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Linear Programming: ApplicationsChapter 4MNGT 379 Operations ResearchBlending ProblemFerdinand Feed Company receives four raw grains from which it blends its dry pet…

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Linear Programming: ApplicationsChapter 4MNGT 379 Operations ResearchBlending ProblemFerdinand Feed Company receives four raw grains from which it blends its dry pet food. The pet food advertises that each 8-ounce packet meets the minimum daily requirements for vitamin C, protein and iron. The cost of each raw grain as well as the vitamin C, protein, and iron units per pound of each grain are summarized on the next slide. Vitamin C Protein Iron Grain Units/lb Units/lb Units/lb Cost/lb 1 9 12 0 .75 2 16 10 14 .90 3 8 10 15 .80 4 10 8 7 .70Ferdinand is interested in producing the 8-ounce mixture at minimum cost while meeting the minimum daily requirements of 6 units of vitamin C, 5 units of protein, and 5 units of iron. MNGT 379 Operations ResearchBlending ProblemDefine the decision variables xj = the pounds of grain j (j = 1,2,3,4) used in the 8-ounce mixtureDefine the objective function Minimize the total cost for an 8-ounce mixture: MIN .75x1 + .90x2 + .80x3 + .70x4Define the constraints Total weight of the mix is 8-ounces (.5 pounds): (1) x1 + x2 + x3 + x4 = .5 Total amount of Vitamin C in the mix is at least 6 units: (2) 9x1 + 16x2 + 8x3 + 10x4 > 6 Total amount of protein in the mix is at least 5 units: (3) 12x1 + 10x2 + 10x3 + 8x4 > 5 Total amount of iron in the mix is at least 5 units: (4) 14x2 + 15x3 + 7x4 > 5 Nonnegativity of variables: xj> 0 for all jMNGT 379 Operations ResearchThe Management Scientist Output OBJECTIVE FUNCTION VALUE = 0.406VARIABLEVALUEREDUCED COSTS X1 0.099 0.000 X2 0.213 0.000 X3 0.088 0.000 X4 0.099 0.000Thus, the optimal blend is about .10 lb. of grain 1, .21 lb. of grain 2, .09 lb. of grain 3, and .10 lb. of grain 4. The mixture costs Frederick’s 40.6 cents. MNGT 379 Operations ResearchPortfolio Planning ProblemWinslow Savings has $20 million available for investment. It wishes to invest over the next four months in such a way that it will maximize the total interest earned over the four month period as well as have at least $10 million available at the start of the fifth month for a high rise building venture in which it will be participating. For the time being, Winslow wishes to invest only in 2-month government bonds (earning 2% over the 2-month period) and 3-month construction loans (earning 6% over the 3-month period). Each of these is available each month for investment. Funds not invested in these two investments are liquid and earn 3/4 of 1% per month when invested locally. Formulate a linear program that will help Winslow Savings determine how to invest over the next four months if at no time does it wish to have more than $8 million in either government bonds or construction loans. MNGT 379 Operations ResearchPortfolio Planning ProblemDefine the decision variables gj = amount of new investment in government bonds in month jcj = amount of new investment in construction loans in month jlj = amount invested locally in month j, where j = 1,2,3,4Define the objective function Maximize total interest earned over the 4-month period.MAX (interest rate on investment)(amount invested) MAX .02g1 + .02g2 + .02g3 + .02g4 + .06c1 + .06c2 + .06c3 + .06c4 + .0075l1 + .0075l2 + .0075l3 + .0075l4MNGT 379 Operations ResearchPortfolio Planning ProblemDefine the constraints Month 1's total investment limited to $20 million: (1) g1 + c1 + l1 = 20,000,000 Month 2's total investment limited to principle and interest invested locally in Month 1: (2) g2 + c2 + l2 = 1.0075l1 or g2 + c2 - 1.0075l1 + l2 = 0 Month 3's total investment amount limited to principle and interest invested in government bonds in Month 1 and locally invested in Month 2: (3) g3 + c3 + l3 = 1.02g1 + 1.0075l2 or - 1.02g1 + g3 + c3 - 1.0075l2 + l3 = 0 Month 4's total investment limited to principle and interest invested in construction loans in Month 1, goverment bonds in Month 2, and locally invested in Month 3: (4) g4 + c4 + l4 = 1.06c1 + 1.02g2 + 1.0075l3 or - 1.02g2 + g4 - 1.06c1 + c4 - 1.0075l3 + l4 = 0MNGT 379 Operations ResearchPortfolio Planning Problem $10 