Collier_suppC_C1-C32[1]

# Collier_suppC_C1-C32 - Chapter Outline Developing Linear Optimization Models Decision Variables Objective Function Constraints Softwater

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Chapter Outline Developing Linear Optimization Models Decision Variables Objective Function Constraints Softwater Optimization Model OM Applications of Linear Optimization OM Spotlight: Land Management at the National Forest Service Production Scheduling Blending Problems Transportation Problems A Linear Programming Model for Golden Beverages A Linear Programming Model for Crashing Decisions Using Excel Solver Modeling and Solving the Transportation Problem on a Spreadsheet Solved Problems Key Terms and Concepts Questions for Review and Discussion Problems and Activities Cases Haller’s Pub & Brewery Holcomb Candle Endnotes Learning Objectives • To recognize decision variables, the objective function, and con- straints in formulating linear optimization models. • To identify potential applications of linear optimization and gain ex- perience in modeling OM applications. • To be able to use Excel Solver to solve linear optimization models on spreadsheets. Modeling Using Linear Programming SUPPLEMENTARY CHAPTER C

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• Haller’s Pub & Brewery is a small restaurant and microbrewery that makes six types of special beers, each having a unique taste and color. Jeremy Haller, one of the family owners who oversees the brewery operations, has become worried about increasing costs of grains and hops that are the principal ingredi- ents and the difficulty they seem to be having in making the right product mix to meet demand and using the ingredients that are purchased under contract in the commodities market. Haller’s buys six different types of grains and four different types of hops. Each of the beers needs different amounts of brewing time and is produced in 30-keg (4,350-pint) batches. While the average customer demand is 55 kegs per week, the demand varies by type. In a meeting with the other owners, Jeremy stated that Haller’s has not been able to plan effec- tively to meet the expected demand. “I know there must be a better way of making our brewing decisions to improve our profitability.” • GE Capital provides credit card services for a consumer credit business that exceeds \$12 billion in total outstanding dollars. Managing delinquent accounts is a problem of paramount importance to the profitability of the company. Different collection strategies may be used for delinquent accounts, including mailed letters, interactive taped telephone messages, live telephone calls, and legal procedures. Accounts are categorized by outstanding balance and expected payment performance, which is based on factors like customer demographics and payment history. GE uses a multiple time period linear programming model to determine the most effective collection strategy to apply to its various categories of delinquent accounts. This approach has reduced annual losses due to delinquency by \$37 million. 1 Quantitative models that seek to maximize or minimize some objective function while satisfying a set of constraints are called optimization models .
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## This note was uploaded on 10/19/2009 for the course IDS IDS302 taught by Professor Rainer during the Spring '09 term at Institute of Business Administration.

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Collier_suppC_C1-C32 - Chapter Outline Developing Linear Optimization Models Decision Variables Objective Function Constraints Softwater

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