Modeling Objectives

Goal Programming Several Objectives Minimum Regret Models

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Workforce Scheduling
Some days we will have too many workers Excess Only concerned with the largest excess Minimize the largest Excess

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Challenge
Formulate a Solver Model

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Formulating the LP
Scheduling Postal Workers

Shift Day Mon Tues Wed Thurs Fri Sat Sun

Mon - Tues - Wed - Thurs - Fri - Sat - Sun Fri Sat Sun Mon Tues Wed Thurs
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Demand 17 13 15 19 14 16 11
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Enhancement
Given Goals:
Have the right number of workers each day

Cost for exceeding and falling short

|Actual Workers Desired Number|

Challenge: Formulate a Linear Model

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Formulating the LP
Scheduling Postal Workers

Shift Day Mon Tues Wed Thurs Fri Sat Sun

Mon - Tues - Wed - Thurs - Fri - Sat - Sun Fri Sat Sun Mon Tues Wed Thurs
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Demand 17 13 15 19 14 16 11
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Policy vs Physical Consts

Physical/Logical Constraints
Flow Conservation Capacity ...

Policy Constraints
Meet service levels ...

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Small Violations
Can violate policy constraints a little Sometimes can violate physical constraints
Capacity Raw materials

Handle with deviation from targets

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Conflicting Objectives
Cost vs Service Price vs Quality Revenue vs Market Share Reach vs Frequency Risk vs Return ...

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Other Examples

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Undominated Optima

Cost

Current Position

Dominating Positions

Service Level
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Getting to the Frontier

Associate a value with Service ($/Time) Change this value of Time Systematic change using Sensitivity Analysis Remember the Retail Pricing Model

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Reach vs Frequency
Invest in Marketing
Radio Ads TV Ads Newspaper Ads

Want
Reach: Lots of people to see the ads Frequency: People to see the adds lots of times

Generally conflicting
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Example
Budget of $500
Media Radio TV News Cost $15 $30 $10 Reach 100 500 10 Frequency 10 2 100

What are the Frontier Solutions?

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6000

The Frontier
News

5000

4000

Frequency

Undominated Solutions

3000

2000

1000

Solutions using the full budget Radio TV

4000 5000 6000 7000 8000 9000

0 0 1000 2000 3000

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Reach

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Dollarize
Reaching one person worth $1 (normalize) Frequency worth $f per repetition
Media Radio TV News Cost $15 $30 $10 Reach 100 500 10 Frequency 10 2 100 Value $100 + 10f $500 + 2f $10 + 100f

What happens to the answer as f increases?

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The Frontier
$120.00

Radio
$100.00

TV News

Value/$

$80.00

$60.00

$40.00

$20.00

$0.00 0 1 2 3 4

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6000

The Frontier
News

5000

4000

Frequency

Undominated Solutions

3000

2000

1000

Solutions using the full budget Radio TV

4000 5000 6000 7000 8000 9000

0 0 1000 2000 3000

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Reach

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Multiple Scenarios
Uncertain Future Make a decision today Live with it tomorrow Example
Singapore Electric Production plan against FORECASTED orders Uncertain Economic climate
HOT (130%) Temperate (100%) Cold (70%) 1/3 chance 1/3 chance 1/3 chance

Allow back-ordering
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Singapore Electric
Unit Costs Prod. $ Inventory $ Prod. Quant. Prod. Limits Init. Inv. Del. Reqmts Ending Inv. Prod. Cost $ Inv. Cost $ Total Cost $ Singapore Electric Generator Production Jan Feb Mar Apr. 28.00 $ 27.00 $ 27.80 $ 29.00 0.30 $ 0.30 $ 0.30 $ 0.30 0 60 15 58 (43) $ (4.20) $ (4.20) $ 0 62 -43 36 (79) $ (18.30) $ (18.30) $ 0 64 -79 34 (113) May

0 66 -113 59 Minimum (172) 7

$ (28.80) $ (42.75) Total (28.80) $ (42.75) $ (94.05)

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Allow Back-Ordering
Defer demand at a cost of $3/unit/month Challenge: Formulate a linear model

