Topic 2 Linear Programming: Concepts and Model

Formulation

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Topic 2 Linear Programming: Concepts and Model Formulation

Contents

Introduction
Learning objectives

ii

1
1

Problem Formulation

Summary

Supply Chain Analysis and Design

Introduction
This topic continues deeper into the model development which is the first
step in quantitative analysis. It introduces you to the six-step process that
guides you to formulate mathematical models systematically.

Learning objectives
At the end of this topic, you will be able to:

Apply the six-step process to formulate mathematical models.

Examine and organise business problem statements into objective

functions and constraints.

Derive decision variables for objective functions and constraints.

Build mathematical models for identifying the optimal solution in a

systematic manner.
Reading
Chapters 2.1 and 5.2 in Anderson, D. R., Sweeney, D. J., Williams, T.
A., Camm, J. D., Cochran, J. J., Fry, M. J., & Ohlmann, J. W. (2016).
An introduction to management science: Quantitative approaches to
decision making (14th ed.). Boston, MA, USA: Cengage Learning.

Problem Formulation
To be able to formulate problem statements into mathematical models
well, it requires practice and experience. Some problems have unique
features. If you are familiar with those unique features, you will be able to
formulate more difficult problems. Nonetheless, the six-step process below
can be used as a guide to think carefully what should be done:
1. Understand the problem thoroughly: You must be able to
understand what the problem is. In this step, deconstructing
problem statements into chunks of information and then
categorising them into groups will help you focus on key issues.
2. Describe the objective: You must be able to derive what the aim to
solve the problem is. Generally, it would be either minimisation or
maximisation. You should also start thinking of what environmental
factors are (i.e. uncontrollable inputs).
3. Describe each constraint: You must be able to identify what the
constraints are. In this step, you should focus on writing them as
phrases or statements. You should also start thinking of what
environmental factors are
4. Define the decision variables: You must be able to derive the
Topic 2 Linear Programming: Concepts and Model Formulation

decision variables (i.e. controllable inputs) from the problem

statement. It is simply what you will be making a decision on. One
aspect that helps you identify the decision variables is that they
relate to both the objective and the constraints. Identifying the
decision variables correctly, or appropriately, can be trickly at
times, and this requires practice to speed up this step.
5. Write the objective in terms of the decision variables: You must
be able to formulate a mathematical equation for the objective,
which is called the objective function. It must consist of all decision
variables and relevant environmental factors.
6. Write the constraints in terms of the decision variables: You must
be able to formulate a mathematical equation for the constraints. It
consists of the left-hand side (LHS), the sign, and the right-hand
side (RHS). The left-hand side must contain decision variables. The
sign in the constraint generally takes one of the three forms: equal
to (=), less than or equal to (), or more than or equal to ().
Nonetheless, keywords to identify the sign can be sometimes trickly,
and it requires practice and a full understanding to the problem.
The constraint must consist of decision variables and relevant
environmental factors.

Example (question 14, p. 70 in the prescribed text)

According to the six-step process of model formulation, the first step
is to understand the problem thoroughly. It is a good practice not to
read it quickly since you may miss out important information.
RMC, Inc., is a small firm that produces a variety of chemical
products. In a particular production process, three raw materials
are blended (mixed together) to produce two products: a fuel
additive and a solvent base. Each ton of fuel additive is a mixture
2
3
of ton of material 1 and of material 3. A ton of solvent base is a
5

mixture of 2 ton of material 1, 5 ton of material 2, and 10 ton of

material 3. After deducting relevant costs, the profit contribution is
$40 for every ton of fuel additive produced and $30 for every ton of
solvent base produced.
RMCs production is constrained by a limited availability of the
three raw materials. For the current production period, RMC has
available the following quantities of each raw material:
Raw Material

Amount Available for Production

Material 1

20 tons

Material 2

5 tons

Material 3

21 tons

Assuming that RMC is interested in maximizing the total profit

contribution, what is the linear programming model for this
problem?
Above is one type of the problem statements which you will come
across in this course.
2