million must be available at start of Month 5: (5) 1.06c2 + 1.02g3 + 1.0075l4> 10,000,000 No more than $8 million in government bonds at any time: (6) g1< 8,000,000 (7) g1 + g2< 8,000,000 (8) g2 + g3< 8,000,000 (9) g3 + g4< 8,000,000 No more than $8 million in construction loans at any time: (10) c1< 8,000,000 (11) c1 + c2< 8,000,000 (12) c1 + c2 + c3< 8,000,000 (13) c2 + c3 + c4< 8,000,000 Nonnegativity: gj, cj, lj> 0 for j = 1,2,3,4MNGT 379 Operations ResearchProduct Mix ProblemFloataway Tours has $420,000 that can be used to purchase new rental boats for hire during the summer. The boats can be purchased from two different manufacturers. Floataway Tours would like to purchase at least 50 boats and would like to purchase the same number from Sleekboat as from Racer to maintain goodwill. At the same time, Floataway Tours wishes to have a total seating capacity of at least 200. Formulate this problem as a linear program. Maximum ExpectedBoat Builder Cost Seating Daily ProfitSpeedhawk Sleekboat $6000 3 $ 70Silverbird Sleekboat $7000 5 $ 80Catman Racer $5000 2 $ 50Classy Racer $9000 6 $110MNGT 379 Operations ResearchProduct Mix ProblemDefine the decision variables x1 = number of Speedhawks orderedx2 = number of Silverbirds orderedx3 = number of Catmans orderedx4 = number of Classys orderedDefine the objective function Maximize total expected daily profit: Max: (Expected daily profit per unit) x (Number of units) Max: 70x1 + 80x2 + 50x3 + 110x4Define the constraints (1) Spend no more than $420,000: 6000x1 + 7000x2 + 5000x3 + 9000x4< 420,000 (2) Purchase at least 50 boats: x1 + x2 + x3 + x4> 50 (3) Number of boats from Sleekboat equals number of boats from Racer:x1 + x2 = x3 + x4 or x1 + x2 - x3 - x4 = 0 (4) Capacity at least 200:3x1 + 5x2 + 2x3 + 6x4> 200 Nonnegativity of variables: xj> 0, for j = 1,2,3,4 MNGT 379 Operations ResearchProduct Mix ProblemComplete Formulation Max 70x1 + 80x2 + 50x3 + 110x4s.t. 6000x1 + 7000x2 + 5000x3 + 9000x4< 420,000 x1 + x2 + x3 + x4> 50 x1 + x2 - x3 - x4 = 0 3x1 + 5x2 + 2x3 + 6x4> 200 x1, x2, x3, x4> 0MNGT 379 Operations ResearchProduct Mix ProblemSolution Summary Purchase 28 Speedhawks from Sleekboat. Purchase 28 Classy’s from Racer. Total expected daily profit is $5,040.00. The minimum number of boats was exceeded by 6 (surplus for constraint #2). The minimum seating capacity was exceeded by 52 (surplus for constraint #4). MNGT 379 Operations ResearchTransportation ProblemThe Navy has 9,000 pounds of material in Albany, Georgia that it wishes to ship to three installations: San Diego, Norfolk, and Pensacola. They require 4,000, 2,500, and 2,500 pounds, respectively. Government regulations require equal distribution of shipping among the three carriers. The shipping costs per pound for truck, railroad, and airplane transit are shown below. DestinationMode San Diego Norfolk PensacolaTruck $12 $ 6 $ 5Railroad 20 11 9Airplane 30 26 28Formulate and solve a linear program to determine the shipping arrangements (mode, destination, and quantity) that will minimize the total shipping cost. MNGT 379 Operations ResearchTransportation ProblemDefine the Decision Variables We want to determine the pounds of material, xij , to be shipped by mode i to destination j. The following table summarizes the decision variables: San Diego Norfolk PensacolaTruckx11x12x13Railroad x21x22x23Airplane x31x32x33Define the Objective Function Minimize the total shipping cost.Min: (shipping cost per pound for each mode per destination pairing) x (number of pounds shipped by mode per destination pairing). Min: 12x11 + 6x12 + 5x13 + 20x21 + 11x22 + 9x23 + 30x31 + 26x32 + 28x33MNGT 379 Operations ResearchTransportation ProblemDefine the Constraints Equal use of transportation modes: (1) x11 + x12 + x13 = 3000 (2) x21 + x22 + x23 = 3000 (3) x31 + x32 + x33 = 3000 Destination material requirements: (4) x11 + x21 + x31 = 4000 (5) x12 + x22 + x32 = 2500 (6) x13 + x23 + x33 = 2500 Nonnegativity of variables:xij> 0, i = 1,2,3 and j = 1,2,3MNGT 379 Operations ResearchTransportation ProblemThe Management Scientist Output Objective Function Value = 142000.000 Variable Value Reduced Costs -------------- --------------- ------------------ X11 1000.000 0.000 X12 2000.000 0.000 X13 0.000 1.000 X21 0.000 3.000 X22 500.000 0.000 X23 