Name: Dwayne M.

Eccleston
Lecturer Name: Miss Karen Adair
Date: November 3, 2010
Course: Logistic and Supply Chain Management I
Assignment no.:- # 1
Module: B.Sc. in International Shipping

Instructions: Answer 2 of the following questions, Question 1 and any other

1a. Explain the basis of linear programming. Indicate it usefulness in supply chain
management and discuss its limitations

1. b. Johnson’s Bespoke Ltd. bought the following material to make uniforms for a
selected amount of students of Maritime Academy

16 square yards of Terylene

15 square yards of Cotton

11 square yards of Wool

A candidate uniform requires: 2 sq. yards of terylene, 1 sq. yard cotton and 1 sq. yard
wool

Girls uniform (a dress) will require: 1 sq. yard of terlyene, 2 sq yards cotton, 3 sq. yards
wool

If Johnson Bespoke can sell a suite to male candidates for $30 and a dress to female
candidates for $50 determine the number of suits and dresses they should make to
maximize sales. What sales figure does it yield?

2. What is Economic order quantity and why is this tool so important to inventory
management.
Question 1 ans.
Linear programming is a mathematical technique used in computer simulation to discover the

best possible solution in allocating limited resources such as money, personnel, space and time to

achieve maximum profit or means by which to minimize cost. But it’s only applicable where all

relationships are arrant to accommodate only a limited cost functions. This was developed by the

Russian economist Leonid Kantorovich (1912-86) and the US economist C. Koopmans (1910-

86), on the basis of the work of the Russian mathematician Andrei Nikolaevich Kolmogorov

(1903-87). Linear programming is used as simulation to study situations characterized by

ambiguity. This involves the construction of a model of a system based on specific assumptions

about system behaviour and information about probability distributions associated with various

variables. By running simulations, it may be possible to determine the best values of various

system parameters, subjected to underlying assumptions. The main advantage of simulation is

that it can be used to study extremely complex systems that cannot be easily modeled by using

certain mathematical equation. It must be emphasized that the recommended solutions are a

function of the quality of the model and the underlying assumptions. A flawed assumption will
lead to flawed recommendations. Linear programming, nonlinear programming and integer

programming consist of a general objective which is often times to maximize profits or to

minimize cost and a set of constraints that can involve a limited budget or capacity faced by the

decision-maker. There are also parameters that are fixed and exogenous that determined values

which are not under the control of the decision-maker.

An example : - ( cost figures)

Linear programming techniques make it possible for a decision-maker to determine the values of

variables that result in the optimal solution. Such limitations that are associated with linear

programming models of a supply chain rests on assumptions about the supply chain. The

outcome obtained is only as good as the assumptions and the model. A complicated, precise

model that generates recommendations that are changed significantly by a small adjustment in

the underlying assumptions is less useful than a simpler, less precise model that generates

recommendations that remain essentially unchanged even with a large change in the underlying

assumptions. Thus the suggestion obtained from any model must be tested for sensitivity to the

original assumptions and must be thoroughly tested for reasonableness. It is also important to

realize that mathematical models can only provide answers to questions posed by a decision-

maker. The task of asking the right questions and identifying the fundamental problems facing a

firm cannot be performed by a mathematical model. Supply chain mathematics cannot act as a

substitute for intelligent decision-making by managers.

Section 1.b ans.

Johnson’s Bespoke Ltd.

Uniform for Maritime Academy

Equation for profit

Profit = P

P = 30x + 50y

Equation for plotting graph:-

1. Terylene: - 2x +1y = 16

2. Cotton: - 1x + 2y = 15

3. Wood: - 1x + 3y = 11

Equation 1.

2x + 1y = 16

If 2x = 16 If 1y = 16

x = 16/2 y = 16/1

x=8 y = 16

Equation 2.

1x + 2y = 15

If 1x = 15 If 2y = 15

x = 15/1 y = 15/2

x = 15 y = 7.5

Equation 3.

1x + 3y = 11

If 1x = 11 If 3y = 11
 x = 11/1 y = 11/3

x = 11 y = 3.7

Equation: - x = 0 , y=0

(1) x= 8 , y =16

Equation: - x = 0 , y=0

(2) x = 15 , y = 7.5

Equation: - x = 0 , y=0

(3) x = 11 , y = 3.7

Points Unit x Unit y Male Cand. Female Total Cand.

Material Cand. Material
Material
$30
$50

A 8 0 30 x 8 = 240 50 x 0 = 0 240

B 7.4 1 30 x 7.4 = 50 x 1 = 50 272

222

C 0 0 30 x 0 = 0 50 x 0 = 0 0

D 0 3.7 30 x 0 = 0 50 x 3.7 = 185

185

TOTAL 15.4 4.7 462 235 697

Sale figure yielded in order to make a profit is 272.

Male candidates: - $240 +$ 222 = $462

Female Candidates: - $50 + $185 = $235

The amt. of uniforms (x + y)

Male (x):- 8x + 7.4x = 15.4

Female(y):- 1y + 3.7y = 4.7

Question 2 ans.
The Economic Order Quantity (EOQ) is the number of units that a company should add to

inventory with each order to minimize the total costs of inventory. Such as holding costs, order

costs, and shortage costs. The EOQ is used as part of a continuous review inventory system, in

which the level of inventory is monitored at all times and a fixed quantity is ordered each time

the inventory level reaches a specific reorder point. The EOQ provides a model for calculating

the appropriate reorder point and the optimal reorder quantity to ensure the instant replenishment

of inventory with no shortages. It can be a valuable tool for small business owners who need to

make decisions about how much inventory to keep on hand. This model supposes that demand is

constant and inventory is depleted at a fixed rate until it reaches zero. At this point, a specific

number of items return the inventory to its beginning level. Since the model assumes

instantaneous replenishment there is no inventory shortages or associated costs. Therefore, the

cost of inventory under the EOQ model involves a tradeoff between inventory holding costs and

order costs which involves any fees associated with placing orders that may involve delivery

charges. Ordering a large amount at one time will increase a small business's holding costs, while
making more frequent orders of fewer items will reduce holding costs but increase order costs.