Operation Research

1.1 - What is Operations Research?
Operations Research (management science) is a

scientific approach to decision making that seeks to
best design and operate a system, usually under
conditions requiring the allocation of scarce
resources.
A system is an organization of interdependent
components that work together to accomplish the
goal of the system.
The term operations research was coined during WW
II when a team of scientists set out to make
scientifically based decisions regarding the best
utilization of war materiel.
The scientific approach to decision making requires
the use of one or more mathematical models. A
mathematical model is a mathematical representation
of the actual situation that may be used to make better
decisions or clarify the situation.
1.1 What is Operations Research?
A Modeling Example 1.1
You have a 5-week business commitment between
Fayetteville (FYV) and Denver (DEN). Fly out of
Fayetteville on Mondays and return on Wednesdays.
A regular round-trip ticket costs $400, but a 20% discount
is granted if the dates of the ticket span a weekend. A one-
way ticket in either direction costs 75%of the regular price.
Howshould you buy the tickets for the 5-week period?
1.2 - An Introduction to Modeling
Look at the situation as a decision-making problem
whose solution requires answering three questions:
1. What are the decision alternatives?
2. Under what restrictions is the decision made?
3. What is an appropriate objective criterion for
evaluating the alternatives?
Alternatives:
1. Buy five regular FYV-DEN-FYV for departure on
Monday and return on Wednesday of the same week.
2. Buy one FYV-DEN, four DEN-FYV-DEN that span
weekends, and one DEN-FYV.
3. Buy one FYV-DEN-FYV to cover Monday of the first
week and Wednesday of the last week and four DEN-
FYV-DEN to cover the remaining legs.
All tickets in this alternative span at least one
weekend.
Restrictions:
You should be able to leave FYV on Monday and return
on Wednesday of the same week.
Objective criterions:
An obvious objective criterion is the price of the tickets.
The alternative that yields the smallest cost is the best.
Specifically, we have
Alternative 1 :
cost = 5 400 = $2000
Alternative 2 :
cost = 0.75 400 + 4 (0.8 400) + 0.75 400 = $1880
Alternative 3 :
cost = 5 (0.8 400) = $1600
Alternative 3 is the best because it is the cheapest.
Though the preceding example illustrates the three
main components of an OR model
Alternatives,
Objective criterion, and
Constraints-situations
differ in the details of how each component is
developed and constructed.
Example 1.2
Consider forming a maximum-area rectangle out of a
piece of wire of length L inches.
What should be the width and height of the rectangle?
In contrast with the tickets example, the number of
alternatives in the present example is not finite;
namely, the width and height of the rectangle can
assume an infinite number of values.
The alternatives of the problem are identified by
defining the width and height as continuous
(algebraic) variables. Let
w = width of the rectangle in inches
h = height of the rectangle in inches
The restrictions of the situation are
1. 2(w + h) = L
2. w 0 , h 0
The objective of the problem is
Maximization of the area of the rectangle.
Let z be the area of the rectangle, then the complete
model becomes
Maximize z = wh
The optimal solution of this model is w = h = L/4 ,
which calls for constructing a square shape.
Based on the preceding two examples, the general OR
model can be organized as
Maximize or Minimize Objective Function
subject to
Constraints
Though OR models are designed to "optimize" a
specific objective criterion subject to a set of
constraints.
A solution of the mode is feasible if it satisfies all the
constraints. It is optimal if, in addition to being
feasible, it yields the best (maximum or minimum)
value of the objective function.
The" optimum solution of a model is best only for
that model. If the model happens to represent the real
system reasonably well, then its solution is optimum
also for the real situation.
Example 1.3
Amy, Jim, John, and Kelly want to cross a river by using
a canoe.
The canoe can hold at most two people at a time and it
cannot be shuttled empty.
Amy can row across the river in 1 minute. Jim, John, and
Kelly would take 2, 5, and 10 minutes, respectively.
The slower person dictates the crossing time.
The objective is for all four people to be on the other
side of the river in the shortest time possible.
