BLO 418-OPERATIONS RESEARCH = INVENTORY MODELS SL Introduction The methodology for inventory situation modeling is based on four concepts, they are: Examine the inventory situation, list characteristics and assumption related to the inventory ituation, 2. Develop the total annual relevant cost equatio Stock out costs Totalannual | _ [item cost Procurement | , | Caving cost | le : : (cycle stocks + {cost/sales relevant cost cost safety stocks back order) 3. Convert the total annual relevant cost equation from narrative form into the shorthand logic of mathematics, 4. Optimize the cost equation by finding the optimum for how much to order (also called order quantity), when to re-order (also called re-order point) and the total annual relevant cost. narrative form as: In general, the situation of inventory can be classified into two types viz. deterministic and stochastic. this variables are known with certainty —in this variables are probabilistic This lecture briefly outlines Deterministic Inventory Models and Probabilistic (Discrete Demand Distribution Model) Inventory Models. In this part we will discuss deterministic inventory models and later we will discuss probabilistic inventory models. 5.2. Deterministic Inventory Models There are different deterministic inventory models, they are: a. Deterministic single item Inventory Models E0Q- Economic Order Quantity Model — 1 E0Q - Economic Order Quantity Model ~ II (instantaneous supply when shortages are allowed) EPQ = Economic Production Model allowed) iv. Price Discounts Model (instantaneous supply with no shortages) v. Dynamic Demand Models (Gradual supply case and shortage not Page 38 of 89BLO 418-OPERATIONS RESEARCH nknown cost st Known cost 5.21 Deterministic Single Htem Invi ry Models Wentory models with all the known parameters ith certainty are known as deterministic inventory ‘model. In this section we wil iscuss the deterministic inventory models for sing item, [Link] Economic Order Quantity (EOQ) Model I The EOQ concept applies to the items which are replenished periodi covering several periods’ needs, subject to the following conditio (0 inventory in lots * Consumption of item or sales or usage is uniform and continuous * The item is replenished in lots or batches, either by manufacturing or by purchasing Deserij ‘The EOQ model is described under the following situations: a. Demand is deterministic and it is denoted by D units per year. b. Price per Unit or cost of purchase is C. ¢. Planning period is one year. 4. Ordering Cost or Procurement Cost or Replenishment Cost is Cs. Suppose if the items are manufactured it is known as set up cost. €. Holding Cost (or carrying cost) is Ch per unit of item per one-year time period. The Ch is expressed either in terms of cost per unit per period or in terms of percentage charge of the purchase price. Shortage Cost (mostly it is back order cost) is Cs per unit per year. Order Size is Q. Cycle period of replenishment ist, Delivery lad/Lead Time is L (expressed in units of time) In this section we will discuss about instantaneous supply when shortages are not allowed. That is whatever is demanded, is supplied immediately after the lead time. In this model we assumed that the shortages are not allowed, it means that shortage cost is prohibitive or C; is too much large or infinite, ~ Everything is so known and regular, there is no need of safety stock. - Inventory will run out altogether just as the next lot is received, The different levels of inventories for this model are fixed as follows: - Minimum level = Safety Stock (Buffer Stock) - Maximum level = Minimum level + EOQ Page 39 of 89BLD 418-OPERATIONS RESEARCH Reorder level = Minimum level + Lead Time Consumption ~ In this case safety stock is not needed, so that safety stock is zero ie. Minimum level = 0. ~ Maximum Inventory is the ORDER SIZE (lot size). ~ Maximum Inventory is the ORDER