Applied Math For DS: Son P. Nguyen

Mathematical modeling
Operations Research
Applied Math for DS
Son P. Nguyen
UEL
VNU in HCMC
June 9, 2018
Son P. Nguyen Applied Math for DS

Operations Research
Table of Contents
1 Mathematical modeling
2 Operations Research

Operations Research
SilComputers
SilComputer would like to determine the number of laptops and

desktops produced tomorrow to maximize their profits. Selling
each laptop brings a profit of $750 and selling each desktop brings
a profit of $ 1000. However, the manufacturer have the following
constraints
1 Each computer (laptop or desktop) needs one CPU and the
inventory for CPU is currently at 10 units.
2 Each laptop needs 16MB RAM and each desktop needs 32MB
RAM. The company has 15 units of 16MB RAM in stock.
3 The assembly time for a laptop and a desktop are 4 minutes
and 3 minutes respectively. The total assembly time is 25
minutes
Formulate an LP and solve it to find an optimal solution.

Operations Research
SilComputers
SilComputer would like to determine the number of laptops and

desktops produced tomorrow to maximize their profits. Selling
each laptop brings a profit of $750 and selling each desktop brings
a profit of $ 1000. However, the manufacturer have the following
constraints
1 Each computer (laptop or desktop) needs one CPU and the
inventory for CPU is currently at 10 units.
2 Each laptop needs 16MB RAM and each desktop needs 32MB
RAM. The company has 15 units of 16MB RAM in stock.
3 The assembly time for a laptop and a desktop are 4 minutes
and 3 minutes respectively. The total assembly time is 25
minutes
Formulate an LP and solve it to find an optimal solution.

Operations Research
More examples
Consider a restaurant that is open seven days a week. Based

of past experience, the number of workers needed on a
particular day is given as follows:
Day Mon Tue Wed Thu Fri Sat Sun
NUmber 14 13 15 16 19 18 11
Every worker works five consecutive days, and then takes two
days off, repeating this pattern idefinitely. How can we
minimize the number of workers that staff the restaurant.

Operations Research
More examples (cont.)
The optimality of a portfolio depends heavily on the model used

for defining risk and other aspects of financial instruments. Here is
a particularly simple model anenable to linear programming
techniques.
Consider a mortgage team with $100,000,000 to finance various
instruments. There are five categories of loans, each with an
associated return and risk (1-10, 1 best):

Operations Research
Loan/investment Return(%) Risk

First mortgages 9 3
Second mortgages 12 6
Personal Loans 15 8
Commercial Loans 8 2
Government Securites 6 1

Operations Research
Any uninvested money goes into a savings account with no

risk and 3% return. The goal for the mortgage team is to
allocate the money to the categories so as to:
Maximize the average return per dollar.
Have an average risk of no more than 5 (all averages and
fractions taken over the invested money (not over the saving
account)).
Invest at least 20% in commercial loans.
The amount in second mortgages and personal loans combined
should be no higher than the amount in first mortgages.

Operations Research
Any uninvested money goes into a savings account with no

risk and 3% return. The goal for the mortgage team is to
allocate the money to the categories so as to:
Maximize the average return per dollar.
Have an average risk of no more than 5 (all averages and
fractions taken over the invested money (not over the saving
account)).
Invest at least 20% in commercial loans.
The amount in second mortgages and personal loans combined
should be no higher than the amount in first mortgages.

Operations Research
The Modeling Approach to Problem Solving
Everyone uses models to make decisions.

Types of models:
Mental (arranging furniture)
Visual (blueprints, road maps)
Physical/Scale (aerodynamics, buildings)
Mathematical (what we’ll be studying)

Operations Research
Characteristics of Models
Models are usually simplified versions of the things they

represent
A valid model accurately represents the relevant
characteristics of the object or decision being studied

Operations Research
Benefits of Modeling
Economy - It is often less costly to analyze decision problems

using models.
Timeliness - Models often deliver needed information more
quickly than their real-world counterparts.
Feasibility - Models can be used to do things that would be
impossible.
Models give us insight & understanding that improves
decision making.

Operations Research
A Generic Mathematical Model
Y = f (X1 , . . . , Xn )
where
Y = dependent (response) variable (aka bottom-line
performance measure).
Xi = independent (explanatory) variables (inputs having an
impact on Y)
f (·) = function defining the relationship between the Xi & Y

Operations Research
Categories of Mathematical Models
Model Cate- Form of f (·) Independent OR tech-

gory Variables niques
Prescriptive, known know or un- LP, Networks,
well-defined der decision’s IP etc.
maker’s con-
trol
Predictive, ill- unknown known or Regression
defined under deci- analysis,
sion maker’s Time series
control analysis etc.

