Linear Programming (LP) is a mathematical optimization technique.
By optimization technique, it refers to a method which attempts to
maximize or minimize some objective, for example, maximize profits or minimize costs.
Linear programming is a subset of a larger area of mathematical optimization procedures called mathematical programming, which is concerned with making an optimal set of decisions.
In any LP problem, certain decisions need to be made. These decisions are represented by decision variables which are used in the formulation of the LP model.
BASIC STRUCTURE OF A LINEAR PROGRAMMING PROBLEM
The basic structure of an LP problem is either to maximize or minimize an objective function, while satisfying a set of constraining conditions called constraints.
Objective function. The objective function is a mathematical representation of the overall goal stated in terms of the decision variables. The firms objective and its limitations must be expressed as mathematical equations or inequalities, and these must be linear equations and inequalities.
Constraints. Constraints are also stated in terms of the decision variables, and represent conditions which must be satisfied in determining the values of the decision variables. Most constraints in a linear programming problem are expressed as inequalities. They set upper or lower limits, they do not express exact equalities; thus permit many possibilities.
Resources must be in limited supply. For example, a furniture plant has a limited number of machine-hours available; consequently, the more hours it schedules for furnitures, the fewer furnitures it can make.
There must be alternative courses of action, one of which will achieve the objective. LINEAR PROGRAMMING ASSUMPTIONS AND GENERAL LIMITATIONS
When using Linear Programming to solve a real business problem, five assumptions (also referred to as limitations) have to be made.
Linearity. The objective function and constraints are all linear functions; that is, every term must be of the first degree. Linearity implies the next two assumptions.
Proportionality. For the entire range of the feasible output, the rate of substitution between the variables is constant.
Additivity. All operations of the problem must be additive with respect to resource usage, returns, and cost. This implies independence among the variables.
Divisibility. Non-integer solutions are permissible.
Certainty. All coefficients of the LP model are assumed to be known with certainty. Remember, LP is a deterministic model.
Computational Techniques to Overcome the Limitations of LP
There are at least three other mathematical programming techniques that may be used when the assumptions (limitations) above do not apply to the problem. These are:
We shall be using one particular example to illustrate most of the LP approaches and concepts. We shall call this the red gadget- blue gadget problem.
A company produces gadgets which come in two colors: red and blue. The red gadgets are made of steel and sell for 30 pesos each. The blue gadgets are made of wood and sell for 50 pesos each. A unit of the red gadget requires 1 kilogram of steel, and 3 hours of labor to process. A unit of the blue gadget, on the other hand, requires 2 board meters of wood and 2 hours of labor to manufacture. There are 180 hours of labor, 120 board meters of wood, and 50 kilograms of steel available. How many units of the red and blue gadgets must the company produce (and sell) if it wants to maximize revenue?
The Graphical Approach
Step 1. Define all decision variables.
Let: x 1 = number of red gadgets to produce (and sell) x 2 = number of blue gadgets to produce (and sell)
Step 2. Define the objective function.
Maximize R = 30 x 1 + 50 x 2 (total revenue in pesos)
Step 3. Define all constraints.
(1) x 1 50 (steel supply constraint in kilograms) (2) 2 x 2 120 (wood supply constraint in board meters) (3) 3 x 1 + 2 x 2 180 (labor supply constraint in man hours) x 1 , x 2 0 (non-negativity requirement)
Step 4. Graph all constraints.
Step 5. Determine the area of feasible solutions. Step 6. Determine the optimal solution.
The shot-gun approach
List all corners (identify the corresponding coordinates), and pick the best in terms of the resulting value of the objective function.
(1) x 1 = 0 x 2 = 0 R = 30 (0) + 50 (0) = 0
(2) x 1 = 50 x 2 = 0 R = 30 (50) + 50 (0) = 1500
(3) x 1 = 0 x 2 = 60 R = 30 (0) + 50 (60) = 3000
(4) x 1 = 20 x 2 = 60 R = 30 (20) + 50 (60) = 3600 (the optimal solution)
(5) x 1 = 50 x 2 = 15 R = 30 (50) + 50 (15) = 2250
The contour-line approach
Assume an arbitrary value for the objective function, then graph the resulting contour line.