SIZE (lot size). ‘Therefore, the average inventory per eycle = 4 (Maximum level + Minimum level). Here cycle is the intermittent pattern, in which inventory vary from maximum to minimum and then back to maximum, ~ Maximum inventory is Q Therefore, the average inventory per cycle = ¥% (Q+0) = Q/2, and the average inventory is time independent In this case, the Total Annual Relevant Cost is as follows: - Annual Purchase Annual Orderin, Total annual = | Cost (Pc) + SN eau (oc) : relevant cost Annual Carrying (TC) Cost (CC) Note that, Number of Orders/Year = Annual Demand/Order Size --~ =DIQ Thus, the eq. is written as: TC=CD + C,DIQ + CrQ2 The EOQ or Order Size is that quantity, which minimizes the Total Cost. Total Cost is the sum of Fixed Cost and Variable Cost, The Fixed Cost (CD) is independent of Order Size while the variable Cost is dependent on the Order Size (Q). Since, the fixed cost does not play any in minimization or maximization process, only variable cost will be minimized here. For the total cost to be minimum, the first order derivative of TC is zero, that is, ATCHAQ = -CoD/Q2 +CW2 = 0 ----- eq.3. or CoDIQ = CrQ/2 “> eq or Annual Ordering Cost = Annual Carrying Cost - From the eq.4, now we will get B0Q=Q*=V 2GD > 9.6 Page 40 of 89BLO 419-OPERATIONS RESEARCH Cy The eyele period t= Optimal Order Quantity or t= Q% = 4 2Co__ Annual Demand D ND 9 eq7 N = Total number of orders per year, which is the reciprocal of cycle period (1/*) ‘That is N=b =V GD > eq Q Co The annual cost = TC = CD + 2GGD. - > e4.9 Lead Time Consumption = (Lead time in years) * (Demand Rate per year) Minimum Level Maximum Level Reorder Level = Let us see few example of this case. Example 5.1 ‘A manufacturer uses N20, 000 worth of an item during the year. Manufacturer estimated the ordering cost as NSO per order and holding costs as 12.5% of average inventory value. Find the optimal order size, number of orders per year, time period per order and total cost. Solution Given that: D=N20, 000 Co=NS50 Ch = 12.5% of average inventory value / unit Total Cost = TC = 25D + (0.125) Q, where Q is order size in. Q D By applying the equations (eq.6) to (eq.9), we will get Q*, t*, N N Q*=V2CoD Ch = 2*50* 2000 = 4000 0.125 t*= ¥2G0 = _2*50 GD (.0.125)* (2000) Page 41 of 88BLO ALA OPERATIONS RESEARCH = 1 years = 73days 5 5 t Note: TC means in this ease variable cost only ves =¥2* 50 * 0.125 * 20000 = 500 Therefore Order Size = Q = N4000 Number of order / year = N=5 ‘Time period / order = t* = 73 days Total Cost = TC* = NSO0 Example $.2 ‘A manufacturer uses an item at a uniform rate of 25,000 units per year. Assume that no shortage is allowed and delivery is at an infinite rate. The ordering, receiving and hauling cost is N23 per order, while inspection cost is N 22 per order. Interest costs is N0.0S6 and deterioration and obsolescence cost is 8 0.004 respectively per year for each item actually held in inventory plus ¥ 0.02 per year per unit based on the maximum number of units in inventory. Determine the EOQ. If lead time is 40 days, find reorder level. Solution Given that Demand = D = 25000 units/year Ordering Cost = Co = 23 + 22 = N45 per order Storage cost Ch = 0.056 + 0.004 = NO.060 (based on actual inventory (~average inventory) Storage cost Ch = N0.02 per unit/year (based on maximum inventory) Total Variable Cost = TC = 25 * 25000 + 0.060 * Q + 0.02 *Q 2 Q = 625000 + 0.1°Q Q 2 Thus, Q*= 26D = Q* =f42525000 = 135355 units (3535 units approximately) Ch 0.1 Page 42 of 89BLO 418 OPERATIONS RESEARCH Reorder level = L*1 ~ 40#25000 = 2739.7 units 105 That is = 2740 units Therefore EOQ = Q¢ = 3535 units Reorder level = 2740 units $.2.1.3 The EOQ Model IT Here we are going to discuss, Instantaneous Supply When shortages are allowed. In this case, stock ‘outs are permitted which means that shortage cost is finite or it is not more. The entire Model 1 assumptions (ato i) are also good