Goal Programming
Penalties and Priorities
MULTIPLE OBJECTIVES
• ZELTON corporation is contemplating
l to produce
d
three new types of small ships at new facilities in near
future;
X1, X2 and X3 are the quantities
of the three types of ships
The goals/targets while lunching the products are;
• Minimum Profit should be $ 125M
• A stable work force level of 4000 employees
• A maximum investment of $ 55M
FACTORS X1 X2 X3 Target/
Goal
CONSTRAINTS Long Run Profit ($M)
12 9 15 >= 125
E l
Employment
t Level
L l 500 300 400 = 4000
Capital Investment 5 7 8 <= 55
($ )
($M)
[Long Run Profit]
[Long_Run_ 12 * X1 + 9 * X2 + 15 * X3 >= 125;
[Employment_Level] 500 * X1 + 300 * X2 + 400 * X3 = 4000;
[Capital_Investment] 5 * X1 + 7 * X2 + 8 * X3 <= 55;
UNITS CONTRIBUTION
FACTORS X1 X2 X3 Target/
g /
Goal
12 9 15 >= 125
Long Run Profit ($M)
Employment Level 500 300 400 = 4000
Capital Investment ($M) 5 7 8 <= 55
MULTI OBJECTIVES : DEVIATION FROM GOALS
• ZELTON corporation management is of the view that all the goals may not be
realized exactly
Each goal may deviate; either positive deviation or negative deviation.
Goal 1 : Minimum Profit of $ 125M;
Positive deviation means profit more than $125M (desirable)
N ti deviation
Negative d i ti means profitfit lless th
than $125M ((undesirable)
d i bl )
Goal 2 : Maintain a work force level of 4000 employees
Positive deviation means more than 4000 employees (undesirable)
Negative deviation means less than 4000 employees (undesirable)
Goal 3 : Maximum investment of $ 55M;;
Positive deviation means investment more than $ 55M (desirable)
Negative deviation means investment less than $ 55M (undesirable)
PENALTIES ON DEVIATION FROM GOALS
To minimize the consequences of undesirable deviations for each
goal, ZERCON management has penalties (weights) reflecting the
severity of not meeting the goal
Goal 1 : Minimum Profit of $ 125M;
Let D1P = Positive deviation from $125M (desirable)
D1N = Negative deviation from $125M (undesirable)
penalty weight : 5 for missing each $1 M of profit
Minimize : 5 D1N
FACTORS X1 X2 X3 Target/
MODIFIED CONSTRAINT Goal
WITH DEVIATION Long Run Profit ($M) 12 9 15 >= 125
Employment Level 500 300 400 = 4000
Capital
p Investment ($
($M)) 5 7 8 <<= 55
12 * X1 + 9 * X2 + 15 * X3 >= 125;
[Long Run Profit]
[Long_Run_
D1 = 12 * X1 + 9 * X2 + 15 * X3 ‐ 125;
D1P ‐ D1N = 12 * X1 + 9 * X2 + 15 * X3 ‐ 125;
Where D1 = D1P – D1N
PENALTIES ON DEVIATION FROM GOALS
Goal 2 : Maintain a work force level of 4000 employees
Let D2P = Positive deviation from 4000 employees
(undesirable)
D2N = Negative deviation from 4000 employees
(undesirable)
penalty weights :
2 for increasing employee level from 4000 employees
4 for reducing employee level from 4000 employees
Minimize : 2 D2P + 4 D1N
FACTORS X1 X2 X3 Target/
Goal
Long Run Profit ($M) 12 9 15 >= 125
