TABLE OF CONTENTS

CHAPTER TOPIC PAGE

01 Background theory – Linear programming 2

1.1 Methodology Explanation 3

1.2 Limitations of linear programming 4

02 Analysis of case

2.1 Range of Feasibility 8

2.2 Range of optimality 9

2.3 Reduced cost 10

2.4 Shadow price 10

2.5 Slack or Surplus 11

03 Discussion of three options 12

04 Recommendations 16

05 Reference 17

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1. Introduction to Linear programming

Introduction:
Linear programming or mathematical programming is the branch of management science that deals
with solving optimization problem, in which we want to maximize a function such as profit or
expected return or minimize a function such as cost, time, distance. In a decision-making
embroilment, model formulation is important because it represents the essence of business decision
problem. The term formulation is used to mean the process of converting the verbal description and
numerical data into mathematical expressions, which represents the relevant relationship among
decision factors, objectives and restrictions on the use of resources. Linear Programming (LP) is a
particular type of technique used for economic allocation of 'scarce' or 'limited' resources, such as
labor, material, machine, time, warehouse space, capital, energy, etc. to several competing activities,
such as products, services, jobs, new equipment, projects, etc. on the basis of a given criterion of
optimally. The phrase scarce resources mean resources that are not in unlimited in availability during
the planning period. The criterion of optimality generally is either performance, return on investment,
profit, cost, utility, time, distance, etc.
George B Dentzing develops this technique when he was working with US air force during world war
2, Which is primarily used for solving military logistic problem. But in today’s world, the technique is
being used in all functional areas of management, hospitals, airlines, agriculture, military operations,
oil refining, education, energy planning, pollution control, transportation planning and scheduling,
research and development.
The most important of application of linear programming has been the allocation problem, allocation
of scare resource for optimal results. Usually there are many jobs which share the common resources and
the variable resources are not adequate enough to allow each job to be carried out to the fullest extent.
Therefore, the objective in such a situation is to allot available resources to the job in such way as to
either maximize the total revenue or to minimize the total cost subject to resource constraints.
Linear programming can be applied to various fields of study. Most extensively it is used in
business and economic situations, but can also be utilized for some engineering problems. Some
industries that use linear programming models include transportation, energy, telecommunications,
and manufacturing. It has proved useful in modeling diverse types of problems in planning, routing,
scheduling, assignment, and design.

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Methodology
It is a model that does seek to maximize or minimize a linear objectives function subject to a set of
linear constraints. But all the means is that the objective function and constraints contain only
mathematical term involving variables (X1, X2, X2) that are raised to the first power (e.g 5X1).

Mathematical model:

The general mathematical model of the linear-programming problem

Maximize (or Minimize) the Objective Function:
C X + C X + … + CX + … + C X
1 1 2 2 j j n n

Subject to the conditions (constraints)

A X + A X + … + A X + … + A X {<=, =, >=} B
11 1 12 2 1j j 1n n 1

A X + A X + … + A X + … + A X {<=, =, >=} B
21 2 22 2 2j j 2n n 2

………………………………………………………………………….

A X + A X + … + A X + … + A X {<=, =, >=} B
i1 2 i2 2 ij j in n i

………………………………………………………………………….

A X + A X + … + A X + … + A X {<=, =, >=} B
m1 2 m2 2 mj j mn n m

And
X1, X2,.. Xj, … , Xn ≥ 0 (non-negativity)
Where:
Cj for j= 1,2,…,n; Bi for i= 1,2,…,n and Aij are all constants
A is a matrix of known coefficients
Cj for j= 1,2,…,n are called cost coefficients
Xj for j= 1,2,…,n are variables to be solved for. Finding out X j we will know the optimal
solution.
(Source: Gauss 2003, p.6)

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Applications of Linear Programming

