54

CHAPTER 4

SOLUTION USING LINGO SOLVER

LINGO solver, an Operations Research software tool, is very useful

to solve hard optimization problems. It solves the problems by using branch
and bound methodology. This chapter discusses LINGO Ver-8 as a solution
methodology to solve the multi-period fixed charge models proposed in this
thesis.

4.1 INTRODUCTION

LINGO is a software tool designed to make building and solving

Linear, Nonlinear, Quadratic, Stochastic, and Integer optimization models
easier and more efficient (Lingo User’s Guide, 1999). Its modeling language
enables users to express their problems in a natural manner that is very similar
to standard mathematical notation. For multi-period fixed charge problems,
LINGO categorizes it under PINLP class. It solves the problems by using
branch and bound manager. LINGO optimization model has two attributes:
objective function of problem and constraints of problem. The objective
function can be specified by stating “min” for minimization problem or
“max” for maximization problem. After stating the objective function,
constraints are specified on next lines.

There are many research works in the field of Operations Research

using LINGO. Sabri and Beamon (2000) developed a supply chain model that
facilitates simultaneous strategic and operational planning using an iterative
method. This model incorporates production, delivery, and demand
 55

uncertainty, and reduces complexity via reasonable simplifications. An

extended version of LINGO Ver-5 is used to solve the model. Qiu-Hong Zhao
et al (2001) modeled a multi-period dynamic programming model for vehicle
composition problems on fixed routes with transshipment points. An exact
algorithm is developed for the model and implemented by using LINGO
Ver-6. Shiang-Tai Liu (2003) developed a method to calculate the lower and
upper bounds of the total transportation cost when the supply and demand
quantities are varying. A pair of two-level transportation problems is
transformed to one-level mathematical programs to find the objective value.
A mathematical programming solver LINGO Ver-9 is used to solve the
mathematical programs. Jayaraman and Ross (2003) described the PLOT
(Production, Logistics, Outbound, and Transportation) design system. They
have also compared the solution obtained using LINGO to the solution
obtained from the heuristic procedure. The solution gap (the difference
between the heuristic solution and the optimal solution) on average was less
than 4% for all datasets. However, the CPU time to find optimal solution
using LINGO was more than 300–400 times slower when compared to the
time taken by the heuristic procedure. Michelle Cheong et al (2007)
formulated a representative model to encompass the different aspects
encountered by third party logistics firms in designing a consolidated network
to serve multiple clients and solved using LINGO solver and the Lagrangian
relaxation method. Darwin Gouwanda and Ponnambalam (2008) used three
techniques to solve the set covering problem: LINGO, genetic algorithm and
ant colony optimization. In order to assess the performance of these
techniques in solving set covering problems, a set of benchmark set covering
problems were used. The genetic algorithm and ant colony optimization is
successfully coded and executed in the MATLAB programming platform.
Also they conclude that LINGO provides optimal solution for all benchmark
problem considered in that paper and it performs better than the proposed
Genetic algorithm and Ant colony optimization. Huanchao Tang et al (2009)
 56

discussed the delivery situation of product oil in China, by taking the example
of R-System (Retailer System) to study the Inventory-Transportation
Integrated Optimization problem and have used LINGO software to verify,
and compare with the traditional optimization methods, to prove its
superiority concise and practical. The points on LINGO reveal the following:

LINGO is very much useful to solve hard optimization

problems.

It solves the problems by using branch and bound

methodology.

It can be used to verify and compare the results with the

traditional and meta-heuristic optimization methods.

It performs better than meta-heuristic algorithms in certain

linear programming problems.

The CPU time to find optimal solution using LINGO is very

much slower when compared to the time taken by the heuristic
procedure particularly in case of NP-hard problems.

On the above considerations, the mathematical formulations of

all the four models have been solved using LINGO to find its
capability of providing optimal solutions and time taken for
solution convergence.
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4.2 EXAMPLE PROBLEM AND ITS DISTRIBUTION

SCHEDULES FOR ALL THE MODELS

The data of the example problem are as follows:

No of suppliers (m) =3; No of customers (n) =3; No of periods

(T) =3.