applicable here. Total Variable Cost = Annual Ordering Cost + Annual Holding Cost + Annual Shortage Cost > €q. 10 = CoD + PCr + (-1PC,_ Q 20) 20 From this we will get peece/eee a GC Inventory Level = 1* = [ 2CaD_)(Cx_) Cy Coty Shortage Level = Q* - I* -> e4.13 Cycle Period =t*#= Qe > eq.14 D ‘Number of Orders/Year = | * Therefore Total Variable Cost=TC* = 1 2C.G,C,D (Ch) => eq.15 ‘Thus, if we compare the total variable cost of Model | and Model II we will see that Page 43 of 89BLO 418-OPERATIONS RESEARCH Y 2GGD > V 2GGGD (ht Cy) is allowed is less than the annual inventory management cost when shortages are not allowed. That is shortage should be allowed whenever the shortage cost is not very large for reducing the total cost. implies that the annual Cost when shortay Example 5.4 Consider the following problem, Problem ‘The demand for an inventory item each costing 5K, is 20000 units per year. The ordering cost is M10. ‘The inventory carrying cost is 30% based on the average inventory per year. Stock out cost is N 5 per unit of shortage incurred. Find out various parameters. Solution Given that Demand = D=20000 Stock out Cost = Cs = NS Now we have to determine the various parameter of EOQ Model II such as EOQ, Inventory Level, Shortage Level, Cycle Period, number of orders/year and Total Cost. EOQ=Q*=1 (2CoD ) ( Cu¥Cr) Ch Ce Fea) fae = 1657 units 5 Inventory Level=1*=¥ (2CoD )(Cs_) Ch CotCh Inventory Level = =804 units 0.30 10+0.30, Page 44 of 89BLO 418-OPERATIONS RESEARCH Shortage Level = Q* - 1% = 1657 — 804 ~ 853 units Cycle Period = = Q* = 1657 = 30.24 days ~ 30 days D 20000 Number of Orders/Year = 1_ D_ = 20000 = 12 Orders/year Qt 1657 Total Cost= OT — (Cr+) -f (x wrasosisn | =N3364 0.3045 [Link] Economie Production Quantity (EPQ) Model Here we will discuss about Graduate Supply case when Shortages are not allowed. EOQ model is EPQ is basically associated ig environment. EPQ shows that over a period of time inventory gradually built and the consumption go side by side where production rate is higher than that of consumption rate. Assumption (a) to (i) of EOQ Model | also hold good for this model. In this model the Order Size (Q) is taken as Production Size, the annual production rate is taken as P such that P> D, otherwise, if P< D, the item will be used as fast as it is produced, Therefore, t = Cycle Time t1=Production Time, t2 = Depletion Time and t= +t of maximum inventory level BD. Production Time = t) = Q P Cycle Time=t=Q D Maximum Inventory Level = BI =(P-D)*Q P Minimum Inventory Level = 0 Average Inventory Carried = (P-D) Q+0 P (P-D)Q 2 2P Page 45 of 89BLO 418-OPERATIONS RESEARCH Total Variable Cosv¥ear ~ Annual Setup Cost + Annual Carrying Cost CoD. Thus, EPQ=Q*=¥ 2CoD___ Total Variable Cost = TC* = The economic production quantity model (gradual supply case and shortage not allowed) is explained with the help of following Example 4.5. Example 5.5 Problem ‘An inventory item unit is used at the rate of 200/day, and can be manufactured at a rate of 700/day. It costs N3000 to set up the manufacturing process and © 0.2 per unit per day held in inventory based on the actual inventory any time. Assume that shortage is not allowed. Find out the minimum cost and the optimum number of units per manufacturing run, Solution Given that Demand, D = 200 units Production, P = 700 units Set up Cost, Co = 8 3000 Holding Cost, Cy = 8 0.2 A Minimum Cost= TC*=1 2CoCi(P-D) D. P =1 2#3000%0.2(700-200) (200) = W414 700 Page 46 of 8LO 418-OPERATIONS RESEARCH EPQ=Q*=¥ 2Cop___ 2CoD_*P ChyP-D) CMP-D) p 04 = 2898.2 = 2898 units eS 0. 