OPIM101 4 Updated

SMU Classification: Restricted
Network (Assignment, Transportation) Models
Decision Analysis
OPIM 101
Liang Xu
Assistant Professor of Operations Management
leonxu@smu.edu.sg
Decision Analysis – OPIM 101 1

Week 4
Recess
- Part 1: LP Sensitivity Analysis (answering “what if” questions)
- Part 2: LP Modelling Examples

Week 4
Sensitivity Analysis Part I:

Objective Coefficients

Week 4
Linear Programming: Analysis and Applications
Sensitivity Report from Excel

Solver Allowable Increase (Decrease): increase
Optimal product mix (decrease) in objective coefficient such that the
optimal product mix does not change
Optimal Reduced Cost:

=20, (1) Positive final value: reduced cost = zero
=100, (2) Zero final value: reduced cost indicates
the deterioration in the objective function if
the final value of that cell is increased by one
unit.

Week 3
Sensitivity Analysis Part II:

Right Hand Side (RHS) of
Constraints
Max +
subject to
+
+
+

Week 4
Sensitivity: Resource Availability

Shadow Price: change in objective function value Range over which the shadow
for a unit change in the constraint right-hand side price is valid
Constraints
Final Shadow Constraint Allowable Allowable
Cell Name Value Price R.H. Side Increase Decrease
$D$4 Quantity Total 120 20 120 13.33 20
$D$10 Red Total 360 0 480 1E+30 120
$D$11 Yellow Total 260 0 300 1E+30 40
$D$12 Blue Total 300 1.67 300 60 120
Max +
subject to
+ Active constraint: positive shadow price
+ Inactive constraint: zero shadow price
+

Week 4
Sensitive Analysis
change in objective change in RHS of

function coefficient constraint
What if more than one parameter change at the same

time? The 100% rule---valid only for change in RHS of
constraint

Week 4
100% Rule
∑ (change / allowable change) ≤ 1
1. For each RHS that changes, compute the amount of
change divided by the total allowable change
2. Add up these fractions.
3. If the total value is less than 1, then the shadow prices

are valid.

Week 4
Recess
- Part 1: LP Sensitivity Analysis (answering “what if” questions)
- Part 2: LP Modelling Examples

Week 4
Blending Problem
Price Octane Rating Sulfur Content Availability (barrels)
Crude oil 1 $45 12 0.5% 5000

Crude oil 2 $35 6 2.0% 5000
Crude oil 3 $25 8 3.0% 5000
Price Octane Rating Sulfur Content Demand (barrels)
Gasoline 1 $70 ≥ 10 ≤ 1.0% 3000
Gasoline 2 $60 ≥8 ≤ 2.0% 2000
Gasoline 3 $50 ≥6 ≤ 1.0% 1000

Week 4
Blending Problem
Decision variables
𝑥𝑖𝑗 barrels of Crude oil i that goes into production of Gasoline j where and
𝑥11 barrels of Crude oil 1 that goes into production of Gasoline 1.

𝑥23 barrels of Crude oil that goes into production of Gasoline 3.

Week 4
Summation Operator
10
∑ 𝑥 𝑖= 𝑥 1+ 𝑥 2 +…+ 𝑥10
- Simple Sum:
𝑖=1
- Double Sum
Sum of the first row:

Sum of the second row:
Sum of the third row:
Sum of the entire table:

Week 4
Property of Summation Operator

𝒏 𝒏
∑ 𝒄 ∗ 𝒙 𝒊=𝒄 ∗ ∑ 𝒙𝒊
𝒊=𝟏 𝒊=𝟏
∑ 𝒄 =𝒏 ∗ 𝒄
𝒊= 𝟏
𝒏 𝒏 𝒏
∑ ( 𝒙 𝒊+ 𝒚 𝒊 )= ∑ 𝒙𝒊 + ∑ 𝒚 𝒊
𝒊=𝟏 𝒊=𝟏 𝒊=𝟏