Let R = 3000
30 x 1 + 50 x 2 = 3000 x 1 = 0 x 2 = 60 x 2 = 0 x 1 = 100
If you are maximizing, draw contour lines parallel to the first contour line drawn, such that it is to the right of (and above) the latter, and touches the last point (points) on the area of the feasible solutions.
If minimizing, go the opposite direction.
Step 7. Determine the binding and non-binding constraints.
Observing graphically, we find that the steel supply constraint is non-binding, implying that the steel supply will not be completely exhausted. On the other hand, both the wood supply and labor supply constraints are binding. By producing 20 units of the red gadget and 60 units of the blue gadget, wood and labor will be completely used.
LINEAR PROGRAMMING: GRAPHICAL SOLUTION (Minimization Problem)
Example: Mindoro Mines
To illustrate the use of the graphical approach to solving linear programming minimization problems, we shall use the Mindoro Mines example. If you already have basic understanding of the graphical method from the example in Session 03, you should have little difficulty appreciating the following application.
Mindoro Mines operates 2 mines: one in Katibo and the other on Itim Na Uwak Island. The ore from the mines is crushed at the site and then graded into high-sulfur ore (ligmite), low-sulfur ore (pyrrite) and mixed ore. The graded ore is then sold to a cement factory which requires, every year, at least 12,000 tons of ligmite, at least 8,000 tons of pyrrite, and at least 24,000 tons of the mixed ore.
Each day, at a cost of P22,000 per day, the Katibo mine yields 60 tons of ligmite, 20 tons of pyrrite, and 30 tons of the mixed ore. In contrast, at the Itim Na Uwak Island mine, at a cost of P25,000 per day, the mine yields 20 tons of ligmite, 20 tons of pyrrite, and 120 tons of the mixed ore.
The management of Mindoro Mines would like to determine how many days a year it should operate the two mines to fill the demand from the cement plant at minimum cost. What are the binding constraints?
The Graphical Approach
Step 1. Define all decision variables.
Let x 1 = number of days (in a year) to operate the Katibo mine x 2 = number of days (in a year) to operate the Itim Na Uwak Island mine
Step 2. Define the objective function. X1 X1 X1 X1
Minimize C = 22000 x 1 + 25000 x 2 (total cost of operating the mines in pesos)
Step 3. Define all constraints.
(1) 60 x 1 + 20 x 2 12000 (ligmite demand in tons) (2) 20 x 1 + 20 x 2 8000 (pyrrite demand in tons) (3) 30 x 2 + 120 x 2 24000 (mixed ore demand in tons) (4) x 1 365 (maximum number of days in a year) (5) x 2 365 (maximum number of days in a year) x 1 , x 2 0 (non-negativity requirement) Step 4. Graph all constraints.
Step 5. Determine the area of feasible solutions.
For Steps 4 and 5, please refer to the following graph.
Step 6. Determine the optimal solution.
Using the shot-gun approach, we list down the following corners or extreme points (with their respective coordinates):
(1) x 1 = 365 x 2 = 365 C = 22000 (365) + 25000 (365) = 17,155,000
(2) x 1 = 365 x 2 = 108.75 C = 22000 (365) + 25000 (108.75) = 10,748,750
(3) x 1 = 78.33333 x 2 = 365 C = 22000 (78.33333) + 25000 (365) = 10,848,333
(4) x 1 = 100 x 2 = 300 C = 22000 (100) + 25000 (300) = 9,700,000
(5) x 1 = 266.66667 x 2 = 133.3333 C = 22000 (266.667)+25000 (133.333) = 9,200,000
The Optimal Solution Step 7. Determine the binding and non-binding constraints.
Observing graphically, we find that binding constraints are those associated with pyrrite and mixed ore production. Total production of these two items will exactly match the requirements of the cement factory. Meanwhile, ligmite production will be in excess of the minimum requirement of 12000 tons by about 6,667 tons. Likewise, total available operating days will not be completely utilized.