2(700-200) Therefore ‘Minimum Cost =-N 414 Number of units per Manufacturing Run = 2898 units §.1.2.5 Price Discounts Model In this section we discuss, instantaneous supply with no shortages. We know very well that Whenever we make bulk purchasing of items there may be some discount in price is usually offered by the suppliers. As far as ‘ount concer, there are two types: 0. Incremental Discount - discount allowed only for items which are in excess of the specified amount. In this case, all the prices offered in different slabs are applicable in finding the total cost. 1. All units Discount ~ discount allowed from all the items purchased. In this, only one price at any one slab is applicable for finding the total cost. Here we are going to discuss only all units’ discount type. Advantages of Bulk Purchase Buying in bulk may results in the following advantages: + less unit price * less ordering cost + cheaper transportation + fewer stock outs *+ sellers preferential treatment Disadvantages of Bulk Purchase Bulk purchase also has the following disadvantages in addition to the above advantages: 0 high carrying cost * lower stock turnover + huge capital required Page 47 of 89BLO 418. OPERATIONS RESEARCH less flexibility older stocks heavy deterioration heavy depreci ion In case of purchased items, if the discounts are allowed, the price C may vary according to the following pattern: $22 Dy amie Demand Models In this model, assume that demand is known with ¢ iainty, and although may vary from one period to the next period. There are five types of dynamic demand inventory models, they are: i) Production Inventory Model (Incremental Cost Method) ii) Dynamic Inventory Model (Prescribed Rule Method) iii) Dynamic Inventory Model (Fixed EOQ Method) The above five dynamic demand models of inventory are discussed in details in the following subsequent sections. 5.2, 1 Production Inventory Model [Link] Detern inistic Multi Item Inventory Models ‘When there is more than one item in the inventory is called as multi item inventory. Since this contains ‘more items, the inventory control requires special type of care, type of inventory problems may different types of constraints like capital, cost structure, storage space, purchasing load etc. As the ‘number of constraints increase the problem becomes more complex. In some examples of this type of inventory. is section we will discuss There are two types of multi item inventory model which is based on the structure of the cost, they are: 1. Model with Unknown Cost Structure 2. Model with Known Cost Structure 5.2.3 Probabilistic Inventory Models In previous sections, we have discussed simple deterministic inventory models where each and every influencing factor is completely known. Generally, in actual business environment complete certainty never occurs. Therefore, here we will discuss some practical situations of inventory problems by relaxing the condition of certainty for some of the factors. The major influencing factors for the inventory problems are Demand, Price and Lead Time. There are also other factors like Ordering Cost, Carrying Cost or Holding Cost and Stock Out Costs, bu! Page 48 of 8LO 418-OPERATIONS RESEARCH their nature is not so much disturh 14. Because of this their estimation provides almost, on the average, as known as valu 1 Price can also be averaged out to reflect the condition of certainty. But there are situations where Price fluctuations are too much in the market and hence they influence the inventory de ons. Similarly, the demand variations or consumption variation of an item as well as the lead time variation influence the overall inventory policy. In this section we will period probabilistie models, uss single 5.2.3 Single Period Probabilistic Models Single Period Discrete Probabilistic Model deals with the inventory situation of the items like perishable goods, seasonal goods and spare parts requiring one time purchase only. These items demand may by discrete or continuous. In these models the lead time is very much important because purchases are made only once. In single period model, the problem is analyzed using incremental (or marginal) analysis and the decision procedure consists of a sequence