Week 4
Blending Problem
Total Profits
Supply Constraints
∀𝑖 Demand Constraints
Octane Constraints
Non-negativity
∀𝑖, ∀ 𝑗 Constraints Sulphur Constraints

Week 4
Loading Problem
You are in charge of loading cargo ships for TransAtlantic
Shipping Co (TSC) at the port of Singapore. You have
been asked to prepare a loading plan for a TSC freighter
destined for Europe. There is demand from four different
contractors to transport the following products aboard
this ship:

Week 4
Loading Problem
You can choose to load any of the available products up to
the available amount. However, the ship has three cargo
holds with the following capacity restrictions:
Because of balance considerations, the weight in the forward

cargo hold must be within 5% of the weight in the rear
cargo hold and the weight in center cargo hold must be
between 40% to 60% of the total weight on board.
Week 4
Loading Problem
How would you load these four products to the three cargo
holds in order to achieve highest profit? Please formulate
as a Linear programming model and solve it in LP.

Week 4
Loading Problem
• Is it a blending problem?
• Decision Variables?
• Objective?
• Constraints?

Week 4
Loading Problem
Decision variables:
The weight of each of the
four products loaded in tons of
each of the cargo hold (12 product 4 tons of
decision variables); product 1
tons of
product 3
: tons of product 𝑖 shipped
by cargo j , where 𝑖 = 1, 2, tons of
3, 4 and 𝑗 = f (forward), c product 2
(center), and r (rear).

Forward Cargo

Week 4
Loading Problem
Objective Function:
Maximize profit from shipped products

Week 4
Loading Problem
Constraints:
There are 4,800 tons of product 1 available.

Week 4
Loading Problem
Constraints:
Forward cargo hold has weight capacity of 3,000 tons.

Week 4
Loading Problem
Constraints:
Forward cargo hold has volume capacity of 145,000 cubic
feet.

Week 4
Loading Problem
Constraints:
Balance constraints across cargo holds:
– The weight in the forward cargo hold must be within 5% of the
weight in the rear cargo hold.
– The weight in center cargo hold must be between 40% to 60% of
the total weight on board.

Week 4
Loading Problem
Subject to
(product availability)
(weight capacity)
(volume capacity)
(forward cargo balancing)
(center
cargo
balancing)
25
(Non-negativity constraints)
Loading Problem In Excel
26
Financial Planning Problem

Mr and Ms Lim recently inherited a substantial amount of
money from a deceased relative. They want to use part
of this money to establish an account to pay for their
daughter’s college education. Their daughter, Lisa, will
be starting college 5 years from now. Mr and Ms Lim
estimate that her first year college expenses will amount
to S$14,000 and increase S$2,000 per year during each
of the remaining three years of her education.

Week 4

The following investments are available to the parents:
The parents want to develop an investment plan that will

provide the necessary funds to cover Lisa’s anticipated
college expenses with the smallest initial investment.
How to build a LP model to solve the problem?

Week 4

• How would you describe the decisions to make?
• Are they outflows or inflows of the investment account?

Week 4

• Decisions to make:
– How much savings to transfer to this account for investment at
the beginning?
– How much money to invest in each fund every year?
• Outflows
– Purchasing funds
– Withdraws for college education
• Inflows
– Savings transferred to this account for investment
– Returns (principals + interests) from any past investments

Week 4

• How to define decision variables?

Week 4

• Decision Variables:
– , …, : the amount of money (in $) invested in Fund A at the
beginning of Year 1, 2, …, 8
– , , , : the amount of money (in $) invested in Fund B at the
beginning of Year 1, 3, 5, 7
– , : the amount of money (in $) invested in Fund C at the
beginning of Year 1, 4
– : the amount of money (in $) invested in Fund D at the beginning
of Year 1
• Objective Function: minimize the amount of money (in $)
transferred to the account for investment at the
beginning:

