Mba in Shipping Management

Chapter Two Linear Programming: Basic Concepts

Learning objectives

After completing this chapter, you should be able to 1. Explain what linear programming is. 2. Identify the three key questions to be addressed in formulating any spreadsheet model. 3. Name and identify the purpose of the four kinds of cells used in linear programming spreadsheet models. 4. Formulate a basic linear programming model in a spreadsheet from a description of the problem. 5. Present the algebraic form of a linear programming model from its formulation on a spreadsheet. 6. Apply the graphical method to solve a two-variable linear programming problem. 7. Use Excel to solve a linear programming spreadsheet model.

The management of any organization regularly must make decisions about how to allocate its resources to various activities to best meet organizational objectives. Linear programming is a powerful problem-solving tool that aids management in making such decisions. It is applicable to both profit-making and not-for-profit organizations, as well as governmental agencies. The resources being allocated to activities can be, for example, money, different kinds of personnel, and different kinds of machinery and equipment. In many cases, a wide variety of resources must be allocated simultaneously. The activities needing these resources might be various production activities (e.g., producing different products), marketing activities (e.g., advertising in different media), financial activities (e.g., making capital investments), or some other activities. Some problems might even involve activities of all these types (and perhaps others), because they are competing for the same resources. You will see as we progress that even this description of the scope of linear programming is not sufficiently broad. Some of its applications go beyond the allocation of resources. However, activities always are involved. Thus, a recurring theme in linear programming is the need to find the best mix of...