Tables 4.1a, 4.1b and 4.1c show the data related to production,
transportation, suppliers and customers respectively.

Table 4.1a Transportation cost data (Cij and FCij)

j 1 2 3
i
1 FCij 900 90 100
Cij 20 35 25
2 150 1100 50
40 5 80
3 800 70 1000
30 70 15

Table 4.1b Suppliers’ data (Pit, CUi, SHi and SIi0)

i
1 2 3 Pi t
1 60 40 60 160
t
Pi t 2 50 30 60 140
3 80 60 30 170
*** CUi 20 21 22 -
SHi 15 12 28 -
SIi0 10 0 0 -
Note: *** Production cost data is used in Models III and IV only
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Table 4.1c Customers’ data (Djt, CHj, BCj, SCj, BLj0 and CIj0)

j
1 2 3 Dj t

1 60 60 70 190
Dj t T 2 60 20 30 110
3 90 60 40 190
CHj 5 10 15 -
*** BCj / SCj 20 40 30 -
BLj0 0 20 0 -
CIj0 0 0 30 -
Note: *** BCj is used in Models I and III; SCj is used in Models II and IV

Tables 4.2 to 4.5 show the optimal distribution schedule of Model I

(Equations 3.1 to 3.10), Model II (Equations 3.20 to 3.29), Model III
(Equations 3.39 to 3.48) and Model IV (Equations 3.58 to 3.67) respectively.

Table 4.2 Optimal distribution schedule of Model I

t
1 2 3
j 1 2 3 SIi1 1 2 3 SIi2 1 2 3 SIi3
i
1 30 40 0 40 10 90 0
2 40 0 30 0 60 0
3 60 0 60 0 30 0
BLjt 0 10 0 0 0 0 0 0 0
CIit 0 0 0 0 0 10 0 0 0
Total distribution cost =17,340 (ZLINGO)
 59

Table 4.3 Optimal distribution schedule of Model II

t
1 2 3
1 2
j 1 2 3 SIi 1 2 3 SIi 1 2 3 SIi3
i
1 40 30 0 20 30 0 80 0
2 40 0 20 10 70 0
3 60 0 50 10 40 0
t
SBj 0 0 10 0 0 0 0 0 0
t
CIi 0 0 0 10 0 0 0 10 0
Total distribution cost =17,430 (ZLINGO)

Table 4.4 Optimal distribution schedule of Model III

t
1 2 3
1 2
j 1 2 3 SIi 1 2 3 SIi 1 2 3 SIi3
i
1 30 40 0 40 10 90 0
2 40 0 30 0 60 0
3 60 0 60 0 30 0
t
BLj 0 10 0 0 0 0 0 0 0
t
CIi 0 0 0 0 0 10 0 0 0
Total production-distribution cost = 27,170 (ZLINGO)

Table 4.5 Optimal distribution schedule of Model IV

t
1 2 3
1 2
j 1 2 3 SIi 1 2 3 SIi 1 2 3 SIi3
i
1 40 30 0 20 30 0 80 0
2 40 0 20 10 70 0
3 60 0 50 10 40 0
t
SBj 0 0 10 0 0 0 0 0 0
t
CIi 0 0 0 10 0 0 0 10 0
Total production-distribution cost =27,260 (ZLINGO)
 60

4.3 PERFORMANCE ANALYSIS

Forty test problems along with their outputs are considered for this
performance analysis. The guidelines for generating the test problems of a
realistic case are as follows:

A particular example case is that tyre manufacturing plants

(suppliers) located at different localities in Tamilnadu state region (India). Car
manufacturers (customers) located at different localities in the same region
require finished tyres (products) in certain numbers every month, which is
manufactured and supplied every month by the tyre manufacturing plants
located at different localities in the same region. The production cost of the
tyres varies at each location. Another important cost is transportation cost.
Geographical distance and its physical connectivity (road/rail) determine the
variable transportation cost. The toll gate charge and vehicle rent constitute
the fixed cost associated with each shipment. The excess demand is carried
over to the next period as backorder with penalty or fulfilled by subcontract.
Similarly, excess production can be stored economically either at suppliers’
location or customers’ locations. The problem faced by the tyre and car
manufacturing company is to decide the optimal number of tyres distributed
from each supplier to each customer at each period, the optimal number of
excess tyres held as inventory with suppliers’ location, the optimal number of
excess tyres held as inventory with customers’ locations, the optimal number
of tyres given as backorder to each customer in order to minimize the cost
associated with production, distribution, inventories and
backorder/subcontract in a planning horizon.