Applications Objective Constraints

Manufacturing Determine production quantities that  Labor availability
maximize profit  Resource availability
Finance Allocate funds to maximize  Diversification
expected return  Acceptable risk levels
Advertising Select a media mix that maximizes  Budget
exposure to a target population  Length of advertising campaign
Worker Assign workers to production and  Production quotas
Training training activities to maximize profit  Number of qualified instructors
while building a workforce and trainees available
Construction Plan tasks and assign labor to met a  Ordering of tasks
production schedule  Project deadline
Oil Refining Blend raw crude oils into different  Supply of raw crude oil and
grades of gasoline demand for different grades of
gasoline
 Required characteristics of the
different grades of gasoline
Transportation Assign delivery of resources to  Supply/ demand of product
minimize transportation costs  Shipping capacities
Agriculture Determine a plant rotation plan to  Anticipated demand for crops
maximize long term profit  Rotation restrictions
Military Assign troops and material to  Troop availability/ training
Operations accomplish a military mission  Transportation of resources
(Source: Lawrence & Pasternack 2002, p.50)

LIMITATION OF LINEAR PROGRAMMING IN REAL – LIFE SITUATIONS

1. Forecasting is based on the past data – hence it may not always accurate and it can give wrong
results.
2. Defining the specific objective function is not easy for all linear programs.
3. The data available may be conflicting in nature. This may cause confusion during analysis.
4. LP is based upon relative relations between input and output. This means that input and output

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 are multiplicative, divisible and additive, but the relation between input and output are not
always linear.

BAY CITY MOVERS

Bay City Movers is a local company that specializes in intercity moves. In the business plan
submitted to its backers, Bay City has committed itself to a total trucking capacity of at least 36 tons.

The company is in the process of replacing its entire fleet of trucks with 1 ton picks up trucks and 2.5-
ton moving van type trucks. The 1 ton pick up trucks will be manned by one worker, whereas the
large vans will utilize a total of four personnel for larger moves.

Bay City Movers currently employs 48 workers and has facilities for 40 trucks. Pick up trucks cost
the company $24,000 and the moving vans cost $60,000. The company wishes to make a minimum
investment in trucks that will provide a trucking capacity of at least 36 tons while not requiring any
new hires or trucking facilities.

Although the continuity assumption is violated (since the number of each truck purchased must be
integer), use a linear programming model to determine the optimal purchase of pick up trucks and
vans for Bay City Movers. You will find that alternative optimal solutions are possible.

Prepare a report detailing several of these options and discuss the pros and cons of each. Among the
alternatives, you should present in your report are the following:

5. Purchasing only one type of truck.

1. Purchasing the same number of pick up trucks as moving vans.

Purchasing the minimum total number of trucks.

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Mathematical model for Bay City movers:
The company is in the process of replacing their entire fleets of trucks with one ton
pick up trucks and 2.5-ton moving van type trucks.
There are two variables in the case. They are:

Let X1 be 1-ton pick up trucks.

X2 be 2.5-ton moving van trucks.
The three constraints in the case are:

Let C1 which represents the capacity of the trucks

C2 that represents the number of workers currently employed for the job
C3 represents the facilities provided to the trucks.

The objective of the case is to reduce the investment-involved n the replacement of the fleet of trucks.

The objective function:

DECISION VARIABLES
Minimize 2400X1+60000X2

Subject to:
X1+4X2<= 48 (Worker)
X1+X2<= 40 (Facility)
X1+2.5X2>= 36 (trucking capacity)

X1, X2 >= 0 (Non negativity)

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WinQSB Printout:
INPUT-

OUTPUT-

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Range of Feasibility

The range of feasibility of Bay City movers:

In case of Capacity:
The range of feasibility for the company is 30 to 44 where the minimum ranges being the 30
and the maximum range being 44. The actual capacity utilized are 36units, 8 more units can be
increased, by paying a certain price if the company feels that they can improve the output by
increasing the capacity.

In case of workers:
The actual workers utilized by the company are 48 and the range, which is inside the range,
which is from 36 to 57.6. So the company can increase by their workers by hiring 10 more workers.

In case of Facility:
The range of feasibility varies from 24 to M (Infinity) so there is no maximum given to
which the company can definitely figure on when they come to the increasing their facility. The
current facility constraint utilized by the company is 24 we know that there is a scope to increase but
due to lack of the maximum range the company does not get a clear idea of which extent they
increase.

