Linear Programming

1. Introduction
This module emphasized the wide applicability of linear programming.
We continue to broaden our horizons in this chapter by discussing particularly
important (and related) 3 types of linear programming problems. Type
number one, called the Assignment problem, received this name because many
of its applications involve determining how to optimally Recruit/hiring
worker, type number two, called the Capital investment problem, received this
name because many of its applications involve determining how to optimally
Capital Investment, type number three, called the transportation problem,
received this name because many of its applications involve determining how
to optimally transport goods. This module discuss how to solve assignment
problem by using software application called Solver.
Solver is part of a suite of commands sometimes called what-if analysis
tools. With Solver, you can find an optimal (maximum or minimum) value for
a formula in one cell - called the objective cell - subject to constraints, or
limits, on the values of other formula cells on a worksheet. Solver works with
a group of cells, called decision variables or simply variable cells, that
participate in computing the formulas in the objective and constraint cells.
Solver adjusts the values in the decision variable cells to satisfy the limits on
constraint cells and produce the result you want for the objective cell.

2. Theoretical Basic
There are numerous references about engineering economic analysis focusing
on the main analysis method listed above. The following are listed to help you
start dig into the subject more :
1. Winston W.L, (2004), Operation Research Application and Algorithms 4th
ed. Brooks/Cole, Cengage Learning, USA.
2. Taha H.A, (2011), Operation Research an Introduction 9th ed. Prentice Hall,
New York.

3. Purpose
To explain solver application of linear programming on assignment problem,
Capital Investment and transportation problem.
A. Assignment Problem
1. Tutorial case study
Hutahaean factory now has made the decision to prohibit the splitting
of task among multiple person. Thus, each of the task must be assigned to a
single person.
There is 3 task and 3 person need to be assign with minimum cost of the task.
Each person have capability with specific cost to proceed all the task. the price
of the task will shown on table below.

Unit Cost Task A Task B Task C

Person 1 46 52 50
Person 2 55 53 65
Person 3 53 56 54

2. Problem Model
Use the solver in Excel to find the assignment that minimizes the total cost.
The model we are going to solve looks as follows in Excel.
3. Analytic Process
1. To formulate this assignment problem, answer the following three
questions.
a. What are the decisions to be made? For this problem, we need Excel
to find out which person to assign to which task (Yes=1, No=0). For
example, if we assign Person 1 to Task 1. Cell C10 equals 1. If not,
cell C10 equals 0.
b. What are the constraint on these decisions? Each person can only do
one task (supply=1). Each task only needs one person (Demand=1).
c. What is the overall measure of performance for these decisions? The
overall measure of performance is the total cost of the assignment, so
the objective is to minimize the quantity.
2. To make the model easier to understand, name the following ranges.
Range Name Cells
Cost C5:E7
Assignment C10:E12
Persons Assigned C14:E14
Demand C16:E16
Tasks Assigned G10:G12
Supply I10:I12
Total Cost I16

3. Insert the following functions.

Explanation: The SUM functions calculate the number of tasks assigned to a

person and the number of persons assigned to a task. Total cost equals the sum
product of cost and assignment.
For example, if we assign 1 person from Person 1 to Task B, 1 Person from
Person 2 to Task A, 1 person from Person 3 to Task 3 , Person Assigned equals
Supply and Task Assigned equals Demand. This solution has a total cost of
161.

It is not necessary to use trial and error. We shall describe next how the Excel
Solver can be used to quickly find the optimal solution.

4. Solve The Model

To find the optimal solution, execute the following steps.
1. On the data tab, click solver.

Note: can’t find the solver button? Click here to load the Solver add-in.
Enter the solver parameters (read-on). The result should be consistent with the
picture below.
You have the choice of typing the range names or clicking on the cells in the
spreadsheet.
2. Enter Total Cost for the objective.
3. Click Min.
4. Enter Shipments for the changing variable Cells.
5. Click Add to enter the following constraint.

Note: binary variables are either 0 or 1.

6. Click Add to enter the following constraint.

7. Click Add to enter the following constraint.

8. Check ‘Make Unconstrained Variables Non-Negative and select ‘Simple

LP’
9. Finally, click Solve.

5. Result
The Optimal Solution:

6. Conclusion
It is optimal to assign Person 1 to task 1, Person 2 to Task 2 and Person 3 to
Task 3. This solution gives the minimum cost of 153. All constraints are
satisfied.

