APPLICATION OF LINEAR

PROGRAMMING IN BUSINESS SETTING

Prescriptive Analytics nbmanasan.svcc22-23
But wait, let’s have a review…
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What is Prescriptive Analytics?

On your own opinion, why do you think Prescriptive Analytics is used

as an advance process in a business/organization?

How Prescriptive Analytics fill the gap/issues in the

business/organization?

Why modelling is essential in business/organization?

Agenda

a) Definition of Linear Programming

b) Application of LP in Business
Setting
c) Why LP is useful and beneficial in
Business
d) Example of Businesses that uses
Linear Programming
Linear Programming

In business, linear programming is applied for

determining the optimal allocation of
resources such as materials, machines,
manpower, etc.

Also used for product smoothing and

assembly line balancing.
APPLICATION OF LINEAR PROGRAMMING
IN BUSINESS SETTING
PERSONNEL MANAGEMENT:

LP technique enables the personnel manager to solve problems relating to

recruitment, selection, training, and deployment of manpower to different
departments of the firm. It is also used to determine the minimum number of
employees required in various shifts to meet production schedule within a
time schedule.
APPLICATION OF LINEAR PROGRAMMING
IN BUSINESS SETTING
APPLICATION OF LINEAR PROGRAMMING
IN BUSINESS SETTING
INVENTORY MANAGEMENT:

A firm is faced with the problem of inventory management of raw materials

and finished products. The objective function in inventory management is to
minimize inven­tory cost and the constraints are space and demand for the
product. LP technique is used to solve this problem.
APPLICATION OF LINEAR PROGRAMMING
IN BUSINESS SETTING
APPLICATION OF LINEAR PROGRAMMING
IN BUSINESS SETTING
MARKETING MANAGEMENT:

LP technique enables the marketing manager in analyzing the audience

coverage of advertising based on the available media, given the advertising
budget as the constraint. It also helps the sales executive of a firm in finding
the shortest route for his tour. With its use, the marketing manager
determines the optimal distribution schedule for transporting the product
from different warehouses to various market locations in such a manner that
the total transport cost is the minimum.
APPLICATION OF LINEAR PROGRAMMING
IN BUSINESS SETTING
APPLICATION OF LINEAR PROGRAMMING
IN BUSINESS SETTING
FINANCIAL MANAGEMENT:

The financial manager of a firm, mutual fund, insurance company, bank, etc.
uses the LP technique for the selection of investment portfolio of shares,
bonds, etc. so as to maximize return on investment.
APPLICATION OF LINEAR PROGRAMMING
IN BUSINESS SETTING
APPLICATION OF LINEAR PROGRAMMING
IN BUSINESS SETTING
BLENDING PROBLEM:

LP technique is also applicable to blending problem when a final product is

produced by mixing a variety of raw materials. The blending problems arise in
animal feed, diet problems, petroleum products, chemical products, etc. In all
such cases, with raw materials and other inputs as constraints, the objective
function is to minimize the cost of final product.
APPLICATION OF LINEAR PROGRAMMING
IN BUSINESS SETTING
WHY LP IS BENEFICIAL?

Linear programming mainly is used in

macroeconomics, business management,
maximizing revenue and minimizing the
cost of production.

For example, inventory management, asset

and stock management, human and non-
human resources allocation, planning and
advertising tours
WHY LP IS BENEFICIAL?

1. Attaining optimum use of resources

2. A more objective way of arriving at
decisions
3. Ensuring due attention to
bottlenecks before the problems
occur
4. Easy adaptation to changes in
circumstances
BUSINESSES THAT USES
LINEAR PROGRAMMING
AIRLINE
• Airline Scheduling
to schedule their aircrafts to flights on
various routes, and to schedule crews to the
flights. In addition, airlines also use linear
programming to determine ticket pricing for
various types of seats and levels of service or
amenities, as well as the timing at which
ticket prices change.
BUSINESSES THAT USES
LINEAR PROGRAMMING
Constraints involve considerations such as:
• Each aircraft needs to complete a daily or weekly tour to
return back to its point of origin.
• Scheduling sufficient flights to meet demand on each route.
• Scheduling the right type and size of aircraft on each route
to be appropriate for the route and for the demand for
number of passengers.
• Aircraft must be compatible with the airports it departs
from and arrives at - not all airports can handle all types of
planes.

A model to accomplish this could contain thousands of variables and

constraints. Highly trained analysts determine ways to translate all the
constraints into mathematical inequalities or equations to put into the
model.
BUSINESSES THAT USES
LINEAR PROGRAMMING
ONLINE MARKET
• Advertisement on Online Marketing
Did you ever make a purchase online and then notice
that as you browse websites, search, or use social
media, you now see more ads related the item you
purchased?

Marketing organizations use a variety of mathematical

techniques, including linear programming, to
determine individualized advertising placement
purchases.
BUSINESSES THAT USES
LINEAR PROGRAMMING
BANKING AND FINANCE
• Loans
A car manufacturer sells its cars though dealers.
Dealers can offer loan financing to customers
who need to take out loans to purchase a car.
Here we will consider how car manufacturers
can use linear programming to determine the
specific characteristics of the loan they offer to a
customer who purchases a car.
BUSINESSES THAT USES
LINEAR PROGRAMMING
BANKING AND FINANCE
• Loans
Linear programming can be used as part of the
process to determine the characteristics of the loan
offer. The linear program seeks to maximize the
profitability of its portfolio of loans. The constraints
limit the risk that the customer will default and will
not repay the loan. The constraints also seek to
minimize the risk of losing the loan customer if the
conditions of the loan are not favorable enough;
otherwise the customer may find another lender,
such as a bank, which can offer a more favorable
loan.
BUSINESSES THAT USES
LINEAR PROGRAMMING
MANUFACTURER
• Production Planning and Scheduling in
Manufacturing
Consider the example of a company that produces
yogurt. There are different varieties of yogurt products
in a variety of flavors. Yogurt products have a short
shelf life; it must be produced on a timely basis to
meet demand, rather than drawing upon a stockpile of
inventory as can be done with a product that is not
perishable. Most ingredients in yogurt also have a
short shelf life, so can not be ordered and stored for
long periods of time before use; ingredients must be
obtained in a timely manner to be available when
needed but still be fresh.
Thank you for listening 

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