision variables
PAt = number of model GM3A motors produced in month t
(t = 1, 2, 3, 4 for January–April)
PBt = number of model GM3B motors produced in month t
IAt = Level of onhand inventory for GM3A at the end of
month t
IBt = Level of onhand inventory for GM3B at the end of
month t
Objective function
Minimize total costs = cost of production + cost of carrying inventory
= 10PA1 + 10PA2 + 11PA3 + 11PA4 + 6PB1
+ 6PB2 + 6.60PB3 + 6.60PB4 + 0.18IA1
+ 0.18IA2 + 0.18IA3 + 0.18IA4 + 0.13IB1
+ 0.13IB2 + 0.13IB3 + 0.13IB4
Production Scheduling
Balance equation
Production Scheduling
subject to
0 + PA1 – 800 = IA1 (GM3A motors in Jan)
0 + PB1 – 1,000 = IB1 (GM3B motors in Jan)
IA1 + PA2 – 700 = IA2 (GM3A motors in Feb)
IB1 + PB2 – 1,200 = IB2 (GM3B motors in Feb)
IA2 + PA3 – 1,000 = IA3 (GM3A motors in Mar)
IB2 + PB3 – 1,400 = IB3 (GM3B motors in Mar)
IA3 + PA4 – 1,100 = IA4 (GM3A motors in Apr)
IB3 + PB4 – 1,400 = IB4 (GM3B motors in Apr)
IA4 = 450 (ending inventory GM3A)
IB4 = 300 (ending inventory GM3B)
IA1 + IB1 ≤ 3,300 (max inventory Jan)
IA2 + IB2 ≤ 3,300 (max inventory Feb)
IA3 + IB3 ≤ 3,300 (max inventory Mar)
I +I ≤ 3,300 (max inventory Apr)
Production Scheduling
subject to
1.3PA1 + 0.9PB1 ≥ 2,240 (Jan labor minimum)
1.3PA1 + 0.9PB1 ≤ 2,560 (Jan labor maximum)
1.3PA2 + 0.9PB2 ≥ 2,240 (Feb labor minimum)
1.3PA2 + 0.9PB2 ≤ 2,560 (Feb labor maximum)
1.3PA3 + 0.9PB3 ≥ 2,240 (Mar labor minimum)
1.3PA3 + 0.9PB3 ≤ 2,560 (Mar labor maximum)
1.3PA4 + 0.9PB4 ≥ 2,240 (Apr labor minimum)
1.3PA4 + 0.9PB4 ≤ 2,560 (Apr labor maximum)
All variables ≥ 0 (nonnegativity)