Week 4

• Constraints: Balancing the inflows and outflows 1.05
1.05+ 1.12
1.05 +1.12+1.16
1.05 1.0516
1.05
1.05
1.05+1.12
1 2 3 4 5 6 7 8 9
+
𝑎2 + + 14,000 + 18,000
+ + +16,000 20,000
++

Week 4
Subject to
,,

Week 4

Transformation for Excel spreadsheet in the next slide
Subject to
,,

Week 4
SUMPRODUCT(X,Y) =x1*y1 + x2*y2 +…

Week 4
Class Outline
LP Modelling Examples:
Network Models:
- Assignment Problem
- Transportation Problem

Week 4
Assignment Problem
MachineCo owns four machines on which it needs to
complete four jobs. Each machine must be assigned to
a single job. The setup time required for each machine
to complete the jobs is given below. Minimize total setup
time.
Job 1 Job 2 Job 3 Job 4
Machine 1 14 5 8 7
Machine 2 2 12 6 5
Machine 3 7 8 3 9
Machine 4 2 4 6 10

Week 4
Assignment Problem
 Determines the most efficient assignment of
 People to people (projects)
 Jobs to machines
 Contracts to bidders
 Location of new factory / warehouse
 Objective: minimize costs or distances.
 Constraints: stock at each origin and requirement at
each destination.

Week 4
Assignment Problem
MachineCo owns four machines on which it needs to
complete four jobs. Each machine must be assigned to
a single job. The setup time required for each machine
to complete the jobs is given below. Minimize total setup
time.
Machine 1 14 5 8 7
Machine 2 2 12 6 5
Machine 3 7 8 3 9
Machine 4 2 4 6 10

Week 4
Assignment Problem
Subject to

Week 4
Assignment Problem
How to solve using Solver?
Subject to

Week 4
Assignment Problem
How to solve using Solver?
Subject to
Binary Decision
Variables
This is not an
LP.

Week 4
Assignment Problem
In an assignment problem where only one job or worker is
assigned to one machine or project, we have the following
important results:
•
The binary constraint can be ignored and the problem
can be solved by LP.

Week 4
Assignment Problem
Subject to

Week 4
Assignment Problem

Week 4
Assignment Problem
In an assignment problem where only one job or worker is
assigned to one machine or project, we have the following
important results:
•
The binary constraint can be ignored and the problem
can be solved by LP.
•
There is a special-purpose algorithm (more efficient than
LP) to solve the assignment problem

Week 4
Assignment Problem
Why do we have special purpose algorithms?
- Their computation times are generally 100 times faster
than the simplex algorithm
- They require less computer memory (and hence can
permit larger problems to be solved)
Special purpose algorithms generally work with balanced

assignment problems.

Week 4
Unbalanced Assignment
If number of machines > number of jobs, how to update the
formulation?
ubject to Subject to

Week 4
If number of machines < number of jobs, how to update the
formulation?
ubject to Subject to

Week 4
Unbalanced Assignment Problem

If number of machines > number of jobs, what can we do to
keep the balanced assignment formulation?
Job 1 Job 2 Job 3 Dummy
Machine 1 10 0 3 0
Machine 2 0 9 3 0
Machine 3 5 5 0 0
Machine 4 0 1 3 0
Add a dummy job with setup cost 0 at each machine to

make it balanced
Week 4
Unbalanced Assignment Problem

If number of machines < number of jobs, what can we do to
keep the balanced assignment formulation?
Machine 1 10 0 3 0
Machine 2 0 9 3 0
Machine 3 5 5 0 4
Dummy 0 0 0 0
Add a dummy machine with setup cost 0 for each job to

make it balanced
Week 4
Formulation 1 (unbalanced formulation)
- number of machines > number of jobs: Change machine equalities to
inequalities
- number of machines < number of jobs: Change job equalities to inequalities
Formulation 2 (balanced formulation):

- number of machines > number of jobs: Create dummy job with setup cost 0
at each machine
- number of machines < number of jobs: Create dummy machine with setup
cost 0 for each job

Week 4
Marriage Problem
Imagine the following situation. Mickey Mouse, Donald
Duck, Popeye, and the Beast are marooned on a desert
island with Minnie Mouse, Daisy Duck, Olive Oyl, and
Beauty. The table which follows indicates the disutility
each couple would experience if they spent all of their
time together. Match them as couples to minimize the
disutility.