Example 1.3
a) Identify at least two feasible plans for crossing the
river.
b) Define the criterion for evaluating the alternatives.
c) What is the smallest time for moving all four people
to the other side of the river?
Solution:
OR Techniques
Linear programming
It is designed for models with linear objective and constraint
functions.
Integer programming
The variables assume integer values.
Dynamic programming
The original model can be decomposed into more manageable
subproblems.
Network programming
The problemcan be modelled as a network, and
Nonlinear programming
Functions of the model are nonlinear.
1.3 Solving the OR Model
In OR techniques solutions are not generally obtained
in closed forms (formula form) . Instead, they are
determined by algorithms.
An algorithm provides fixed computational rules that
are applied repetitively to the problem, with each
repetition (called iteration) moving the solution closer
to the optimum.
Phases of an OR study
1. Definition of the problem.
2. Construction of the model.
3. Solution of the model.
4. Validation of the model.
5. Implementation of the solution.
linear functions and linear inequality:
A function f(x
1
, x
2
, , x
n
) of x
1
, x
2
, , x
n
is a linear
function if and only if for some set of constants,
c
1
, c
2
, , c
n
,
f(x
1
, x
2
, , x
n
) = c
1
x
1
+ c
2
x
2
+ + c
n
x
n
.
f(x
1
,x
2
) = 2x
1
+ x
2
is a linear function of x
1
and x
2
.
f(x
1
,x
2
) = (x
1
)
2
x
2
is not a linear function of x
1
and x
2
.
For any linear function f(x
1
, x
2
, , x
n
) and any
number b, the inequalities f(x
1
, x
2
, , x
n
) b and
f(x
1
, x
2
, , x
n
) b are linear inequalities.
Two-Variable LP Model
Two-variable problems hardly exist in practice, the
treatment provides concrete foundations for the
development of the general simplex algorithm (next
chapter).
1.4 Modeling with Linear
Programming (LP)
Example 1.4 (The Reddy Mikks Company)
Reddy Mikks produces both interior and exterior
paints from two raw materials, Ml and M2.
1.4 Modeling with LP
Tons of raw material per ton of
Maximum daily
availability (tons)
Exterior paint Interior paint
Raw material, M1 6 4 24
Raw material, M2 1 2 6
Profit per ton
($1000)
5 4
A market survey indicates that
The daily demand for interior paint cannot exceed that
for exterior paint by more than 1 ton.
The maximumdaily demand for interior paint is 2 tons.
Reddy Mikks wants to determine the optimum(best)
product mix of interior and exterior paints that
maximizes the total daily profit.
The LP model, as in any OR model, has three basic
components.
1. Decision variables that we seek to determine.
2. Objective (goal) that we need to optimize
(maximize or minimize).
3. Constraints that the solution must satisfy.
For the Reddy Mikks problem, the variables of the
model are defined as
o X
l
= Tons produced daily of exterior paint
o X
2
= Tons produced daily of interior paint
To construct the objective function,
o Total profit from exterior paint = 5 X
l
(thousand) dollars
o Total profit from interior paint = 4 X
2
(thousand) dollars
z= The total daily profit (in thousands of dollars)
The objective function is
Maximize z = 5X
l
+ 4X
2
To construct the raw material constraints
Usage of a raw material by both paints Maximum
raw material availability
Usage of raw material M
1
by both paints = 6X
l
+ 4X
2
tons/day
Usage of raw material M
2
by both paints = 1X
l
+ 2X
2
tons/day
The daily availabilities of raw materials M
1
and M
2
are
limited to 24 and 6 tons
So
6X
l
+ 4X
2
24 (Raw material M
1
)
X
l
+ 2X
2
6 (Raw material M
2
)
The first demand restriction stipulates that the excess of
the daily production of interior over exterior paint, X
2
X
1
,
should not exceed 1 ton.
The second demand restriction stipulates that the
maximum daily demand of interior paint is limited to 2
tons.
An implicit restriction requires all the variables to assume
zero or positive values only.
