COB 291

An Introduction to Management Science

Dr. Mike BusingCollege of Business, James Madison University

Agenda

• Syllabus Review

• Algebra Review Quiz

• Introduction to Models/Modeling

• Introduction to Linear Programming (LP)

• Graphical Solution to LP

Announcements

Please purchase and bring to next and subsequent classes:

– Pack of graph paper– Pack of colored pencils– Straight edge or ruler

Linear ProgrammingDeterministic Modeling

• LP problems contain uncontrollable variables

• The uncontrollable variable quantities are known

• The uncontrollable variable quantities are fixed or constant in short-run

Used to solve problems where there is no uncertainty about the future.

Linear ProgrammingDeterministic Modeling (cont’d)

The GOAL of LP is to identify the decision that givesme the best outcome.

However, there are millions of decision possibilities

LP is a searching mechanism that sifts through all thepossible (feasible) solutions to find the “best” solution.

LP is a very efficient search technique

LP Example

BMW must produce cars such that they satisfy theconstraints of the production plan, the marketing plan,the finance plan, etc. In addition, this plan should generate the most profit, given the constraints of thevarious functional business areas.

“x” million 3 series“x” million 5 series“x” million 7 series“x” million 8 series“x” million Z series“x” million SUV

LP Example

Advertising: Limited amount of money to investin different advertising mediums

“x” million dollars in radio spots“x” million dollars in television spots“x” million dollars in newspaper ads“x” million dollars in magazine ads“x” million dollars in billboards

LP Example

Finance: As a mutual fund manager, you must take all the money and invest it in variousinstruments

“x” million dollars in stocks“x” million dollars in fixed income bonds“x” million dollars in money funds“x” million dollars in annuities“x” million dollars in cash

LP Class Example - Seuss’s Sandwich Shop

Seuss’s Sandwich Shop sells two types of sandwiches:green eggs and ham (GEH) and ham and cheese (HC).A green eggs and ham sandwich consists of 2 slicesbread, 1 green egg, and 1 slice ham. It takes anemployee 3 minutes to make one of these sandwiches.A ham and cheese sandwich consists of 2 slices bread,2 slices ham, and 1 slice cheese. It takes 2 minutesto make a ham and cheese sandwich. The SandwichShop presently has available 400 slices of bread, 80 slices of cheese, 120 green eggs and 200 slices of ham.The shop also has one employee scheduled for 7 hoursto make all of the sandwiches. If a green egg and hamsandwich sells for $5 and a ham and cheese sandwich sellsfor $4, how many of each type should be prepared to maximizesales revenue? (Assume that demand is great enough to ensurethat all sandwiches made will be sold.)

LP Class Example - Seuss’s Sandwich Shop

We will figure out how to represent the English sentencesin the problem via convenient mathematical equations. Thisis the most important part of linear programming.

LP Class Example - Seuss’s Sandwich Shop

3 steps in all LP formulations:

1st: Decision Variables

- why am I solving this problem?- what are the unknown quantities in the problem?- the minimum number of decision variables is 2and the maximum is several hundred thousand inpractical situations.

LP Class Example - Seuss’s Sandwich Shop

3 steps in all LP formulations:

2nd: Objective Function

- what is the motivation behind this problem?(e.g., maximize profit or minimize cost?)

3rd: Constraints

- issues that force decision variables from takingon -to + values.- no restriction on number of constraints.- non-negativity is extremely important.

LP (cont’d)

So why do we call it “Linear” Programming?

LP Class Example - Seuss’s Sandwich Shop

Steps:1. Identify the objective function, z.2. Identify the constraints.3. Identify what we mean by “feasible solution”4. Identify the “optimal solution”5. Identify the “binding constraints”

LP Class Example - Seuss’s Sandwich Shop

# of Green Eggs and Ham Sandwiches 0# of Ham and Cheese Sandwiches 0Sales Revenue -$

ITEM Green Eggs and Ham Ham and Cheese Available Used

Bread 400 0

Cheese 80 0

Green Eggs 120 0

Ham 200 0

LP Class Example - Seuss’s Sandwich Shop

GRAPHICAL SOLUTION TO PROBLEM