These two constraints can also be expressed as equations. The fact that you have a single bulldozer available for only 3,000 hours each year also limits the number of lots and houses you can annually sell because every lot requires 80 hours of bulldozing and every house requires 200 hours of bulldozing. Your working capital of $1,200,000 limits the number of lots and houses you can annually sell because every lot requires a $50,000 cash investment and every house requires a $25,000 cash investment. To continue with the fictional case of residential development, suppose that you have two principal limiting fac- tors: working capital and bulldozer capacity. Of course, any objective function is limited by certain constraints. Your princi- pal financial objective is to maximize your profits, and this objective can be expressed as an objective function, or equation, that you want to maximize: Suppose that you make $20,000 on each home you build and $15,000 on each building lot you develop and then sell. You create and sell two products: building lots and houses.
Suppose, for example, that you’re a residential real estate developer and contractor. While this abstract definition sounds complicated, at least at the conceptual level, optimization modeling makes common sense once you provide a concrete example.ĮasyRefresher: How Optimization Modeling Works With an optimization-modeling problem, you want to optimize an objective function but at the same time recognize that there are constraints, or limits. Nelson 1 Comment Excel’s Solver tool lets you solve optimization-modeling problems, also commonly known as linear programming programs. We can then move onto building a similar solution for the remaining two months.Optimization Modeling with Solver in Excelīy Stephen L. We don’t necessarily need a fully automated process to make this work (at least not in the first attempt). If required, some “hand adjustments” can also be made. Once you have a solution that works for one month, you can then try to validate for constraints.
EXCEL SOLVER EXAMPLES SCHEDULING FULL
Don’t worry if you can’t produce for full demand.Minimize for the production cost and add capacity constraints for each production line as approximate capacity at monthly level. It is quite easy to solve this as a product mix problem using Excel solver or some other linear programming solver (or any heuristics approach). By doing this, we get a 81 x 6 matrix for 81 SKUs and 6 production lines. Scheduling can be a relatively easy exercise if we add aggregated product demand in rows and plant capacity in columns.First a few thoughts on the scheduling (sourcing) problem:.You can solve it one by one – first look at the scheduling part and then the sequencing part. Basically, it can be said to be both a scheduling and a sequencing problem. Sourcing can be formulated as a scheduling problem.Aim to solve the problem for the first month and use the same approach for the second and third months.It’s a fairly straight-forward approach. You can think about aggregation and disaggregation approaches as well.īelow, we have mentioned the steps you can follow to solve a sourcing/sequencing problem: A few examples of sub-problems are:įor instance, the first objective of making a forecast for the next 3 months can be accomplished using a time-series forecasting technique. The aim is to reach a feasible solution and then attempt to increase its optimality.
The approach we recommend is to divide this problem into multiple smaller sub-problems and solve them using the 80-20 approach.
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