X
2
X
1
1 (Market limit)
X
2
2 (Demand limit)
X
1
, X
2
0
The complete Raddy Mikks model is
Maximize z = 5X
l
+ 4X
2
Subject to
6X
l
+ 4X
2
24 (1)
X
l
+ 2X
2
6 (2)
X
2
X
1
1 (3)
X
2
2 (4)
X
1
, X
2
0 (5)
Any values of X
l
and X
2
that satisfy all five constraints
constitute a feasible solution. Otherwise, the solution
is infeasible.
X
l
= 3 , X
2
= 1 is a feasible solution
X
l
= 4 , X
2
= 1 is an infeasible solution
The goal of the problem is to find the best feasible
solution, or the optimum, that maximizes the total
profit.
Need a systematic procedure that will locate the
optimum solution in a finite number of steps.
Binding and Nonbinding Constraints
A constraint is binding if the left-hand side and the
right-hand side of the constraint are equal when the
optimal values of the decision variables are substituted
into the constraint.
A constraint is nonbinding if the LHS and the RHS of
the constraint are unequal when the optimal values of
the decision variables are substituted into the
constraint.
A linear programming problem (LP) is an optimization
problemfor which we do the following:
1. Attempt to maximize (or minimize) a linear function
(called the objective function) of the decision
variables.
2. The values of the decision variables must satisfy a set of
constraints. Each constraint must be a linear equation or
inequality.
3. A sign restriction is associated with each variable. For
each variable x
i
, the sign restriction specifies either that
x
i
must be nonnegative (x
i
0) or that x
i
may be
unrestricted in sign.
Properties of LP Model
1. Proportionality:
The contribution of each decision variable in both the
objective function and the constraints to be directly
proportional to the value of the variable.
2. Additivity:
The total contribution of all the variables in the objective
function and in the constraints to be the direct sum of the
individual contributions of each variable.
3. Certainty:
All the objective and constraint coefficients of the LP model
are deterministic. This means that they are known constant
Example 1.5 (Giapettos Wooden Trains)
Giapettos, Inc., manufactures wooden soldiers and
trains.
Each soldier built:
Sell for $27 and uses $19 worth of raw materials.
Increase Giapettos variable labor/overhead costs by $14.
Requires 2 hours of finishing labor.
Requires 1 hour of carpentry labor.
Each train built:
Sell for $21 and used $9 worth of raw materials.
Increases Giapettos variable labor/overhead costs by $10.
Requires 1 hour of finishing labor.
Requires 1 hour of carpentry labor.
Each week Giapetto can obtain:
All needed raw material.
Only 100 finishing hours.
Only 80 carpentry hours.
Also
Demand for the trains is unlimited.
At most 40 soldiers are bought each week.
Giapetto wants to maximize weekly profit (revenues
expenses).
Define a LP model of Giapettos situation.
Solution:
Graphical LP Solution
The graphical procedure includes two steps:
1. Determination of the feasible solution space.
2. Determination of the optimum solution from among
all the feasible points in the solution space.
We use two examples to show how optimization
objective functions are handled.
Example 1.4 (The Reddy Mikks Company)
Step 1. Determination of the Feasible Solution Space:
Constraints:
6X
l
+ 4X
2
24 (1)
X
l
+ 2X
2
6 (2)
X
2
X
1
1 (3)
X
2
2 (4)
X
1
, X
2
0 (5)
The feasible
solution space of
the problem
represents the area
in which all the
constraints are
Satisfied
simultaneously.
In Figure 1.1, any
point in or on the
boundary of the area
ABCDEF (the shade
area) is the feasible
solution space. All
points outside this
area are infeasible.
Figure 1.1
Step 2. Determination of the OptimumSolution:
The number of solution points in the feasible space
ABCDEF is infinite. A systematic procedure is needed to
determine the optimumsolution.
First, the direction in which the profit function z = 5X
1
+
4X
2
increases is determined by assigning arbitrary
increasing values to z. For example, using z = 10 and z =
15 would be equivalent to graphing the two lines 5X
1
+
4X
2
= 10 and 5X
1
+ 4X
2
= 15, thus identifying the direction
of increasing z as shown in Figure 1.2. The optimum
solution occurs at C.