To reflect the above scenario in a generalized way, forty test instances

(various sizes of m, n, T, Pit, Djt) are generated by gradually increasing the
problem sizes (m*n*T) from the small starting size as (2*2*2). Supply and
demand values are generated by uniformly varying the quantity in the range 5
 61

to 200 with multiples of 5 units. Fixed transportation cost is generated

randomly in the range of 50 to 1200 with multiples of 50 units. Variable
transportation cost and other costs are generated randomly in the range of 5 to
150 with multiples of 5 units.

Table 4.6 shows the results obtained for the forty test problems that
are given in Appendix I. LINGO solved the test problems by branch and
bound methodology. It starts with an initial feasible solution and the solution
is converged after reaching the global optimal solution. LINGO solved the
first test problem (2*2*2) to global optimum in 2 seconds. Then the solver
time varies with the problem dimensions. In the forty test problems, 35
problems were solved to global optimum. The remaining 5 problems (test
problem No. 28, 29, 32, 33 and 40 shown by underlined in Table 4.6) came to
an end after certain time and resulted in failure reply (i.e. they were unable to
solve to global optimum). Hence, those 5 problems were solved to local
optimal (shown by bold italic style) by LINGO.
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Table 4.6 Total distribution cost of forty test problems

Test Problem
Problem Model I Model II Model III Model IV Average
dimensions Solution Solution Solution Solution Solver
No. Size (ZLINGO )/ (Z LINGO )/ (Z LINGO )/ (Z LINGO)/ time

Constraints
Variables
m*n*T Solver Solver Solver time Solver time (secs)
No of

No of
time (secs) time (secs) (secs)
(secs)

1. 2*2*2 28 36 9,190 2 9,010 2 13,365 2 13,185 2 2

2. 2*3*2 40 50 17,625 2 17,625 3 22,500 2 22,500 2 2.3
3. 2*4*2 52 64 14,915 2 14,915 2 21,305 2 21,305 2 2
4. 2*5*2 64 78 30,850 4 29,690 4 45,350 4 44,190 4 4
5. 2*6*2 76 92 28,720 4 28,720 4 43,420 4 43,420 4 4
6. 2*7*2 88 106 18,320 9 17,450 9 30,120 8 29,250 7 8.3
7. 3*2*2 38 48 8,200 2 7,875 2 11,955 2 11,630 2 2
8. 3*3*2 54 66 11,290 2 11,290 2 17,390 2 17,390 2 2
9. 3*4*2 70 84 15,010 8 15,010 8 21,600 7 21,600 8 7.8
10. 3*5*2 86 102 18,690 8 18,690 8 31,310 8 31,310 7 7.8
11. 3*6*2 102 120 24,300 92 22,940 92 38,220 92 36,860 92 92
12. 3*7*2 118 138 25,780 20 25,780 20 45,500 22 45,500 22 21
13. 4*2*2 48 60 10,155 4 10,155 4 15,695 4 15,695 4 4
14. 4*3*2 68 82 21,620 4 21,220 4 37,390 4 36,990 4 4
15. 4*4*2 88 104 20,421 47 20,421 47 38,061 47 38,061 47 47
16. 4*5*2 108 126 20,460 59 17,400 59 35,260 59 32,200 59 59
17. 4*6*2 128 148 24,805 40 24,805 40 39,335 40 39,335 40 40
18. 5*2*2 58 72 14,285 9 14,285 9 21,845 12 21,845 10 10
19. 5*3*2 82 98 21,180 26 21,180 26 36,360 26 36,360 26 26
20. 5*4*2 106 124 24,283 117 24,283 117 45,533 117 45,533 117 117
21. 5*5*2 130 150 20,528 152 20,150 152 34,538 152 34,160 152 152
22. 5*6*2 154 176 17,444 136 17,444 136 26,074 136 26,074 136 136
23. 2*2*3 42 54 14,530 2 14,630 3 21,405 3 21,505 3 2.8
24. 2*3*3 60 75 25,100 2 23,750 2 32,150 2 30,800 2 2
25. 2*4*3 78 96 22,655 17 21,485 18 32,255 17 31,085 17 17.3
26. 3*2*3 57 72 11,500 6 11,550 6 16,920 6 16,970 6 6
27. 3*3*3 81 99 17,340 4 17,430 4 27,170 4 27,260 4 4
28. 3*4*3 105 126 23,165 370 23,320 365 32,105 360 32,260 370 366.3
29. 3*5*3 129 153 23,820 358 24,010 360 37,630 355 37,820 356 357.3
30. 4*2*3 72 90 15,435 5 15,130 7 23,755 5 23,450 5 5.5
31. 4*3*3 102 123 22,650 12 22,540 12 38,610 14 38,500 13 12.8
32. 4*4*3 132 156 28,390 380 28,390 380 46,230 380 46,230 380 380
33. 4*5*3 162 189 26,120 412 26,450 412 44,140 412 44,470 412 412
34. 5*2*3 87 108 21,200 4 20,750 4 38,890 5 38,440 4 4.3
35. 5*3*3 123 147 28,610 252 28,150 252 48,740 250 48,280 253 251.8
36. 2*2*4 56 72 17,975 2 17,885 2 25,355 2 25,265 2 2
37. 2*3*4 80 100 38,725 8 38,100 8 49,845 8 49,220 8 8
38. 2*4*4 104 128 20,860 82 19,360 82 26,710 84 25,210 83 82.8
39. 3*2*4 76 96 12,360 4 11,505 4 18,290 4 17,435 4 4
40. 3*3*4 108 132 13,875 330 13,035 332 19,495 338 18,655 336 334
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4.4 COMPARISON OF MODELS