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With Backordering
Singapore Electric Generator Production Economic Climate 100% Unit Revenue $ 50 Unit Costs Jan Feb Mar Apr. Prod. $ 28.00 $ 27.00 $ 27.80 $ 29.00 Inventory $ 0.30 $ 0.30 $ 0.30 $ 0.30 BackOrder $3.00 $3.00 $3.00 $3.00 Prod. Quant. Inventory BackOrder Net Inv. Prod. Limits Init. Inv. Del. Reqmts Ending Inv. Prod. Cost $ Inv. Cost $ Total Cost $ 31 0 0 0 60 10 58 (17) 868 $ $ 868 $ 25 0 0 0 62 (17.00) 36 (28) 675 $ $ 675 $ 24 0 0 0 64 (28.00) 34 (38) May

48 7 0 7 66 (38.00) 59 Minimum (49) 7

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667 $ 1,392 $ 21 Total 667 $ 1,413 $ 3,623 Net Rev. 5,727

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Revised Model
No constraint on ending inventory Charge $50 for any back orders in May Maximize Net Revenue
$50 for each item sold Cost Lost Sales ($50 for back orders in May)

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Robust Answers
Minimum Regret: Max the Min Revenue
Regardless of the outcome, we get at least this revenue

Idea of the model

One set of variables for production Inventory variables for each scenario Cost & Revenue calculations for each scenario New Variable for Minimum Revenue Maximize the Minimum Revenue S.t. Minimum Revenue Revenue in Each Scenario
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Best Answers
Solution Hot Temper Cold Min Regret Net Rev $ 5,627 $ 4,442 $ 3,604 $ 2,221 Jan 60 51 36 60 Feb 62 62 62 62 Mar 64 64 41 64 Apr. 47 1

Solution Hot Temper Cold Min Regret

$ $ $ $

Hot 5,627 1,452 (1,534) 2,221

Temper $ 2,802 $ 4,442 $ 1,568 $ 4,150

$ $ $ $

Cold 873 2,513 3,604 2,221

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Model (Messy)

Unit Costs Prod. $ Inventory $ BackOrder Prod. Quant. Scenario 1 Inventory BackOrder Net Inv. Prod. Limits Init. Inv. Del. Reqmts Ending Inv. Prod. Cost $ Inv. Cost $ Total Cost $

Unit Revenue $ 50 Jan Feb Mar Apr. 28.00 $ 27.00 $ 27.80 $ 29.00 0.30 $ 0.30 $ 0.30 $ 0.30 $3.00 $3.00 $3.00 $3.00 60 62 80% 64

May

Minimum Net 0.981607 2221.43892

Economic Climate 24 57 0 0 24 57 60 62 10 24.00 46 29 24 57 1,680 $ 7 $ 1,687 $ 1,674 $ 17 $ 1,691 $

94 47.981607 0 0 94 47.981607 64 66 57.00 94.00 27 47 Lost Sales 94 48 $ 1,779 $ 28 28 $ 14 Total 1,807 $ 43 $ 5,229 Net Rev. 2,221 100% 68 0 68 64 38.00 34 68 9.981607 0 9.981607 66 68.00 59 Lost Sales 10 $ -

Scenario 2 Inventory BackOrder Net Inv. Prod. Limits Init. Inv. Del. Reqmts Ending Inv. Prod. Cost $ Inv. Cost $ Total Cost $

Economic Climate 12 38 0 0 12 38 60 62 10 12.00 58 36 12 38 1,680 $ 4 $ 1,684 $ 1,674 $ 11 $ 1,685 $

1,779 $ 28 20 $ 3 Total 1,800 $ 31 $ 5,200 Net Rev. 4,150 130% 30 0 0 46.018393 30 -46.01839 64 66 10.00 30.00 44 77 Lost Sales 30 (46) 4,601.84 1,779 $ 28 9 $ 138 Total 1,788 $ 167 $ 5,327 Net Rev. 2,221

Scenario 3 Inventory BackOrder Net Inv. Prod. Limits Init. Inv. Del. Reqmts Ending Inv. Prod. Cost $ Inv. Cost $ Total Cost $

Economic Climate 0 10 5 0 -5 10 60 62 10 (5.00) 75 47 (5) 10 1,680 $ 15 $ 1,695 $ 1,674 $ 3 $ 1,677 $

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Summary
Modeling Goals Modeling Conflicting Objectives
The Efficient Frontier

Modeling Scenarios
Complicated models Robust Solutions

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