The values of X
1
and X
2
associated with
the optimum
point C are
determined by
solving the
equations
associated with
lines (1) and (2),
6X
1
+ 4X
2
= 24
X
1
+ 2X
2
= 6
The solution is
X
1
= 3 , X
2
= 1.5
with z = 21.
Figure 1.2
An important characteristic of the optimum LP solution is
that it is always associated with a corner point (extreme
points) of the solution space (where two lines intersect).
It means that the optimum solution can be found simply by
enumerating all the corner points:
Corner point (X1 , X2) z
A (0, 0) 0
B (4, 0) 20
C (3, 1.5) 21 (Optimum)
D (2, 2) 18
E (1, 2) 13
F (0, 1) 4
Convex Sets and Extreme Points
A set of points S is a convex set if the line segment
joining any pair of points in S is wholly contained in S.
In Figure a, S is convex, while in Figure b, S is not
convex.
For any convex set S, a point P in S is an extreme
point if each line segment that lies completely in S
and contains the point P as an endpoint.
The feasible region for any LP is a convex set.
The feasible region for any LP has only a finite number
of extreme points.
Any LP that has an optimal solution has an extreme
point that is optimal. This result is very important
because it reduces the set of points that will yield an
optimal solution from the entire feasible region
(generally an infinite set) to the set of extreme points
(a finite set).
Example 1.6 (Diet Problem)
Ozark Farms uses at least 800 lb of special feed daily.
The special feed is a mixture of corn and soybean meal
with the following compositions:
Feedstuff
lb per lb of feedstuff
Cost ($/lb)
Perotein Fiber
Corn 0.09 0.02 0.3
Soybean 0.6 0.06 0.9
The dietary requirements of the special feed are at
least 30%protein and at most 5%fiber.
Ozark Farms wishes to determine the daily minimum
cost feed mix.
Decision variables:
X
l
= lb of corn in the daily mix
X
2
= lb of soybean meal in the daily mix
Solution:
Some LPs have an infinite
number of solutions.
Consider the following
model:
max z = 3x
1
+ 2x
2
Subject to
.025 X
l
+ .017 X
2
1
.02 X
l
+ .02 X
2
1
X
l
, X
2
0
Any point (solution)
falling on line segment AE
will yield an optimal
solution of z =120.
X1
X2
10 20 30 40
1
0
2
0
3
0
4
0
5
0
Feasible Region
F
50
6
0
z = 60
z = 100
z = 120
A
B
C
D
E
Figure 1.4
Some LPs have no
solution. Consider the
following model:
max z = 3x
1
+ 2x
2
Subject to
.025 X
l
+ .017 X
2
1
.02 X
l
+ .02 X
2
1
X
l
30
X
2
20
No feasible region
exists
X1
X2
10 20 30 40
1
0
2
0
3
0
4
0
5
0
No Feasible Region
50
6
0
x1 >= 0
x2 >=0
Figure 1.5
Exercise:
Find the graphical LP solution for example 1. 5
(Giapettos )
LP Applications:
1. Investment.
2. Production planning and inventory control.
3. Manpower planning.
Each one shows by an example.
Example 1.7 (Bank Loan Model)
Bank One is in the process of devising a loan policy
that involves a maximum of $12 million. The following
table provides the pertinent data about available types
of loans.
Type of loan Interest rate Bad-debt ratio
Personal .140 .10
Car .130 .07
Home .120 .03
Farm .125 .05
Commercial .100 .02
Bad debts are unrecoverable and produce no interest
revenue.
Competition with other financial institutions requires that
the bank allocate at least 40% of the funds to farm and
commercial loans. To assist the housing industry in the
region, home loans must equal at least 50% of the
personal, car, and home loans. The bank also has a stated
policy of not allowing the overall ratio of bad debts on all
loans to exceed 4%.
The Bank One wants to maximize its net return, the
difference between interest revenue and lost bad debts.
The interest revenue is accrued on loans in good standing.
