PROJECT SELECTION

DECISION MAKING
-A GOAL PROGRAMMING APPROACH
Group 4
Aspi, Maria Mercedes
Barillo, Bernadette Joyce
Billones, Jesica
Dela Cruz, Mark Allan
Realizo, Regina Marie

Objectives
Define goal programming
Compare goal programming with linear
programming
Give an example of goal programming
Explain an application of goal programming
in insurance

Goal Programming
-an extension of linear programming, is a branch of multiobjective optimization, in which it deals with maximizing or
minimizing multiple objective functions subject to a set of
constraints.

Goal Programming

Linear Programming

Multiple Goals

One Goal

Deviation Variables are Minimized

Maximizing Profit / Minimizing Costs

The feasible region of the Goal

programming is approximately certain
Comparison:
They

are both are formulated under the requirements and assumptions of linear
programming which are linearity, non-negativity, and certainty.
It also uses graphical methods to illustrate linear programming concepts.

Definition of Terms:
Deviation Variables are variables that show
whether the goals are attained or otherwise.
oPositive Deviation Variables
oNegative Deviation Variables
Example:
10 L+ 15 E+ Y1- Y1+= 40

Goal Function
Example:
100 L+ 100 E+ Y2 Y2+= 1000
Achievement Function
Example:
Minimize
A = P1d1-+ P2d2-+ P3d3-+P2d4-+ P3d5-+ P4d6-+ P4d7-+
P5d4++ P6d6+ + P6d7

Example
A small paint company manufactures two types of paint,
latex and enamel. In production, the company uses 10 hours
of labor to produce 100 gallons of latex and 15 hours of
labor to produce 100 gallons of enamel. The company has
40 hours of daily labor and 30 hours of overtime labour
available each week. Furthermore, if enamel paint is
produced, latex paint must also be produced. Each paint
generates a profit at the rate of $1.00 per gallon.

The company has the following objectives listed in

decreasing priority:
Avoid the use of overtime
Achieve a weekly profit of $1000
Produce at least 700 gallons of enamel paint each week

Goal Programming Formulation

Step 1: State the Decision Variables
Latex

Enamel

Labor for 100 gallons (hours)

10

15

Profit for 1 gallon

$1

$1

Let
L = no. of 100 gallons of latex paint produced per week
E = no. of 100 gallons of enamel paint produced per week

Step 2: State the (Functional) Constraints

Labour 70 hours/ wk
Latex paint Enamel paint

Functional Constraints:
10 L + 15 E 70
LE 0 because, L E

Step 3a: Decide the priority level of each goal.

P1: Goal 1 - Labour has to be 40 hrs/wk
P2: Goal 2 - Profit $1000
P 3: Goal 3 - Enamel paint i.e. enamel paint 700 gallons/wk
Where P1, P2, P3 are the priorities of the goals, where P1 P2 P3

Step 3b: Rewrite the goal constraints using the decision

variables
P1: Goal 1 - 100L + 15 E 40 hrs/wk
P2: Goal 2 - 100 L + 100 E 1000
P 3: Goal 3 E 7
Where P1, P2, P3 are the priorities of the goals, where P1 P2 P3

Step 4: Add deviation variables to the goal constraints

Goal 1: 10 L+ 15 E+ Y1- Y1+= 40

Goal 2: 100 L+ 100 E+ Y2 Y2+= 1000
Goal 3: E+ Y3- Y3+= 1000

Step 5: Write the objective function with priorities

Minimize
+
Z =P1Y1 + P2Y2 + P3Y3

Goal Programming Model

Min Z = P1Y1++ P2Y2-+ P3Y3-

s.t.
10 L + 15 E 70
L E 0

(Labour)

(Production)

Goal 1: 10 L+ 15 E+ Y1- Y1+= 40

(Overtime)

Goal 2: 100 L+ 100 E+ Y2 -Y2+= 1000

Goal 3: E+ Y3- Y3+= 1000

(Profit)

(Profit)

PROJECT SELECTION
DECISION MAKING
-A GOAL PROGRAMMING APPROACH
V. Subbaiah, G. Ravindra Babu & S. D. Sahrma
Pacific-Asian Journal of Mathematics, Volume 5, No. 2, July-December 2011

Capital Budgeting
is a method for evaluating, comparing, and
selecting projects to achieve the best long-term
financial return of companies or businesses.

The data specifies for consideration nine mutually exclusive projects with given present
values of outlays for periods I&II and given present values of investment proposals of
large-scale industry in Hyderabad.

Objective Function

Minimize

A = P1d1 + P d + P3d3 +P d + P d +
-

2 2

2 4

P4d6 + P4d7 + P5d4 + P d + P6d7

3 5

+
6 6

REFERENCES:
Hoisen, A. (2005). Two Variable Goal Programming Model with Priorities. Retrieved
from http://prejudice.tripod.com/ME30B/two_gp.htm
Kumar, A. (2015). Goal programming approach for the study of industrial problems,
(Mcdm), 141. Retrieved from http://shodhganga.inflibnet.ac.in/handle/10603/46789
V. Subbaiah, G. Ravindra Babu & S. D. Sahrma(2011). Project Selection Decision
Making-a Goal Programming Approach, Pacific-Asian Journal of Mathematics, 5(2).
Workday, H., & Erp, L. (n.d.). Innovation in Financial Management Innovation in
Financial Management, 3, 211229.

Man is a goal seeking animal. His life only has meaning if he is reaching
out and striving for his goals.
Aristotle 384-322 BC