MODIFIED CONSTRAINT Employment Level 500 300 400 = 4000
WITH DEVIATION
Capital
p Investment ($
($M)) 5 7 8 <<= 55
500 * X1 + 300 * X2 + 400 * X3 = 4000
[Employment Level]
[Employment_Level]
D2 = 500 * X1 + 300 * X2 + 400 * X3 ‐ 4000;
D2P ‐ D2N = 500 * X1 + 300 * X2 + 400 * X3 ‐ 4000;
where, D2 = D2P ‐ D2N
PENALTIES ON DEVIATION FROM GOALS
Goal 3 : Maximum investment of $ 55M;
Let:
D3P = Positive deviation means investment more than $ 55M
(undesirable)
D3N = Negative deviation means investment less than $ 55M
(desirable)
penalty weight :
3 for each $1 M of investment going above $ 55M
Minimize : 3 D3P
FACTORS X1 X2 X3 Target/
Goal
Long Run Profit ($M) 12 9 15 >= 125
MODIFIED CONSTRAINT Employment Level 500 300 400 = 4000
WITH DEVIATION
Capital
p Investment ($
($M)) 5 7 8 <<= 55
5 * X1 + 7 * X2 + 8 * X3 <= 55;
[Capital Investment]
[Capital_Investment]
D3 = 5 * X1 + 7 * X2 + 8 * X3 ‐ 55;
D3P – D3N = 5 * X1 + 7 * X2 + 8 * X3 ‐ 55;
Where, D3 = D3P – D3N
OBJECTIVE FUNCTION AND CONSTRAINTS
BASED ON PENALTIES
MIN = 5 * D1N + 2 D2P + 4 D1N + 3 D3P;
[Long_Run_ Profit]
12 * X1 + 9 * X2 + 15 * X3 ‐ 125 = D1P ‐ D1N ;
[Employment_Level]
500 * X1 + 300 * X2 + 400 * X3 ‐ 4000 = D2P ‐ D2N ;
[Capital_Investment]
5 * X1 + 7 * X2 + 8 * X3 ‐ 55 = D3P – D3N ;
Objective function : Minimize penalties on undesirable deviations
Min = 5 * D1N + 2 * D2P + 4 * D2N + 3 * D3P;
Goal 1; Minimum Profit,
Profit $ 125M
D1 = D1P – D1N = 0 ‐ 2 = ‐2 Æ Profit $ 123M
Goal 2;; Maintain a work force level of 4000
D2 = D2P – D2N = 0 ‐ 0 = 0 Æ Work Force 4000
Goal 3; Maximum Investment $ 55M
D3 = D3P – D3N = 5 ‐ 0 = 5 Æ Investment $60 M
X1 = 4, X2 = 0 , X3 = 5
Setting Priorities on Goals
• Management does not intend to overshoot
maximum investment limit of $ 55M (D3P)
• Also Management does not want to exceed
employer upper limit of 4000 (D2P)
• These two goals have higher priority than Goal 1
((exceedingg profit
p above $ 125 M)) ((D1N)) and,,
reducing employer level from 4000 (D2N)
• For meeting higher priority goals
goals, modify the
objective function as follows;
Min = 2 * D2P + 3 * D3P;
OUTPUT FOR FIRST PRIORITY GOALS
Goal 1; Minimum Profit, $ 125M
D1 = D1P – D1N = 0 ‐ 125 = ‐125 Æ Profit $ 0M
Goal 2; Maintain a work force level of 4000
D2 = D2P – D2N = 0 ‐ 4000 = ‐4000 Æ Work Force 0
Goal 3; Maximum Investment $ 55M
D3 = D3P – D3N = 0 ‐ 55 = ‐55 Æ Investment $0 M
X1 = 0, X2 = 0 , X3 = 0
Add the
th following
f ll i constraints;
t i t
MIN = 5 * D1N + 4 * D2N;
Add the following constraints;
D2P = 0
D3P = 0
Solve modified LP
OUTPUT FOR SECOND PRIORITY GOALS
Goal 1; Minimum Profit,
Profit $ 125M
D1 = D1P – D1N = 0 ‐ 20 = ‐20 Æ Profit $105M ($125M)
Goal 2;; Maintain a work force level of 4000
D2 = D2P – D2N = 0 ‐ 0 = 0 Æ Work Force 4000 (4000)
Goal 3; Maximum Investment $ 55M
D3 = D3P – D3N = 0 ‐ 3 = ‐3 Æ Investment $52M ($55M)
X1 = 6, X2 = 2 , X3 = 1