Decision variables
X
1
= personal loans (in millions of dollars)
X
2
= car loans
X
3
= home loans
X
4
= farm loans
X
5
= commercial loans
The objective of the Bank One is to maximize its net
return. For example, when 10% of personal loans are lost to
bad debt, the bank will receive interest on only 90% of the
loan-that is, it will receive 14% interest on .9 X
1
of the
original loan X
1
. The same reasoning applies to the
remaining four types of loans. Thus,
Total interest = .14(.9 X
1
)+ .13(.93 X
2
) + .12(.97 X
3
) +
.125(.95 X
4
) + .1(.98 X
5
)
= .126 X
1
+ .1209 X
2
+ .1164 X
3
+ .11875 X
4
+ .098 X
5
and
Bad debt = .1 X
1
+ .07 X
2
+ .03 X
3
+ .05 X
4
+ .02 X
5
The objective function is
Maximize z= Total interest Bad debt
z = .026 X
1
+ .0509 X
2
+ .0864 X
3
+.06875 X
4
+ .078 X
5
The constraints are:
1. Total funds should not exceed $12 (million):
X
1
+ X
2
+ X
3
+ X
4
+ X
5
12
2. Farm and commercial loans equal at least 40% of all loans:
X
4
+ X
5
.4(X
1
+ X
2
+ X
3
+ X
4
+ X
5
)
3. Home loans should equal at least 50% of personal, car, and
home loans:
X
3
.5(X
1
+ X
2
+ X
3
)
4. Bad debts should not exceed 4% of all loans:
.1 X
1
+ .07 X
2
+ .03 X
3
+ .05 X
4
+ .02 X
5
.4(X
1
+ X
2
+ X
3
+ X
4
+ X
5
)
5. Nonnegalivily:
X
1
, X
2
, X
3
, X
4
, X
5
0
Total Loan Bank Model
Maximize
z = .026 X
1
+ .0509 X
2
+ .0864 X
3
+.06875 X
4
+ .078 X
5
s.t.
X
1
+ X
2
+ X
3
+ X
4
+ X
5
12
.4 X
1
+ .4 X
2
+ .4 X
3
- .6 X
4
- .6 X
5
0
.5 X
1
+ .5 X
2
- .5 X
3
0
.06 X
1
+ .03 X
2
- .01 X
3
+ .01 X
4
- .02 X
5
0
X
1
, X
2
, X
3
, X
4
, X
5
0
The optimum solution is
z= .99648, X
1
= 0, X
2
=0, X
3
=7.2, X
4
, X
5
Remarks:
1. The right-hand side of the second constraint doesnt
define as (.4 12) instead of .4(X
1
+ X
2
+ X
3
+ X
4
+ X
5
),
after all, it seems logical that the bank would want to
loan out all $12 (million),because of two important
reasons:
1) If other constraints in the model are such that all $12
(million) cannot be used (for example, the bank may set
caps on the different loans), then the choice .4 X 12 could
lead to an infeasible or incorrect solution.
2) If you want to experiment with the effect of changing
available funds (say from$12 to $13 million) on the optimum
solution, there is a real chance that you may forget to
change (.4 12) to (.4 13), in which case the solution you get
will not be correct.
2. The return on the investment is
Rate of return = z/ 12 = .99648/12 = .08034.
The combined annual rate of return is 8.034% < The
best net interest rate (= 8.64% for home loans)
why the model does not take advantage of this
opportunity?
Because constraint 2 forces the solution to allocate $4.8
million to commercial loans at the lower net rate of .078,
hence lowering the overall interest rate to 8.034%.
If we remove constraint 2, the optimum will allocate all
the funds to home loans at the higher 8.64% rate.
Example 1.8 (Multiperiod Production Smoothing
Model)
A company will manufacture a product for the next four
months: March, April, May, and June .
The demands are 520, 720, 520, and 620 units, respectively.
It has 10 employees but can hire and fire temporary
workers, if necessary. The extra costs of hiring and firing in
any month are $200 and $400 per worker, respectively.
A permanent worker can produce 12 units per month, and
a temporary worker, only produce 10 units per month.
