BU275, Spring 2023, Class 19

Business Decision Models

Integer Programming

Peruvemba S. Ravi
Agenda
• Integer Programming (IP) Models
Types of Models

Pure Integer Program: All decision variables required to have integer

solution values.

Mixed Integer Some of the decision variables (but not all)

Program: required to have integer values.
Example 1: A Pure Integer Program (1 of 2)
• Machine shop obtaining new presses and lathes.
• Profits: each press $100/day; each lathe $150/day.
• Resource constraints: $40,000 budget, 200 sq. ft. floor space.
• Machine purchase prices and space requirements:

Required Floor
Machine Space ( ft.2 ) Purchase Price
left parenthesis feet squared right
parenthesis

Press 15 $8,000
Lathe 30 4,000
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Example 1: A Pure Integer Program (2 of 2)

Integer Programming Model:

Maximize Z $100 x1  $150 x2

subject to:
$8,000 x1  4,000 x2 $40,000
15 x1  30 x2 200 ft 2

x1, x2 0 and integer

x1 number of presses
x2 number of lathes
Example 2: A 0-1 (or Binary) Integer
Program (1 of 2)
• Recreation facilities selection to maximize daily usage by residents.
• Resource constraints: $120,000 budget; 12 acres of land.
• Selection constraint: either swimming pool or tennis center (not both).

Expected Land
Recreation
Usage Cost ($) Requirements
Facility
(people/day) (acres)
Swimming pool 300 35,000 4
Tennis center 90 10,000 2
Athletic field 400 25,000 7
Gymnasium 150 90,000 3
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Example 2: A 0-1 (or Binary) Integer

Program (2 of 2)
Integer Programming Model:
Maximize Z 300 x1  90 x2  400 x3  150 x4
subject to:

$35,000 x1  10,000 x2  25,000 x3  90,000 x4 $120,000

4 x1  2 x2  7 x3  3 x4 12 acres
x1  x2 1 facility
x1, x2 , x3 , x4 0 or 1
x1 construction of a swimming pool
x2 construction of a tennis center
x3 construction of an athletic field
x4 construction of a gymnasium
Example 3: A Mixed Integer Program (1 of 2)
• $250,000 available for investments providing greatest
return after one year.
• Data:
– Condominium cost $50,000/unit; $9,000 profit if sold
after one year.
– Land cost $12,000/ acre; $1,500 profit if sold after
one year.
– Municipal bond cost $8,000/bond; $1,000 profit if sold
after one year.
– Only 4 condominiums, 15 acres of land, and 20
municipal bonds available.
Example 3: A Mixed Integer Program (2 of 2)
Maximize Z $9,000 x1  1,500 x2  1,000 x3
subject to:
50,000 x1  12,000 x2  8,000 x3 $250,000
x1 4 condominiums
x2 15 acres
x3 20 bonds
x2 0
x1, x3 0 and integer
x1 condominiums purchased
x2 acres of land purchased
x3 bonds purchased
Finding Solutions to Integer Programs

•Computer codes are available for solving integer linear

programs

•Much more time consuming to solve IPs than LPs

•There exist integer programming problems for which an

exact solution cannot be found in a reasonable amount of
time.

•Excel solves IP models

 Excel Solver & IP
•In Excel Add Constraint dialog box, select int to
restrict variables to integer; Solver automatically
sets RHS to integer.

•In Excel Add Constraint dialog box, select bin to

restrict variables to binary; Solver automatically
sets RHS to binary.

•Set the Solving Method to be GRG Nonlinear.

(Recall that the Solving Method is set to be
Simplex LP for linear programs with no integer
variables.)
Example 4: A Capital Budgeting Problem
• University bookstore expansion project.
• Not enough space available for both a computer
department and a clothing department.
Example 4: A Capital Budgeting Problem

Project
Project Year Project Year
NPV Return Year 3
Project 1 Cost 2 Cost
($1,000s) Cost
($1,000s) ($1,000s)
($1,000s)
1. Web site $120 $55 $40 $25
2. Warehouse 85 45 35 20
3. Clothing 105 60 25 —
department
4. Computer 140 50 35 30
department
5. ATMs 70 30 30 —
Available funds per Blank
year $150 $110 $60
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Example 4: A Capital Budgeting Problem

x1 = selection of web site project
x2 = selection of warehouse project
x3 = selection of clothing department project
x4 = selection of computer department project
x5 = selection of ATM project
xi = 1 if project “i” is selected, 0 if project “i” is not selected
Maximize Z $120 x1  $85 x2  $105 x3  $140 x4  $70 x5
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Example 4: A Capital Budgeting Problem

subject to:

55 x1  45 x2  60 x3  50 x4  30 x5 150
40 x1  35 x2  25 x3  35 x4  30 x5 110
25 x1  20 x2  30 x4 60
x3  x4 1
xi 0 or 1
Example 5: A Fixed Cost/Fixed Charge Problem
The Terraco Motor company produces a lightweight vehicle. It has three
plants that make the vehicle and two retailers. The company is unsure of
public demand, and is considering reducing its fixed cost by closing one
or more plants, even if this increases transportation costs. Relevant data
are shown below, with transportation costs per thousand vehicles
shipped. Formulate a mixed integer programming model to help with
production and shipping decisions.
Retailer
Plant (Transportation cost in $1000) Capacity Fixed Cost
A B
1 56 21 12,000 2,100,000

2 18 46 18,000 850,000

3 12 71 14,000 1,800,000

Demand 6,000 14,000

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Example 5: A Fixed Cost/Fixed Charge Problem