of steps. In such cases, there are two types of cost involved. There are Under Stocking Cost and Over Stocking Cost. These two costs describe opportunity losses incurred when the number of units stocked is not exactly equal to the number of units actually demanded, In this section we will use the following symbols: Demand for each unit of item (or a random variable) Q= Number of units stocked or to be purchased Cl = Under Stocking Cost sometimes also known as over ordering cost. This is an opportunity loss associated with each unit left unsold i.e, Cl =S-Chi2-Cs C2 = Over Stocking Cost sometimes also known as under ordering cost. This is an opportunity loss due to not meeting the demand, i.e C2=C+Ch-V Where C= cost/unit Ch = carrying cost/unit for the entire period Cs= shortage cost V = salvage value $= selling price In this section we are going to discuss only discrete demand distribution. Page 49 of 89,DLO 414- OPERATIONS RESEARCH 4.5.2 Single Period Discrete Probabilistic Demand Model (Diserete Demand Distribution) Here we will discus the following methods of solving the single period discrete probabilistic demand Incremental Analysis Method b, Payoff Matrix Method Perishable Products Inventory Many of the organization manage merchandise which contains negligible utility if itis not sold almost immediately, The examples of such kind of products are newspaper, fresh produce, printed programmes for special events and other perishable products. Generally, such inventory items have hhigh mark-up. The major difference between the wholesale cost and the retail price is due to the risk vendor faces in stocking the inventory, Vendor faces obsolescence costs on the one hand and opportunity costs on the other. All this kind of problems can be very easily solved with the help of the above discussed model. This is explained in the following Example 4.14, Example 4.14 A boy selling newspaper, he buys papers for Rs.0.45 each and sells them for Rs.0.70 each. The condition here is the boy cannot return unsold newspapers. The following table shows the daily demand distribution. If each days demand is independent of the previous days demand, how many newspapers should he order each day? Number of | 240 | 250 | 260 | 270 | 280 | 290 | 300 | 310 | 320 | 330 Customers Probability| 0.01 | 0.03 | 0.06 | 0.10 | 0.20 | 0.25 | 0.15 | 0.10 | 0.05 | 0.05 Solution Step 1: Prepare a following Table 4.9 showing the probability p(D), and cumulative probability p(D0 Alll these characteristics explored above give the following Linear Programming (LP) model man z= 3x1 + ry (The Objective function) St 28+325100 Finishing constraint w+ 2s 80 Mw s40 (Carpentry constraint) (Constraint on demand for soldiers) x 220 (Sign restrictions) Avvalue of (x1,x2) isin the feasible region ifit satisfies all the constraints and sign restrictions. Graphically and computationally we see the solution ig (1, x2) = (20, 60) at which z= 180. (Optimal solution) Report ‘The maximum profit is N180 by making 20 soldiers and 60 trains each week. Profit is limited by the carpentry and finishing labor available. Profit could be increased by buying more labor. Example 2,2 A block industry has 32 tipper loads of laterite, 60 loads ‘of sharp and 60 loads of chipens (rock dust). He makes blocks of 2 design. The first requires 2,3 and 1.5 of laterite, sharp and chipens and the second requires 1, 4 and 5 tipper loads of laterites sharp sand and chipens respectively. Formulates this problem on a tableau and write out the inequali Solution: The in equalities are given below 2D, + 1D: <32 3D) + 4D2 < 60 Page 19 of 89LO 418-OPERATIONS RESEARCH J.D) # SD: $60 Ifthe profit contribution per unit of Dy =Oand D2 = 1.5 Then the objective or target function is given below May profit lop) + 15D ‘The problem can now be stated thus Max 10D: + 15Dz Subject to 2D + 1D2<32 3D1 +4D2 5 60 1.SD1 + SD2 $60 When an LP is solved, one of the following four cases will occur: 1. The LP has a unique optimal solution, 2 The LP has alternative (multiple) optimal solutions. It has more than one (actually an infinite number of) optimal solutions 3. The LP is infeasible. It has no feasible solutions (The feasible region contains no points). 