Supply Chain Analysis and Design

The second step is to describe the objective. The third paragraph in

the problem statement says that RMC is interested in maximizing
the total profit contribution. So it is clear that the objective is
maximization of the total profit (i.e. revenue-cost). In this example,
the profit is already determined (i.e. $40/ton of fuel additive and
$30/ton of solvent base). In some cases, you may have to formulate
revenue and cost equations separately.
The third step is to describe each constraint. Based on the problem
statement, the constraints are the followings:

Constraint 1: The number of Material 1 used in production

must be less than or equal to the number of available Material
2
1. We also know that every ton of the fuel additive uses ton
1

of Material 1, that every ton of the solvent base uses ton of

2
Material 1, and that the available amount of Material 1 is 20
tons.

Constraint 2: The number of Material 2 used in production

must be less than or equal to the number of available Material
1
2. We also know that every ton of the solvent base uses 5 ton
of Material 2 and that the available amount of Material 2 is 5
tons.

Constraint 3: The number of Material 3 used in production

must be less than or equal to the number of available Material
3
3. We also know that every ton of the fuel additive uses 5 ton
3

of Material 3, that every ton of the solvent base uses 10 ton of

Material 3, and that the available amount of Material 3 is 21
tons.
The fourth step is to define the decision variables. Since the total
profit and the amount of materials used in production will depend on
the amount of fuel additive and solvent base to be produced, the
decision variables are:

F = the amount of fuel additive to be produced

S = the amount of solvent base to be produced

There is no guideline on how to name the decision variables. You may

choose whatever you like as long as you consistently use them
throughout the whole process. You may choose to name them in an
easy-to-recall manner.
The fifth step is to write the objective in terms of the decision
variables. According to the objective of this problem and the
environmental factors, the objective function can be written as:
Max = 40 + 30
We use Z to represent the profit.
The sixth step is to write the constraints in terms of the decision
variables. According to the constraints of this problem and the
environmental factors, the constraints can be written as:
2

Constraint 1: 5 + 2 20
1

Constraint 2: 5 5
3

3: 5 + Concepts
21
Topic 2 Constraint
Linear Programming:
and Model Formulation
10

Since the amount of fuel additive and solvent base to be produced

cannot not be negative, we must add the fourth constraint:
Constraint 4: , 0
When we put all equations that we just formulated previously
together, we get:
Max

= 40 + 30

Available Material 1:

2
1
+ 20
5
2
1
5
5
3
3
+ 21
5
10

subject to (s.t.)

Available Material 2:
Available Material 3:
Nonnegativity:

, 0

Above is what we call a mathematical model.

Sometimes environmental factors may come in different units (e.g. g
and kg), and you have to convert them into the same unit (e.g. either
g or kg) to ensure that units are the same on LHS and RHS.

Summary
This topic introduces a systematic process of how to build a mathematical
model from a problem statement. Careful reading and understanding a
statement must be done prior to formulation. This only comes with practice
and experience by applying this process on end-of-chapter problems. The
best way to practice is to first solve it by yourself then share your answers
with others. If some of you do not arrive at the same answer, you should
check why. As a result, we encourage you to utilise an online discussion as
often as possible.

Supply Chain Analysis and Design

Activity 1 (question 7, p. 253 in the prescribed text)

Hanson Inn is a 96-room hotel located near the airport and convention
center in Louisville, Kentucky. When a convention or a special event
is in town, Hanson increases its normal room rates and takes
reservations based on a revenue management system. The Classic
Corvette Owners Association scheduled its annual convention in
Louisville for the first weekend in June. Hanson Inn agreed to make at
least 50% of its rooms available for convention attendees at a special
convention rate in order to be listed as a recommended hotel for the
convention. Although the majority of attendees at the annual meeting
typically request a Friday and Saturday two-night package, some
attendees may select a Friday night only or a Saturday night only
reservation. Customers not attending the convention may also request
a Friday and Saturday two-night package, or make a Friday night only
or Saturday night only reservation. Thus, six types of reservations are
possible: Convention customers/two-night package; convention
customers/Friday night only; convention customers/Saturday night
only; regular customers/two-night package; regular customers/ Friday
night only; and regular customers/Saturday night only. The cost for
each type of reservation is shown here:
Two-Night
Package

Friday Night
Only

Saturday
Night Only

Convention

$225

$123

$130

Regular

$295

$146

$152

The anticipated demand for each type of reservation is as follows:

Two-Night
Package

Friday Night
Only

Saturday
Night Only

Convention

40

20

15

Regular

20

30

25

Hanson Inn would like to determine how many rooms to make

available for each type of reservation in order to maximize total
revenue.
a. Define the decision variables and state the objective function.
Formulate a linear programming model for this revenue management
application.

