1 / 11

Business Optimization Models

Business Optimization Models. Text: Chapters 13-14. Home of my ancestors …. Hakka communal dwelling / fortress known as Tulou . Why cylindrical ?. Why Cylindrical shape ?. Amphitheatre, Nimes, France. Stadium Capacity. Motivation: Cash Flow Financing.

christophermelvin
Download Presentation

Business Optimization Models

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. BusinessOptimizationModels Text: Chapters 13-14

  2. Home of my ancestors … Hakka communal dwelling / fortress known as Tulou. Why cylindrical?

  3. Why Cylindrical shape ? Amphitheatre, Nimes, France Stadium Capacity

  4. Motivation: Cash Flow Financing Many firms earn revenues which do not synchronize with monthly bills. The CFO of Hongguo has forecasted revenues and bills for the next 6 months as tabled below. Clearly, Honguo must borrow money to cover the negative net cash flow in Jul-Sep. There are 3 options available: • At the beginning of July, take out a 6 months loan, to be paid back end Dec together with 4% interest (i.e. 8% annual rate ; no discount for early payback) • Month-to-month revolving loans (i.e. 1000 in July, 3100 in Aug, 4200 in Sep, …), for which the interest charge is 1% monthly (i.e.12% annual rate). • A combination (which?) of 6 months and month-to-month loans Which option minimizes Hongguo’s interest charges? Explain.

  5. SOLVER

  6. Business Optimization Models:Market-Driven Optimal Allocation of Resources Efficient Allocation of Resources: HOW? Optimal Product Mix Optimal Advertising Impact Yield / Revenue / Cash Flow Management Supply Chain Optimization Outsourcing Portfolio Optimization Worker Rosters / Assignment Minimizing CO2 emission

  7. Optimization=> Cheaper, Better, Faster • Managerial focus on modeling rather than mathematical intricacies. • Models are abstractions: they make assumptions ; they can be rigid ; they ignore “soft” factors e.g. people, politics, ...

  8. LP Motivation: Profit Maximization Primo Concierge is introducing 2 new services: A and B. Their respective expected profit are $5 and $2 per unit. Their departmental resource requirements are: Advise management on sales quotas for services A and B in order to maximize the total expected profit. Common sense says (? , ?):WHY?

  9. Optimal Location for Warehouse The table and graph below display the (x,y) co-ordinates of four sales outlets as well as the number of daily truck deliveries to them. Outlet #Daily Deliveries (x,,y) A 8 (8,2) B 6 (3,10) C 2 (8,15) D 5 (14,13) MBA students have extended idea to network of warehouses (how many?, where?) to serve 100’s of customers in China, Thailand etc. based on GPS or latitude / longtitude coordinates. Delivery cost is $1 per unit distance. Your company intends to build a warehouse within the rectangle zone bounded by the (x,,y) co-ordinates: (10,6), (12,6), (12,10) and (10,10). Advise on the optimal (x,y) location of the warehouse so as to minimize delivery costs. • Why is this called a non-linear programming problem? ?

  10. PWC: Which Capital Projects to select? Your firm has short listed 6 potential projects for investments. Their NPV annual capital expenditures and cash flows are tabled below. (a) Which projects would you select given the annual capital expenditure budget? (b) Which projects would you select if un-spent budget can be carried forward?

  11. SOLVER Limitations • “Free” Solver in Excel can handle • 200 unknown variables • 100 constraints • For BIGGER problems, use • SolverPlus • OpenSolver

More Related