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RANGE OF OPTIMALITY

In case of Pick up truck:

The actual cost of one unit of pick up truck is 24,000. The range from which the range of
optimality varies is from 24,000 to M (infinity) this shows that the cost can be increased to infinity but
the cost cannot be reduced than the minimum range which is 24,000 by doing so the optimum solution
will tend to change.
In case of Moving van:
The cost involved in one moving van is 60,000. The range of optimality, which has the
minimum range of –M (Infinity) and the maximum range being the 60,000 the company cannot
exceed its cost or the maximum range but try and reduce its cost if it wants to.

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REDUCED COST

The reduced cost for both the pick up truck and the moving van are zero. So there is no requirement
for the company to reduce in their costs. Thus 24,000 being the reduced cost of Pick up truck and
60,000 being the reduced cost of Moving van remain constant.

SHADOW PRICE

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Capacity-
Every unit of capacity over 36 units will cost the company 24,00 per unit.
Workers and Facility-
Since the shadow price of both workers and facility are zero the company need not increase
on the number of units, which they already have.

SLACK OR SURPLUS

Capacity and Workers:

The slack or surplus for both the capacity and workers being zero, it means that the
company is utilizing their resources related to the workers and capacity to its optimum thus there is no
surplus.
Facility-

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 The surplus for facility are 16 units, thus the company is not utilizing its resources efficiently
when it comes to facility.

Discussion of three options

Option 1
Purchasing only one type of truck

Purchasing only Pick up truck:

Input:

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Output:

This is the purchase of only pick up truck. The optimum solution over here is feasible. The maximum
capacity of the pick up truck is 40. The minimum purchase of the pick up trucks is 36. The number of
workers utilized totally is 36. The maximum allowable trucks that can be purchased are 8. Thus the
values are feasible enough for the company to work on and achieve their objectives.

Purchase only Moving vans:

Input

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Output

Since the minimum and maximum range of capacity is negative and the company, which has a huge
difference of range when it comes to the number of workers, and high shadow price for every extra
unit of worker, thus the solution is infeasible.

OPTIONS 2

Purchasing equal number of pick up trucks as moving vans:

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Input:

Output:

The capacity is being negative and a huge shadow price for purchase of a new unit of worker being
high the optimum solution is infeasible.

OPTION 3

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PURCHASING THE MINIMUM TOTAL NUMBER OF TRUCKS

INPUT

OUTPUT

The solution arrived for purchasing minimum total number of trucks is, for Pickup trucks it is 16 and
for van it is 8. The unit cost for each truck is one. The unit cost being 1 for both the cases indicate that
the company can reduce its cost. Through this the objective function 24 is achieved. The total
investment the company has to use is 864,000. Thus the solution is also feasible.

RECOMMENDATIONS AND CONCLUSION

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In the above problem of Bay City Movers, the main objective function is to minimize the cost of
purchase of moving vans and pickup trucks (i.e., 24000 X1 + 60000 X2)

When we analyze the option 1, purchasing only one truck, it was feasible because, the solution given
in the WinQsb is very effective for the company to achieve its objective function.

When we analyze the option 3, purchasing minimum total number of trucks, the solution is feasible, as
it is given that the company can purchase 16 pickup trucks and 8 moving vans, which ultimately come
up to 24, which is the objective function of the company and hence it is feasible.

The most recommended option for the company to achieve the objective function; minimum
purchasing of trucks is option 3. As it says the cost for each truck is only 1 and the minimum trucks
and vans they can purchase is 16 and 8, the minimum total trucks are 24. It is recommendable that if
the company chooses option three, it can attain the objective of getting more profits, by reducing the
cost of purchase.

Reference

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Dantzig, G. (1999).Linear Programming-Theory and Extensions. Berlin:Springer
Karloff, H.(1991) Linear Programming, Boston: Ashton Press
Gass.S. (1985), Linear Programming – Method and Application
Loomba, N (1964). Paul. Linear Programming: An Introductory Analysis. New York: McGraw-Hill.

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