Topic 2 Linear Programming: Concepts and Model Formulation

Activity 2 (question 54, p. 82 in the prescribed text)

Jackson Hole Manufacturing is a small manufacturer of plastic
products used in the automotive and computer industries. One of its
major contracts is with a large computer company and involves the
production of plastic printer cases for the computer companys
portable printers. The printer cases are produced on two injection
molding machines. The M-100 machine has a production capacity of 25
printer cases per hour, and the M-200 machine has a production
capacity of 40 cases per hour. Both machines use the same chemical
material to produce the printer cases; the M-100 uses 40 pounds of
the raw material per hour and the M-200 uses 50 pounds per hour. The
computer company asked Jackson Hole to produce as many of the
cases during the upcoming week as possible; it will pay $18 for each
case Jackson Hole can deliver. However, next week is a regularly
scheduled vacation period for most of Jackson Holes production
employees; during this time, annual maintenance is performed for all
equipment in the plant. Because of the downtime for maintenance,
the M-100 will be available for no more than 15 hours, and the M-200
will be available for no more than 10 hours. However, because of the
high setup cost involved with both machines, management requires
that, each machine must be operated for at least 5 hours. The
supplier of the chemical material used in the production process
informed Jackson Hole that a maximum of 1000 pounds of the
chemical material will be available for next weeks production; the
cost for this raw material is $6 per pound. In addition to the raw
material cost, Jackson Hole estimates that the hourly cost of
operating the M-100 and the M-200 are $50 and $75, respectively.
a. Formulate a linear programming model that can be used to
maximize the contribution to profit.

Supply Chain Analysis and Design

Activity 3 (question 28, p. 75 in the prescribed text)

Toms, Inc., produces various Mexican food products and sells them to
Western Foods, a chain of grocery stores located in Texas and New
Mexico. Toms, Inc., makes two salsa products: Western Foods Salsa
and Mexico City Salsa. Essentially, the two products have different
blends of whole tomatoes, tomato sauce, and tomato paste. The
Western Foods Salsa is a blend of 50% whole tomatoes, 30% tomato
sauce, and 20% tomato paste. The Mexico City Salsa, which has a
thicker and chunkier consistency, consists of 70% whole tomatoes, 10%
tomato sauce, and 20% tomato paste. Each jar of salsa produced
weighs 10 ounces. For the current production period, Toms, Inc., can
purchase up to 280 pounds of whole tomatoes, 130 pounds of tomato
sauce, and 100 pounds of tomato paste; the price per pound for these
ingredients is $0.96, $0.64, and $0.56, respectively. The cost of the
spices and the other ingredients is approximately $0.10 per jar.
Toms, Inc., buys empty glass jars for $0.02 each, and labeling and
filling costs are estimated to be $0.03 for each jar of salsa produced.
Toms contract with Western Foods results in sales revenue of $1.64
for each jar of Western Foods Salsa and $1.93 for each jar of Mexico
City Salsa.
a. Develop a linear programming model that will enable Toms to
determine the mix of salsa products that will maximize the
total profit contribution.
Reflection
Based on the three problems above, what are the common features
among them? What about their unique features?

Discussion forum
Activity 1
Share your answers to the three problems and thought from your
reflection on the discussion forum. Check whether other students
arrive at the same answers. If not, why?
Activity 2
Try to formulate mathematical models from problem statements in
chapters 2 and 5 of the textbook as many as you can, both
maximisation and minimisation. Reflect your learning experience on
the problems and share it on the online discussion forum.

Topic 2 Linear Programming: Concepts and Model Formulation