Operations Research
Linear Programming
Excel Solver
Manufacturing Logistics
What is OR ?
• Management Science: 경영과학
• Operations Research, Operational Research: 운용과학
O.R. & Analytics enable
organizations to turn complex
challenges into substantial opportunities
by transforming data into
information, & information into
insights for making better
decisions & improving results.
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What is OR ?
• Techniques to help efficient decision • Finding the optimal solution or
making using mathematical and approximate solution in complex
statistical models decision problems
• Mainly use mathematical modeling, • Used to solve real-world problems
statistical analysis, optimization that maximize profits,
techniques, etc. performance, and returns, or
minimize losses, risks, and costs.
• Much research in Mathematics,
Industrial engineering, Business • Linear programming
administration • Dynamic
programming
• Can find applications in almost all • Queuing theory
disciplines (computer science, • Analytic
electrical engineering, electronics hierarchical analysis
engineering, chemical engineering, • Combination
materials science, mechanical optimization
engineering, economics, biology, • Simulation
biotechnology, • Network theory
• Game theory
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OR Techniques
• LP: Linear Program
• IP: Integer Program
• NLP: Nonlinear Program
• Network Opt.: e.g. Tree Search
• Combinatorial Optimization
.
• Algorithm
Heuristics
Meta-Heuristics: Genetic algorithm, Simulated annealing algorithm, etc.
Optimal algorithms
• Stochastic Process
• Queuing theory
• Simulation
• Forecasting
• Game theory
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Linear Programming
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What is Linear Programming ?
• Most common technique among
OR techniques
• A type of mathematical
optimization technique
• Technique to optimize linear
objective function while satisfying
linear constraints
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History of Linear Programming
Leonid Kantorovich George B. Dantzig
• Mathematician & economist in Soviet • American mathematician
Union • Developed Simplex method in 1947
• Founder of Linear Programming
• Use LPs during World War II to minimize
the cost and loss of the army
• Nobel Prize in Economics (1975)
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Linear Programming Model
A mathematical model that optimizes a linear objective function while
satisfying given linear constraints as a kind of optimization model
Objective function: Maximize Z = 8X1 + 10X2
Nonlinear Constraints: s.t.
8X1 + 10X2 ≤ 480
X1 + X2 ≤ 100
X1, X2 ≥0
Linear
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Air Container Loading Planning Model
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Simple Example of Linear Programming Model
• Jun is a child who likes ice cream.
• He is especially fond of Ssangsangba, Babamba, and Worldcorn.
• His euphoria (Utility) is 4 when he eats a Ssangsangba, 3.5 a Babamba, and
8 a Worldcorn.
• Each price is 300 won per a Ssangsangba, 400 won per Babamba, and 500 won
per Worldcorn, and his pocket money is 3,000 won.
Questions: How many of each of ice creams does he has to buy in order to feel
the greatest happiness
Ice cream Variable Euphoria Price (won)
Ssangsangba X1 4 300
Babamba X2 3.5 400
Worldcorn X3 8 500
Pocket money 3000
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Simple Example of Linear Programming Model
Jun’s euphoria maximization LP model
Maximize 4X1 + 3.5X2 + 8X3 Objective function
subject to: Constraints
300X1 + 400X2 + 500X3 ≤ 3000
X1, X2, X3 ≥ 0, Integer [Integer programming]
The above model is mathematically difficult
Integer Knapsack Model
Ice cream Variable Euphoria Price (won)
Ssangsangba X1 4 300
Babamba X2 3.5 400
Worldcorn X3 8 500
Pocket money 3000
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Components of Linear Program
Terms Concept
Model/ • Mathematical expressions / expressions of problems to be
Modeling solved
Objective • Function that allow to measure the performance of solutions
function to problems
Decision • Variables that affect the result of the objective function
variable • e.g., Number of ice creams
• A set of limits on which decision variables can have values
Constraints
• e.g., Pocket money 3,000 won
• Constants of constraints and objective functions are called
Parameters parameters of the model
• Determined by the analyst when performing the modeling
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Commercial Linear Programming Solvers
• Most used
• For professional use
• Vendor: KSTEC
• Nonlinear program
• For professional use
• Vendor: AtWorth
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Excel Solver : Easy-to-Use Solver
Solver in EXCEL
• Easy to use
• No need of computer
programming skills
• Can be used for business
• Large models cannot be solved
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Excel Solver
How to Create “Excel Solver” Menu
1) Click
4) Click
3) Click
5) Click
2) Click
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How to Create “Excel Solver” Menu
2) Click
3) Click
4) Click
1) Click [Excel Solver Dialog]
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