2500.000 0.000 X31 3000.000 0.000 X32 0.000 2.000 X33 0.000 6.000 Constraint Slack/Surplus Dual Prices -------------- --------------- ------------------ 1 0.000 17.000 2 0.000 12.000 3 0.000 -1.000 4 0.000 -29.000 5 0.000 -23.000 6 0.000 -21.000San Diego will receive 1000 lbs. by truck and 3000 lbs. by airplane.Norfolk will receive 2000 lbs. by truck and 500 lbs. by railroad.Pensacola will receive 2500 lbs. by railroad. The total shipping cost will be $142,000. MNGT 379 Operations ResearchData Envelopment AnalysisData envelopment analysis (DEA) is an LP application used to determine the relative operating efficiency of units with the same goals and objectives. DEA creates a fictitious composite unit made up of an optimal weighted average (W1, W2,…) of existing units. An individual unit, k, can be compared by determining E, the fraction of unit k’s input resources required by the optimal composite unit. If E < 1, unit k is less efficient than the composite unit and be deemed relatively inefficient. If E = 1, there is no evidence that unit k is inefficient, but one cannot conclude that k is absolutely efficient. The DEA Model MIN E s.t. Weighted outputs > Unit k’s output (for each measured output) Weighted inputs <E [Unit k’s input] (for each measured input) Sum of weights = 1E, weights > 0 MNGT 379 Operations ResearchData Envelopment AnalysisThe Langley County School District is trying to determine the relative efficiency of its three high schools. In particular, it wants to evaluate Roosevelt High. The district is evaluating performances on SAT scores, the number of seniors finishing high school, and the number of students who enter college as a function of the number of teachers teaching senior classes, the prorated budget for senior instruction, and the number of students in the senior class. Input RooseveltLincolnWashingtonSenior Faculty 37 25 23Budget ($100,000's) 6.4 5.0 4.7Senior Enrollments 50 700 600 Output RooseveltLincolnWashingtonAverage SAT Score 800 830 900High School Graduates 450 500 400College Admissions 140 250 370MNGT 379 Operations ResearchData Envelopment AnalysisDecision Variables E = Fraction of Roosevelt's input resources required by the composite high schoolw1 = Weight applied to Roosevelt's input/output resources by the composite high schoolw2 = Weight applied to Lincoln’s input/output resources by the composite high schoolw3 = Weight applied to Washington's input/output resources by the composite high schoolObjective Function Minimize the fraction of Roosevelt High School's input resources required by the composite high school:MIN EConstraints Sum of the Weights is 1: (1) w1 + w2 + w3 = 1Output Constraints: Since w1 = 1 is possible, each output of the composite school must be at least as great as that of Roosevelt:(2) 800w1 + 830w2 + 900w3> 800 (SAT Scores) (3) 450w1 + 500w2 + 400w3> 450 (Graduates) (4) 140w1 + 250w2 + 370w3> 140 (College Admissions)MNGT 379 Operations ResearchData Envelopment AnalysisConstraints Input Constraints:The input resources available to the composite school is a fractional multiple, E, of the resources available to Roosevelt. Since the composite high school cannot use more input than that available to it, the input constraints are:(5) 37w1 + 25w2 + 23w3< 37E (Faculty) (6) 6.4w1 + 5.0w2 + 4.7w3< 6.4E (Budget) (7) 850w1 + 700w2 + 600w3< 850E (Seniors)Nonnegativity of variables: E, w1, w2, w3> 0MNGT 379 Operations ResearchData Envelopment AnalysisObjective Function Value = 0.765 Variable Value Reduced Costs -------------- --------------- ------------------ E 0.765 0.000 W1 0.000 0.235 W2 0.500 0.000 W3 0.500 0.000 Constraint Slack/Surplus Dual Prices -------------- --------------- ------------------ 1 0.000 -0.235 2 65.000 0.000 3 0.000 -0.001 4 170.000 0.000 5 4.294 0.000 6 0.044 0.000 7 0.000 0.001Conclusion The output shows that the composite school is made up of equal weights of Lincoln and Washington. Roosevelt is 76.5% efficient compared to this composite school when measured by high school graduates (because of the 0 slack on this constraint (#3)). It is less than 76.5% efficient when using measures of SAT scores and college admissions (there is positive slack in constraints 2 and 4.)MNGT 379 Operations Research

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