Week 4
Marriage Problem
Disutility Beauty Daisy Minnie Olive Oyl
Score Duck Mouse
Beast 0 4 3 4
Donald 2 1 1 7
Mickey 2 2 0 5
Popeye 2 4 2 2

Week 4
Marriage Problem
Decision variables?
Objective?
Constraints?
Is this a linear program?

Week 4
Marriage Problem
Decision variables:
: 1 if male i is assigned to female j,
0 otherwise (if male is not assigned to female j).
where 𝑖 = 1, 2, 3, 4 and 𝑗 = 1, 2, 3, 4.
,
,
,
,
Week 4
Marriage Problem
Objective:
Minimize the total disutility from assignments
Define disutility parameter:
disutility from assigning male i to female j

Week 4
Marriage Problem
Constraints:
Each male is assigned to one and only one female

Week 4
Marriage Problem
Constraints:
Each female is assigned to one and only one male

Week 4
Marriage Problem
Subject to

Week 4

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SMU Classification: Restricted

Network (Assignment, Transportation) Models

Decision Analysis – OPIM 101 1

Network (Assignment, Transportation) Models

- Part 2: LP Modelling Examples

Decision Analysis – OPIM 101 2

Network (Assignment, Transportation) Models

Sensitivity Analysis Part I:

Decision Analysis – OPIM 101 3

Linear Programming: Analysis and Applications

Sensitivity Report from Excel

Optimal Reduced Cost:

Decision Analysis – OPIM 101 4

Network (Assignment, Transportation) Models

Sensitivity Analysis Part II:

Decision Analysis – OPIM 101 5

Network (Assignment, Transportation) Models

Sensitivity: Resource Availability

Decision Analysis – OPIM 101 6

Network (Assignment, Transportation) Models

change in objective change in RHS of

What if more than one parameter change at the same

Decision Analysis – OPIM 101 7

Network (Assignment, Transportation) Models

2. Add up these fractions.

3. If the total value is less than 1, then the shadow prices

Decision Analysis – OPIM 101 8

Network (Assignment, Transportation) Models

- Part 2: LP Modelling Examples

Decision Analysis – OPIM 101 9

Network (Assignment, Transportation) Models

Crude oil 1 $45 12 0.5% 5000

Price Octane Rating Sulfur Content Demand (barrels)

Gasoline 1 $70 ≥ 10 ≤ 1.0% 3000

Gasoline 2 $60 ≥8 ≤ 2.0% 2000

Gasoline 3 $50 ≥6 ≤ 1.0% 1000

Decision Analysis – OPIM 101 10

Network (Assignment, Transportation) Models

𝑥11 barrels of Crude oil 1 that goes into production of Gasoline 1.

𝑥31 barrels of Crude oil 3 that goes into production of Gasoline 1.

Network (Assignment, Transportation) Models

Sum of the first row:

Sum of the third row:

Sum of the entire table:

Decision Analysis – OPIM 101 12

Network (Assignment, Transportation) Models

Property of Summation Operator

Decision Analysis – OPIM 101 13

Network (Assignment, Transportation) Models

Decision Analysis – OPIM 101 14

Network (Assignment, Transportation) Models

Decision Analysis – OPIM 101 15

Network (Assignment, Transportation) Models

Because of balance considerations, the weight in the forward

Network (Assignment, Transportation) Models

Decision Analysis – OPIM 101 17

Network (Assignment, Transportation) Models

Decision Analysis – OPIM 101 18

Network (Assignment, Transportation) Models

(center), and r (rear).

Decision Analysis – OPIM 101 19

Network (Assignment, Transportation) Models

Decision Analysis – OPIM 101 20

SUMPRODUCT(X,Y) =x1y1 + x2y2 +…