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Lecture 1
14x2=28C, 14x1=14S
021-4029269
EVALUATION
Written examination and laboratory activity 50%
Final written examination 50%
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MDE. Part I- Generalities. 1. Basic terms. Motivation 2/12
Part I. Generalities concerning the significance of terms and mathematical models of economic processes
The concept of a “batch planning”. What are resources in production and economic activities?
The need of mathematical models of planning and resourcing: we want to optimize (maximize or
minimize) a cost function, in the presence of constraints
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MDE. Part I- Generalities. 1. Basic terms. Motivation 3/12
The concept of “batch planning”. What are resources in production and economic activities?
“Scheduling is an important tool for manufacturing and engineering, where it can have a major impact on the
productivity of a process.
In manufacturing, the purpose of scheduling is to minimize the production time and costs, by telling a production
facility when to make, with which staff, and on which equipment. Production scheduling aims to maximize the
efficiency of the operation and reduce costs.
PRODUCTION SCHEDULING AIMS TO MAXIMIZE THE EFFICIENCY OF THE OPERATION AND REDUCE
COSTS.
BATCH production scheduling is the practice of PLANNING AND SCHEDULING of batch manufacturing processes”
SOURCE: Wikipedia
„In the simplest of terms batch production is a particular sized lot of parts produced to a particular
set of instructions. For example producing 50 medium green t-shirts would be a batch. Producing
white medium t-shirts all day would be mass production.
Batch production planning requires discreet manufacturing routes and operations that tracks the
process time and yield (rom. “producție”) in order to define capacity, product cost and throughput.
Mass production planning requires repetitive process planning that in most cases measures labour
consumption, output and yield against a defined set of route and operational expectations.”
Source: Denis Conner, http://www.quora.com/Operations-Management/What-is-the-difference-
between-Batch-and-Mass-Production-Planning
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MDE. Part I- Generalities. 1. Basic terms. Motivation 4/12
“batch processing
term for a processing mode in which the work to be accomplished is done sequentially. Input such as transaction
records is processed through the system in a predetermined order. Batch processing systems are fairly inexpensive and
represent the most common system in use today.”
“Resource allocation
Resource allocation is assigning inputs to produce output. The aim is to maximize output with given inputs or to
minimize quantity of inputs to produce required output.”
SOURCE: wikipedia
For more details concerning the terms related to production systems, see for example
http://nptel.ac.in/courses/112107142/part3/ppc/lecture1.htm# (in the archive to this lecture)
„resource allocation
In strategic planning, resource allocation is a plan for using available resources, for example human resources,
especially in the near term, to achieve goals for the future. It is the process of allocating scarce resources among the
various projects or business units.”
SOURCE: Wikipedia
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MDE. Part I- Generalities. 1. Basic terms. Motivation 5/12
“ALLOCATION OF RESOURCES (Definition):
Analysis of how scarce resources ('factors of production') are distributed among producers, and how scarce goods and
services are apportioned among consumers.
This analysis takes into consideration the accounting cost, economic cost, opportunity cost, and other costs of resources
and goods and services.
Allocation of resources is a central theme in economics (which is essentially a study of how resources are allocated)
and is associated with economic efficiency and maximization of utility.
SOURCE: Business Dictionary, Read more: http://www.businessdictionary.com
Hence resources may be: time, financial capital, production capacity, human work as production factors
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MDE. Part I- Generalities. 1. Basic terms. Motivation 6/12
MOTIVATION for using models as abstractions of economic situations
In order to study these processes systematically and to characterize classes of solutions to for classes of problems, it is
necessary to abstract planning and resource allocation as MATHEMATICAL MODELS of economic processes.
Informally,the economic problem is now to maximize or minimize the cost function against the constraints, i.e. a
CONSTRAINED OPTIMIZATIOM problem
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MDE. Part I- Generalities. 1. Basic terms. Motivation 7/12
The concept of a MODEL :a mathematical relationship (equations, inequalities etc.) between variables
The relationship comes from: technological reasons, physical laws or from marketing constraints
The MODEL is independent of the data (I/O signals or parameter values)
Basic classes of mathematical programming models, reflecting static situations (as opposed to dynamic
problems):
o LP (linear programming), as a particula case of
o NLP (non-linear programming),
o IP (integer programming)
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MDE. Part I- Generalities. 1. Basic terms. Motivation 8/12
Remark. Mathematical programming Computer programming. The term “program” is here related to planning.
Mathematical programming Operational research
Remark. David Gale (1960) “Maximum and minimum problems occur frequently in many branches of pure and
applied mathematics. In economic applications, such problems are especially natural. Firms try to maximize profits or
minimize costs. Social planners attempt to maximize welfare of the community. Consumers wish to spend their income
in such a way as to maximize their satisfaction.” Note also, that these extremes cannot become arbitrarily large (small),
because real life is submitted to CONSTRAINTS!
The basic philosophy of the lecture: to introduce general concepts by means of concrete examples.
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MDE. Part I- Generalities. 1. Basic terms. Motivation 9/12
Remind, from the optimization lectures1,
THE GENERAL PROBLEM OF OPTIMIZATION UNDER CONSTRAINTS:
maximize f (x ) (1)
subject to g( x) b , x X
where
x Rn decision variables
n
f :R R objective function
X Rn regional constraints
g : Rn Rm m functional equations (constraints)
b Rm upper bound or constrained vector
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THE STANDARD THE CANONICAL
LINEAR PROGRAMMING (LP) PROBLEM LINEAR PROGRAMMING (LP) PROBLEM
T
max c x (2.1) max c T x (2.2)
Ax b , x 0 Ax b , x 0
where
A R mn , x R n , c R n , b R m
Remark. One can pass from (2.1) to (2.2) by introducing slack variables in the constraints, as explained later.
1
Next lecture: mathematical review
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MDE. Part I- Generalities. 1. Basic terms. Motivation 10/12
Example 1 of an IP model: production mix (Williams, 1999).
1. Informal problem formulation.
Consider the following information:
5 types of products, PROD1, …, PROD5 are produced by means of
After deducing raw material costs, each unit of each product yields a contribution to profit (1st table row) and each
unit requires a certain time on each process, if necessary (2nd row in the table)
Table 1
PROD1 PROD2 PROD3 PROD4 PROD5
Contribution to profit (£) 550 600 350 400 200
Grinding time (hours) 12 20 - 25 15
Drilling time (hours) 10 8 16 - -
Employee’s time (hours) 20 20 20 20 20
There are: 3 grinding machines, 2 drilling machines and 8 workers, each one working an 8 hours shift/day. There are 2
shift/day and 6 working days/week.
Problem (informal): how much to make of each product per week, so as to maximize the total profit contribution?
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MDE. Part I- Generalities. 1. Basic terms. Motivation 11/12
Homework
Consider the LP problem:
P: maximize x1 x2
subject to x1 3
x2 3
1,5x1 x 2 6
x1 , x 2 0
a) Put the problem in the standard LP form (2.1)
max c T x
Ax b , x 0 and specify the dimensions of A R mn , x R n , c R n , b R m .
b) Draw a graphical representation, in the ( x1 , x 2 ) -plane, of:
a. the objective line x1 x 2 d , for d 0 and d 1 and
b. of the set X {( x1 , x 2 ) : x1 3, x 2 3, 1.5x1 x 2 6, x1 , x 2 0} , called the feasibility set of the LP
problem (Hint: a polygon. Start by representing the boundaries x1 3 , x 2 3 , 1.5x1 x 2 6 , x1 , 0 ,
x 2 0 ).
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MDE. Part I- Generalities. 1. Basic terms. Motivation 12/12