4. The LP is unbounded. In the feasible region there are points with arbitrarily large (in 4 max problem) objective function values. Graphical Analysis of Linear Programming Graphical procedure for LPP is convenient for solving a problem that has two decision variables. It could also solve a problem with three decision variables but with less ease. Any LP with only two variables can be solved graphically The fe le region is the set of all points satisfying the constraints. max z= 3x) + 2x2 st. 2ui +325 100 (Finishing constraint) mitms 80 (Carpentry constraint) 40 (Demand constraint) xa 20 (Sign restrictions) The set of points satisfying the LP is bounded by the five sided polygon DGFEH. Any point ‘on or in the interior of this polygon (the shade area) isin the feasible region. Having identified Page 20 of 89LO 418-OPERATIONS RESEARCH the feasible region forthe LP, a search ean beggin for the opHlmal sofuion which will be the point in the feasible region with the largest z-value (maximization problem). To find the optimal solution, a tine on which the points have the same z-value is graphed. In called an isoprofit line whi min problem, this is called the isocost line. (The figure shows the isoprofit lines for ¢ ~ 60, z ~ 100, and z = 180). amax problem, such a x2, 3 finishing constraint demand constraint carpentry constraint In the unique optimal solution case, isoprofit line last hits a point (vertex - comer) before leaving the feasible region. The optimal solution of this LP is point G where (x1, x2) = (20, 60) giving z= 180, A constraint is binding (active, tight) ifthe left-hand and right-hand side of the constraint are equal when the optimal values of the decision variables are substituted into the constraint. ‘A constraint is nonbinding (inactive) if the left-hand side and the right-hand side of the constraint are unequal when the optimal values of the decision variables are substituted into the constraint. the finishing and carpentry constraints are binding. On the other hand, the demand constraint for wooden soldiers is nonbinding since at the optimal solution x1 < 40 (x1 = 20). Page 21 of 8968 j0zz a8eq STL =(STEHS = EXE + Ixy uonouny aanvafqo amp Jo anjea ayn a0uopy (ST 1) = (EX gx) = Jos jeuundo amp ydesd ayp wory aed sae 0='x (Avs) 01 = ex + INC € uonenbo woy puy s=Ix 0-% f=%x 0='X (Aes) ¢] = exe + INE Zuonenba wor “woyB94 2141822) 1 pol!t9 UotIn|os qysH2} JO 98 ay J9p|suog 144) Pinoys am uorNnjos wmuNdO ue puy of, “uonnjos winuundo ue pojjvo 2q 6 an]A wiNUAINEUH SL 7 SALT Yo!Yar HORN}OS ‘iqsseay ous ‘uo! njos a]q)svay v SU S| 1e1)SU09 aK pal od ayy auyjap 2X (=. cg zexny (e)- - = OLS NT 4 ING = SES ING + INE ‘on ofans - singh ING = Z XO Wo[qoud G7] Burmoyjoy ay aAlOS Zaduexd HOMVasaN SNOLLVHIdO BI 1HBLD 418-OPERATIONS RESEARCH Problem of mixture Kind arise when resources have to be shared among two or more product oF strated by lac re required at this stage and the methods are best xs A block of fa capable of producing 1750 blocks per day but another new the manager decided to buy capacity is 2000 blocks per day. The maximum number of man-day is Shrs, the factory can allow t required to produce 1000 blocks \ 1000 blocks wi joulding mal {ype of operation for a8man-day. 4man-day are he new machine and 8man-day are required to produce old machine, The profit ¢ lated per 1000 blocks with the new moulding the old moulding machine. Maximise the total Let x1 represent daily production with old moulding machine (in thousand) Let xa represent dai The the production with new moulding machine (in thousand) inager can produce as many blocks as he wishes, provided he does not exceed set by the constrained, If he produced x1 and x2 in full he will make a daily profit of 60x1+100x2 this is known as OBJECTIVE FUNCTIONS and will give the . The maximum number which can be produced with old and new moulding is 1750 and 2000 blocks respectively. 