7. Case Study
The DIGO PAPER COMPANY has decided to initiate the production of ten new products,
using ten plants that currently have excess production capacity. Each plant can produce any
of these product. Management has specified that one plant must be assigned one of the
products. However, the variable costs per unit of each product differ from plant to plant, as
shown in the main body of Table 1. Management now needs to make a decision on how to
split up the production of the products among plants to minimize cost.

Product
Cost A B C D E F G H I J
1 2 3 4 6 4 2 2 6 2 4
2 7 6 2 3 4 8 5 5 2 5
3 3 8 5 3 2 3 6 7 3 3
4 6 4 6 2 6 6 4 3 4 7
5 5 3 3 5 2 3 5 6 3 3
6 6 6 4 3 2 2 6 3 2 6
7 7 4 4 6 5 5 6 7 7 4
8 3 6 6 6 6 2 7 4 4 7
9 7 5 7 4 5 7 6 5 7 2
10 4 8 5 8 2 8 8 2 7 7
B. Capital Investment
1. Tutorial Case Study
J.CO Company plant to expand its location by build factory. There is six
location are available for expansion. The Company had to choose the location
for expansion between location one or two, Three or Four, six or seven if five
must be build. The company has 50 million dollars available for expansion.
The Price of Capital cost and Profit will shown on table below. Find the
optimal location to expand the factory by minimize cost.
Investment One Two Three Four Five Six Seven
Capital 12 10 15 7 14 18 16
Profit 42 47 21 36 18 33 45

2. Problem Model
Use the solver in Excel to find the assignment that minimizes the total cost.
The model we are going to solve looks as follows in Excel.

3. Analytic Process
1. To formulate this capital investment problem, answer the following three
questions.
a. What are the decisions to be made? For this problem, we need Excel
to find out which capital investments to make (Yes=1, No=0).
b. What are the constraints on these decisions? First, the amount of
capital used by the investments cannot exceed the limited amount of
capital available (50). For example, investment One uses 12 units of
 capital. Second, only investment One or investment Two can be made.
Third, only investment Three or investment Four can be made. Fourth,
investment Six and investment Seven can only be made if investment
Five is made.
c. What is the overall measure of performance for these decisions? The
overall measure of performance is the total cost of the assignment, so
the objective is to minimize the quantity.
2. To make the model easier to understand, name the following ranges.
Range Name Cells
Profit C5:I5
Yes/No C13:I13
Total Profit M13

3. Insert the following functions.

Explanation: cell K7 (the amount of capital used) equals the sumproduct of

the range C7:I7 and Yes/No, cell K8 equals the sumproduct of the range C8:I8
and Yes/No, etc. Total profit equals the sumproduct of profit and Yes/No.
For example, if we make investment one and two, the second constraint is
violated. If we make investment six and seven, without making investment
five, the fourth constraint is violated.
 However, it’s OK to make investment One, Five and Six. All constraints are
satisfied.

It is not necessary to use trial and error. We shall describe next how the Excel
Solver can be used to quickly find the optimal solution.

4. Solve The Model

To find the optimal solution, execute the following steps.
1. On the data tab, click solver.
Note: can’t find the solver button? Click here to load the Solver add-in.
Enter the solver parameters (read-on). The result should be consistent with the
picture below.

You have the choice of typing the range names or clicking on the cells in the
spreadsheet.
2. Enter Total Profit for the objective.
3. Click Max.
4. Enter Yes/No for the changing variable Cells.
5. Click Add to enter the following constraint.

6. Click Add to enter the following constraint.

Note: binary variables are either 0 or 1.

7. Check ‘Make unconstrained variable Non-negative and select ‘Simplex

LP’.

