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Business Optimization Models

Business Optimization Models. Text: Chapters 13-14. How my Hakka (chinese “nomads”) ancestors optimized scarce resources?. Hakka fortress known as Tulou : Why are they cylindrical ?. Charcoal Blocks : Why are they cylindrical ?.

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Business Optimization Models

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  1. Business Optimization Models Text: Chapters 13-14

  2. How my Hakka (chinese “nomads”) ancestors optimized scarce resources? Hakka fortress known as Tulou: Why are they cylindrical?

  3. Charcoal Blocks : Why are they cylindrical?

  4. London Olympic Games 2012 Stadium: Why is it Cylindrical?

  5. Optimization=> Cheaper, Better, Faster + Sustainability Minimize use of resources eg => CBF + Sustainability

  6. Cheaper, Better, Faster: A Case Study World’s Most Admired Company World’s Most Valuable Brand

  7. Doing Business Cheaper CHEAPEST Manufacturing Cost => HIGHEST Profit Margin

  8. Doing Business Better Better Customer Capture BETTER Product Specs

  9. Doing Business Faster

  10. Doing business Cheaper, Better, Faster: A Sudoku Analogy Sudoku Rules All digits 1 through 9 must appear in any order in • Each row • Each column • Each 3x3 subsection Sudoku vs Business: Both must solve problems with CONSTRAINTS! How to solve PRODUCTIVELY i.e. cheaper, better, faster?

  11. 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 Where lo locate call (production) centres? Consultants: IBM , HP …

  12. Motivation: Cash Flow Financing Many firms earn revenues which do not synchronise 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.

  13. 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, ...

  14. LP Motivation: Profit Maximization Primo Insurance is introducing 2 new products: Special Risk & Mortgage insurances. Their respective expected profit are $5 and $2 per unit. The resource requirements are: Advise management on sales quotas for the 2 product lines to maximise total expected profit.Common sense says (???,???): WHY?

  15. 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) Cisco Lab relocates from Sydney to Singapore 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 minimise delivery costs. • Why is this called a non-linear programming problem? ?

  16. 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?

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