1 Xis 1 %and x2<2 ‘There is also a side const profit he wishes to m: 8 dsr tan > 12 dxi t 12x > 24 x120,%220 _qssation shows how a {wo-Variable linear programming problem is solved graphically, which «illustrated as follows: i Example 2.3: consider the product mix problem discussed in se mn 2.2 Maximize 30x1 + 40x2 subject to: 3x1 + 2x25 600 3xr+ 5x2 S800 5x1 + 6x2 $1100 xz 0,220 From the first constraints 3x1 + 2x2 < 600, draw the line 3x; + 2x2 = 600 which passes through the point (200, 0) and (0, 300). This is shown in the following graph as line 1. | Page 26 ofOLD A18-OPFRATIONS RESEARCH 300 Jai # 2x0 = 6006line 1) 200 100 3x1 + 5x0 = 800(line2) 1 + 6x2 = 1100(line3) 0 50 100 150-200 2950 XS Graph 1: Three closed half planes and Feasible Region Half Plane - A linear inequality in two variables is called as a half plane. Boundary - The corresponding equality (Iine) is called as the boundary of the half plane. Close Half Plane — Half plane with its boundary is called as a closed half plane. In this case we must decide in which side of the line 3x1 + 2x2 = 600 the half plane is located. ‘The easiest way to solve the inequality for x2 is 3x1$ 600-2x2 And for the fixed x1, the coordinates satisfy this inequality are smaller than the corresponding ordinate on the line and thus the inequality is satisfied for ll the points below the line 1. Page 27 of 89BLOA18 OPERATIONS RESEARCH jay, we have to determine the closed half planes forthe inequalities 34y + $x) © 800 and sant etl ons+ 1100 (ine 2 andl Line Vin the graph, Since al the three constraints must be satisfied ® anancously, we have considered the intersection of these thee closed half planes. The Soni three elosed half planes is shown in the above graph as ABCD, iperogion ABCD is called the Feasible region, which is shaded in the graph, reasible Solution: any non-negative value of x1, x2 that is x1 > 0 and x2 2 0 is known as feasible solution of the jnsar programming problem if'it satisfies all the existing constraints, Feasible Region: The collection of all the feasible solution is called as the feasible region, Example 24: In the previous example we discussed about the less than or equal to type of linear programming problem, i.e. maximization problem. Now consider a minimization (i.e, greater than or equal to type) linear programming problem formulated in Example 2.2. Minimize 2000x1 + 1500x2 Subject to: 6x1 +2m> 8 Qxi+4eoz 12 4xi+ 12x22 24 xZOx2 0 The three lines 6xy + 2x2 = 8, 2x1 + 4x2 = 12, and 4x1 + 12x2= 24 passes through the point (1.3.0) (04), (6,0) (0,3) and (6,0) (0,2). The feasible region for this problem is shown in the following Graph 2. In this problem the constraints are of greater than or equal to type of feasible region, “hich is bounded on one side only. Page 28 of 89PLO 418- OPERATIONS neseARcH x 6x14 2x2> 8 2 4x1 + 12xa> 24 2 4 6 & a Graph 2: Feasible Region Key Terms. Objective Funetion: is a linear function of the devision variables representing the objective of the manager/decision maker. Constraints: are the linear equations or inequalities arising out of practical limitations, Decision Variables: are some physical quantities whose values indicate the solution, Feasible Solution: is a solution which satisfies all the constraints (including the non-negative) presents in the problem, Feasible Region: is the collection of feasible solutions, Multiple Solutions: are solutions each of which maximize or minimize the objective function. Unbounded Solution: is a solution whose objective function is infinite, Infeasible Solution: means no feasible solution. Page 29 of 89