It can produce more than needed in any month and carry
the surplus over to a succeeding month at a holding cost of
$50 per unit per month.
Develop an optimal hiring/firing policy for over the four-
month planning horizon.
Mathematical Model:
Each month has its production, demand, ending
inventory and considering the permanent versus the
temporary workforce, and accounting for the cost of
hiring and firing in each month.
The 10 permanent workers can be accounted for by
subtracting the units they produce from the respective
monthly demand. The remaining demand is then
satisfied through hiring and firing of temps. Thus
Remaining demand for March = 520 - 12 10 = 400 units
Remaining demand for April = 720 - 12 10 = 600 units
Remaining demand for May = 520 - 12 10 = 400 units
Remaining demand for June = 620 - 12 10 = 500 units
The variables of the model for month i
X
i
= Net number of temps at the start of month i after any
hiring or firing
S
i
= Number of temps hired or fired at the start of month i
I
i
= Units of ending inventory for month i
By definition, X
i
and I
i
are nonnegative, whereas S
i
is
unrestricted in sing because it is the number of hired
and fired workers.
The number of units produced in month i by X
i
temps
is 10X
i
. Thus,
10X
1
= 400 + I
1
(March)
I
1
+ 10X
2
= 600 + I
2
(April)
I
2
+ 10X
3
= 400 + I
3
(May)
I
3
+ 10X
4
= 500 (June)
X
1
, X
2
, X
3
, X
4
0 , I
1
, I
2
, I
3
0
For hiring and firing First, the temp workforce starts
with X
1
workers at the beginning of March. At the start
of April, X
1
will be adjusted (up or down) by S
2
to
generate X
2
, and the same for X
3
, X
4
. So
X
1
= S
1
X
2
= X
1
+ S
2
X
3
= X
2
+ S
3
X
4
= X
3
+ S
4
S
1
, S
2
, S
3
, S
4
unrestricted in sign
X
1
, X
2
, X
3
, X
4
0
To develop the objective function, the goal is to
minimize the inventory cost plus the cost of hiring and
firing.
Inventory holding cost = 50(I
1
+ I
2
+ I
3
)
Cost of hiring/firing = 200(# hired temps at month)
+ 400(# fired temps at month)
If S
i
is positive (negative), hiring (firing) takes place in
month i. We can use the substitution
S
i
= S
i
-
- S
i
+
, where S
i
-
, S
i
+
0
S
i
-
: # temps hired, S
i
+
: # temps fired
The variables S
i
-
and S
i
+
cannot be positive
simultaneously.
Cost of hiring = 200(S
i
-
+ S
i
-
+ S
i
-
+ S
i
-
)
Cost of firing = 400(S
i
+
+ S
i
+
+ S
i
+
+ S
i
)
The complete model is
Min z= 50(I
1
+ I
2
+ I
3
+ I
4
)+ 200(S
i
-
+ S
i
-
+ S
i
-
+ S
i
-
)
+ 400(S
i
+
+ S
i
+
+ S
i
+
+ S
i
)
s.t
10X
1
= 400 + I
1
I
1
+ 10X
2
= 600 + I
2
I
2
+ 10X
3
= 400 + I
3
I
3
+ 10X
4
= 500
X
1
= S
1
-
- S
1
+
X
2
= X
1
+ S
2
-
- S
2
+
X
3
= X
2
+ S
3
-
- S
3
+
X
4
= X
3
+ S
4
-
- S
4
+
S
1
-
, S
1
+
, S
2
-
, S
2
+
, S
3
-
, S
3
+
, S
4
-
, S
4
+
0
X
1
, X
2
, X
3
, X
4
0 ,
I
1
, I
2
, I
3
0
The optimum solution is
z = $19500,
X
1
= 50 , X
2
= 50 , X
3
= 45 , X
4
= 45 ,
S
1
-
= 50 , S
3
+
= 5 , I
1
= 100 , I
3
= 50 .
All the remaining variables are zero.
Example 1.9 (Bus Scheduling Model)
Progress City is studying the feasibility of introducing
a mass-transit bus system to reduce in-city driving.