Operations Research
Categories of Mathematical Models
Model Cate- Form of f (·) Independent OR tech-

gory Variables niques
Descriptive, Known, unknown or simulation,
well-defined uncertain queueing inventory

Operations Research
The Problem Solving Process

Mathematical modeling Graphical Method
Operations Research The simplex method
Table of Contents
1 Mathematical modeling
2 Operations Research
Graphical Method
The simplex method

LP model
Let x1 and x2 be the number of laptops and desktops to be

produced (decision variables)
The objective function: z = 750x1 + 1000x2

LP model

The constraints:
1 x1 + x2 ≤ 10
2 x1 + 2x2 ≤ 15
3 4x1 + 3x2 ≤ 25
4 Sign constraints: x1 , x2 ≥ 0

LP model

The constraints:
1 x1 + x2 ≤ 10
2 x1 + 2x2 ≤ 15
3 4x1 + 3x2 ≤ 25
4 Sign constraints: x1 , x2 ≥ 0

The graphical method
The first constraint

The feasible region

The solution

The solution is at the intersection point of the two lines
x1 + 2x2 = 15
4x1 + 3x2 = 25
Solve the linear system to get the optimal solution (1, 7)

corresponding to the maximum profit z = $7, 750.

x1 + 2x2 = 15
4x1 + 3x2 = 25

Recall
The optimal solution happens on the boundary of the feasible
region.
In particular, it is at a vertex of the feasible region.

x1 + 2x2 = 15
4x1 + 3x2 = 25

Recall
The optimal solution happens on the boundary of the feasible
region.
In particular, it is at a vertex of the feasible region.

Standard form
Convert the SilComputer model into the standard form.

The tableau method
The starting tableau
z x1 x2 x3 x4 x5 RHS
λi
1 -0,75 -1 0 0 0 0
0 1 1 1 0 0 10 10
0 1 2 0 1 0 15 15/2
0 4 3 0 0 1 25 25/3

Example
Starting position

Example
After step 1
λi
1 -1/4 0 0 1/2 0 15/2
0 1/2 0 1 -1/2 0 5/2 5
0 1/2 1 0 1/2 0 15/2 15
0 5/2 0 0 -3/2 1 5/2 1

Example
After step 1

Example
λi
1 0 0 0 4/5 1/10 7.75
0 0 0 1 1/4 -1/5 2
0 0 1 0 5/4 -1/5 7
0 1 0 0 -3/5 2/5 1
The solution is optimal

Example
The optimal solution

Applied Math For DS: Son P. Nguyen

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Mathematical modeling

Applied Math for DS

Son P. Nguyen Applied Math for DS

Son P. Nguyen Applied Math for DS

SilComputer would like to determine the number of laptops and

Son P. Nguyen Applied Math for DS

SilComputer would like to determine the number of laptops and

Son P. Nguyen Applied Math for DS

Consider a restaurant that is open seven days a week. Based

Son P. Nguyen Applied Math for DS

More examples (cont.)

The optimality of a portfolio depends heavily on the model used

Son P. Nguyen Applied Math for DS

More examples (cont.)

Loan/investment Return(%) Risk

Son P. Nguyen Applied Math for DS

More examples (cont.)

Any uninvested money goes into a savings account with no

Son P. Nguyen Applied Math for DS

More examples (cont.)

Any uninvested money goes into a savings account with no

Son P. Nguyen Applied Math for DS

The Modeling Approach to Problem Solving

Everyone uses models to make decisions.

Son P. Nguyen Applied Math for DS

Models are usually simplified versions of the things they

Son P. Nguyen Applied Math for DS

Economy - It is often less costly to analyze decision problems

Son P. Nguyen Applied Math for DS

A Generic Mathematical Model

Son P. Nguyen Applied Math for DS

Categories of Mathematical Models

Model Cate- Form of f (·) Independent OR tech-

Son P. Nguyen Applied Math for DS

Categories of Mathematical Models

Model Cate- Form of f (·) Independent OR tech-

Son P. Nguyen Applied Math for DS

The Problem Solving Process

Son P. Nguyen Applied Math for DS

Son P. Nguyen Applied Math for DS

Let x1 and x2 be the number of laptops and desktops to be

Son P. Nguyen Applied Math for DS

Let x1 and x2 be the number of laptops and desktops to be

Son P. Nguyen Applied Math for DS

Let x1 and x2 be the number of laptops and desktops to be

Son P. Nguyen Applied Math for DS

The graphical method

The first constraint

Son P. Nguyen Applied Math for DS

The graphical method

The feasible region

Son P. Nguyen Applied Math for DS

The graphical method

Son P. Nguyen Applied Math for DS

The graphical method

The solution is at the intersection point of the two lines

Solve the linear system to get the optimal solution (1, 7)

Son P. Nguyen Applied Math for DS

The graphical method

The solution is at the intersection point of the two lines

Solve the linear system to get the optimal solution (1, 7)

Son P. Nguyen Applied Math for DS

The graphical method