This section analyses the deviation among the four multi-period

fixed charge problems (Model I to Model IV) using the results of the sample
problem (given in section 4.2) solved using LINGO.

In Model I, the total distribution cost is the sum of transportation

costs, backorder penalty cost and inventory holding costs. In Model II, the
total distribution cost is the sum of transportation costs, subcontracting costs
and inventory holding costs. Though the subcontracting cost assumed equal to
backorder penalty cost in Model II, the distribution schedule and total cost are
not equal. The reasons are:

In backorder case, the backorder increases the total demand in

the forthcoming period. Consequently it creates a distribution
schedule for the current and forthcoming periods according to
the new demand pattern.

But in subcontract case, the excess demand is fulfilled by

subcontract in the same period itself. Nothing is carried over
to the forthcoming period. Eventually the subcontract creates a
distribution schedule for the current and forthcoming periods
according to the existing demand pattern.

This is clearly shown in Table 4.2 (Model I distribution

schedule) and Table 4.3 (Model II distribution schedule). In
Table 4.2, the unfilled demand (10 units) of cutomer-2 in
period-1 is added to the demand of cutomer-2 in period-2.
Distribution schedules are then derived accordingly. But in
Table 4.3, the unfilled demand (10 units) is fulfilled by
subcontract in the same period. Distribution schedules are then
derived accordingly. This results in increased total distribution
cost (17430-17340=90) in Model II.
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Since the Models III and IV are the extensions of Model I and
Model II respectively, the total distribution cost comparison
between Model III and Model IV provides the variations due
to the addition of production cost in the objective function.

4.5 SUMMARY

In this chapter four multi-period fixed charge problems (Model I to

Model IV) are solved using LINGO. This is tested with forty test problems of
different dimensions. LINGO generally uses branch and bound methodology
in solver execution. In branch and bound methodology, the computational
time grows along with problem size. Hence, the outcomes reveal that LINGO
is not capable to provide optimal solution in large problem instances and the
solver time grows exponentially with the problem dimensions. This is clearly
shown in Figure 4.1.

Figure 4.1 Time complexity of LINGO while solving multi-period fixed

charge test problems

Hence this thesis proposes a simple EVC heuristic, neighbourhood

search based SAA heuristic and population search based GA heuristic. The
next chapter deals with the EVC heuristic.