The study seeks the minimum number of buses that
can handle the transportation needs.
The minimum number of buses needed fluctuated
with the time of the day and that the required number
of buses could be approximated by constant values
over successive 4-hour intervals, Figure 1.6. To carry
out the required daily maintenance, each bus can
operate 8 successive hours a day only.
The variables of
the model are
the number of
buses needed in
each shift, and
the constraints
deal with
satisfying
demand. The
objective is to
minimize the
number of buses
in operation.
Figure 1.6
Each bus will run for 8 consecutive hours. If we follow
a normal three-shift schedule (8:01 A.M.-4:00 P.M.,
4:01 p.M.-12:00 midnight, and 12:01 A.M.-8:00 A.M.)
and assume that X
i
is the number of buses starting in a
shift, we can see from Figure 1.6 that X
1
10, X
2
12 ,
and X
3
8. The corresponding minimum number of
daily buses is X
1
+ X
2
+ X
3
= 10 + 12 + 8 = 30.
It may be advantageous, however, to allow the
optimization process to choose the "best" starting time
for a shift. A reasonable way to accomplish this is to
allowa shift to start every 4 hours. Thus,
The variables defined as
X
1
= number of buses starting at 12: 01 A.M.
X
2
= number of buses starting at 4:01 A.M.
X
3
= number of buses starting at 8:01 A.M.
X
4
= number of buses starting at 12:01 P.M.
X
5
X
6
From Figure 1.6 the number of buses for the successive
4-hour periods is given as
Time period Number of buses
12:01 A.M. to 4:00 A.M. X
1
+ X
6
4:01 A.M. to 8:00 A.M. X
1
+ X
2
8:01 A.M. to 12:00 noon X
2
+ X
3
12:01 P.M. to 4:00 P.M. X
3
+ X
4
4:01 P.M. to 8:00 P.M. X
4
+ X
5
8:01 P.M. to 12:00 A.M. X
5
+ X
6
The complete model is thus written as
Min z = X
1
+ X
2
+ X
3
+ X
4
+ X
5
+ X
6
s.t.
X
1
+ X
6
4 (12:01 A.M.-4:00 A.M.)
X
1
+ X
2
8 (4:01 A.M.-8:00 A.M.)
X
2
+ X
3
10 (8:01 A.M.-12:00 noon)
X
3
+ X
4
7 (12:01 r.M.-4:00 P.M.)
X
4
+ X
5
12 (4:01 p.M.-8:00 P.M.)
X
5
+ X
6
4 (8:01 p.M.-12:00 P.M.)
X
1
, X
2
, X
3
, X
4
, X
5
, X
6
0
Solution:
The optimum solution is z= 26. Calls for using 26
buses,
X
1
= 4 buses to start at 12:01 A.M., X
2
= 10 at 4:01 A.M.,
X
4
= 8 at 12:01 P.M., and X
5
= 4 at 4:01 P.M.
The alternative optimum
X
1
= 2 , X
2
= 6 , X
3
= 4 , X
4
= 6 , X
5
= 6 , X
6
= 2 , z= 26
Exercise:
Investor Doe has $10,000 to invest in four projects.
For project 1, $1.00 invested at the start of year 1 will yield
$.50 at the start of year 2, $.30 at the start of year 3, $1.80
at the start of year 4, and $1.20 at the start of year 5.
Cash flow ($1000) at the start of
Project Year 1 Year 2 Year 3 Year 4 Year 5
1 -1.00 0.50 0.30 1.80 1.20
2 -1.00 0.60 0.20 1.50 1.30
3 0.00 -1.00 0.80 1.90 0.80
4 -1.00 0.40 0.60 1.80 0.95
The entry 0.00 indicates that no transaction is taking
place.
Doe has the additional option of investing in a bank
account that earns 6.5%annually.
All funds accumulated at the end of one year can be
reinvested in the following year.
Formulate the problem as a linear program to
determine the optimal allocation of funds to
investment opportunities.
Solution:

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Operations Research (management science) is a

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