Decision Variables:
yi = 1 if plant i is open i=1,2,3
= 0 if plant i is not open
xi,j = vehicles shipped (in1000s) from plant i to retailer j
i=1,2,3; j=A,B
Objective Function:
Minimize z = 56 x1,A + 21 x1,B + 18 x2,A + 46 x2,B + 12 x3,A + 71 x3,B
+ 2,100 y1 + 850 y2 + 1,800 y3
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Example 5: A Fixed Cost/Fixed Charge Problem

Constraints:
Supply:
x1,A + x1,B < 12 y1
x2,A + x2,B < 18 y2
x3,A + x3,B < 14 y3

Demand:
x1,A + x2,A + x3,A = 6
x1,B + x2,B + x3,B = 14

xi,j > 0 and yi = 0 or 1 for all i, j

Example 6: The Capacitated Lot Sizing Problem
•Determine a production schedule for the next 4 weeks,
given:
– Maximum demand in next 4 weeks: 20, 30, 40, 10
– Amount sold cannot exceed max demand in each week.
– Initial Inventory: 5 items
– Holding cost: $15/unit/week
– Production cost/item: $4
– Revenue per item sold: $12
– Setup cost: $200
– Setup time: 6 hours
– Processing time: 1 hour/item
– Production capacity(including setup time): 40 hours/week
– If you produce in week 4, you have to produce at least 20 items and not more than 30
items.
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Example 6: The Capacitated Lot Sizing Problem

Decision Variables:
xi = quantity produced in week i, (i=1,2,3,4)
yi = 1 if there is production in week i, (i=1,2,3,4) and 0 otherwise
si = amount sold in week i, (i=1,2,3,4)
Ii = inventory at the end of week i

Objective Function:
Maximize z =12[s1 + s2 + s3 + s4] - 200 [y1 + y2 + y3 + y4] - 4[x1 + x2 + x3 + x4] - 15[I1 + I2 + I3 +
I4]
Constraints:
Production and amount sold: Week 4
x1 + 5 = s1 + I1 x4 > 20 y4
x2 + I1 = s2 + I2 x4 < 30 y4
x3 + I2 = s3 + I3
x4 + I3 = s4 + I4 Max items sold
s1 < 20
Production capacity s2 < 30
xi  34 yi i=1,2,3,4 s3 < 40
s4 < 10
All decision variables are non-nega
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Example 7: The Set Covering Problem

There are 6 cities in Kilroy County. The county must determine where
to build central fire stations. The county wants to build the minimum
number of central fire stations needed to ensure that at least one fire
station is within 15 minutes (driving time) of each city. The times (in
minutes) required to drive between the cities in Kilroy county are
given in the table. Formulate an IP that will tell Kilroy how many fire
stations should be built and where they should be located.
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Example 7: The Set Covering Problem

To
From City 1 City 2 City 3 City 4 City 5 City 6
City 1 0 10 20 30 30 20
City 2 10 0 25 35 20 10
City 3 20 25 0 15 30 20
City 4 30 35 15 0 15 25
City 5 30 20 30 15 0 14
City 6 20 10 20 25 14 0
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Example 7: The Set Covering Problem

The first step is to determine the cities which are within 15 minutes of each of the cities.

City 1: 1,2
City 2: 1,2,6
City 3: 3,4
City 4: 3,4,5
City 5: 4,5,6
City 6: 2,5,6
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Example 7: The Set Covering Problem

Decision Variables
X(i) = 1 if a fire station is built in city i, i=1,2,3,4,5,6
=0 otherwise

Objective Function
Minimize z = x(1) + x(2) + x(3) + x(4) + x(5) + x(6)
Constraints
City 1: x(1) + x(2) > 1
City 2: x(1) + x(2) + x(6) > 1
City 3: x(3) + x(4) > 1
City 4: x(3) + x(4) + x(5) > 1
City 5: x(4) + x(5) + x(6) > 1
City 6: x(2) + x(5) + x(6) > 1

x(i) - binary
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The use of binary variables to

represent logical constraints
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Example 8: The Project Selection Problem

An engineering firm has 5 potential new projects. Each project is expected
to generate a return (given by the net present value) and requires a fixed
amount of cash and personnel. Because resources are limited, not all
projects can be undertaken. Projects cannot be done partially – either a
project is completed or it is not undertaken at all. The data is given in the
table below. Further, if project 2 is undertaken, project 5 must also be
undertaken. If project 1 is undertaken then project 2 must not be
undertaken. Project 3 is undertaken only if project 4 is also undertaken.
Formulate an IP model that will maximize the total return.
Project 1 Project 2 Project 3 Project 4 Project 5 Available
Resources
Expected $180,000 $220,000 $150,000 $140,000 $200,000
Return (NPV)
Cash $55,000 $83,000 $24,000 $49,000 $61,000 $150,000
requirements
Personnel 5 3 2 5 3 12
requirements
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Example 8: The Project Selection Problem

Define xj = 1 if project j is selected and 0 otherwise, j=1,2,3,4,5

Max z = 180,000x1 + 220,000x2 + 150,000x3 + 140,000x4 + 200,000x5

Constraints

Cash Available: 55,000x1 + 83,000x2 + 24,000x3 + 49,000x4 + 61,000x5 < 150,000

Personnel Available: 5x1 + 3x2 + 2x3 + 5x4 + 3x5 < 12

If Project 2 is done, then Project 5 must be done: x5 > x2

If Project 1 is done, then Project 2 must NOT be done: x2 < 1 – x1

Project 3 is done only if Project 4 is done: x3 < x4