8. Finally, click Solve.

5. Result

The Optimal Solution:

6. Conclusion
It is optimal to make investments Two, Four, Five and Seven. This solution
gives the maximum profit of 146. All constraints are satisfied.
7. Case Study
Ford Company plant to expand its location by build dealer. There is nine
location are available for expansion. The Company had to choose the location
for expansion between location One or Two or Nine, Three or Four or Eight,
Six or Seven if Five must be build. The company has 170 million dollars
available for expansion. Find the optimal location to expand the factory by
minimize cost.
Investment One Two Three Four Five Six Seven Eight Nine
Profit 4 6 2 3 5 2 4 5 6
Capital 24 28 18 30 38 22 35 40 34
C. Transportation Problem
1. Tutorial Case Problem
One of the main products of the H & S COMPANY is canned peas. The peas
are prepared at three canneries factory (near Bellingham, Washington;
Eugene, Oregon; and Albert Lea, Minnesota) and then shipped by truck to
three distributing warehouses in the western United States (Sacramento,
California; Salt Lake City, Utah; Rapid City, and South Dakota). Because the
shipping costs are a major expense, management is initiating a study to reduce
them as much as possible. The problem now is to determine which plan for
assigning these shipments to the various cannery-warehouse combinations
would minimize the total shipping cost.

2. Problem Model
Use the solver in Excel to find the number of units to ship from each factory
to each customer that minimizes the total cost. The model we are going to solve
looks as follows in Excel.

3. Analytic Process
1. To formulate this transportation problem, answer the following three
question.
a. What are the decisions to be made? For this problem, we need Excel
to find out how many units to ship from each factory to each customer.
 b. What are the constraints on these decisions? Each factory has a fixed
supply and each customer has a fixed demand.
c. What is the overall measure of performance for these decisions? The
overall measure of performance is the total cost of the shipments, so
the objective is to minimize this quantity.

2. To make the model easier to understand, name the following ranges.

Range Name Cells
UnitCost C5:E7
Shipments C10:E12
TotalIn C14:E14
Demand C16:E16
TotalOut G10:G12
Supply I10:I12
TotalCost I16

3. Insert the following functions.

Explanation: The SUM functions calculate the total shipped from each factory (Total
Out) to each customer (Total In). Total Cost equals the sum product of Unit Cost and
Shipments. With this formulation, it becomes easy to analyze any trial solution.
 For example, if we ship 100 units from Factory 1 to Customer A, 200 units
from Factory 2 to Customer B, 100 units from Factory 3 to Customer A and
200 units from Factory 3 to Customer C, Total Out equals Supply and Total
In equals Demand. This solution has a total cost of 31900.

It is not necessary to use trial and error. We shall describe next how the Excel
Solver can be used to quickly find the optimal solution.

4. Solve The Model

To find the optimal solution, execute the following steps.
1. On the data tab, click solver.

Note: can’t find the solver button? Click here to load the Solver add-in.
Enter the solver parameters (read-on). The result should be consistent with the
picture below.
You have the choice of typing the range names or clicking on the cells in the
spreadsheet.
2. Enter Total Cost for the Objective.
3. Click Min.
4. Enter Shipments for the changing variable Cells.
5. Click Add to enter the following constraint.

6. Click Add to enter the following constraint.

7. Check 'Make Unconstrained Variables Non-Negative' and select 'Simplex
LP'.
8. Finally, Click Solve.

5. Result

The Optimal Solution:

6. Conclusion
It is optimal to ship 100 units from Factory 1 to Customer C, 100 units from
Factory 2 to Customer B, 200 units from Factory 3 to Customer A, 100 units
from Factory 3 to Customer C. This solution gives the minimum cost of
31.300. All constraints are satisfied.

7. Case Study
Atlantic Carter is a lumber company that has Ten sources of wood and ten markets to be
supplied. The Annual availability of wood at sources 1, 2, 3…,10 is 15, 18, 23, 25, 21, 24,
22, 24, 20, and 15 million board feet, respectively. The amount that can be sold annually at
markets A, B, C, D, E, F, G, H, I, J is 18, 13, 20, 21, 23, 18, 22, 19, 25 and 28 million board
feet, respectively. Tabel 1 shown the shipping costs in thousands of dollars per million board
by water would be the following for each route:

Cost 1 2 3 4 5 6 7 8 9 10
A 3 4 3 4 6 3 4 5 3 3
B 3 3 4 5 2 4 3 3 3 4
C 5 2 3 4 3 6 6 5 5 3
D 2 2 6 2 4 5 3 2 3 4
E 4 4 5 1 5 2 5 3 5 2
F 2 3 2 6 6 6 4 2 2 5
G 4 3 4 2 4 3 2 3 6 4
H 2 6 6 5 4 2 2 4 2 2
I 2 5 2 4 5 3 5 5 2 5
J 6 6 3 6 4 2 6 5 3 2