Alpha University College

Department Of Business Administration

Course title- Quantitative Analysis for
Management Decision
Group1 Assignment
Name ID No
1. Fikiru Desalegn MBAD1/20/027/15
2. Banchiayehu Teshome MBAD1/20/115/15
3. Binyam Gezahign MBAD1/20/030/15
4. Elsabet G/Mariam MBAD1/20/022/15
5. Meron Eshetu MBAD1/20/058/15
6. Saron Wagnew MBAD1/20/046/15

Submitted To: Dr Hailemichael

2015 E.C
Introduction
◦ Goal programming is an approach used for solving a multi-objective optimization problem that
balances a trade-off in conflicting objectives.
◦ It is an approach of deriving a best possible ‘satisfactory’ level of goal attainment.
◦ A problem is modeled into a goal programming model in a manner similar to that of a linear
programming model. However, the goal programming model accommodates multiple and often
conflicting incommensurable (dimension of goals and units of measurements may not be same)
goals, in a particular priority order (hierarchy).
◦ A particular priority order is established by ranking or weighing various goals in accordance
with their importance.
◦ The priority structure helps to deal with all goals that cannot be completely and/or
simultaneously achieved, in such a manner that more important goals are achieved first, at the
expense of the less important ones.

Goal Programming
Goal Programming is an extension of Linear Programming in which targets are specified for a
set of constraints. In Goal Programming there are two basic models: the pre-emptive
(lexicographic) model and the Archimedean model. In the pre-emptive model, goals are ordered
according to priorities. The goals at a certain priority level are considered to be infinitely more
important than the goals at the next level. With the Archimedean model weights or penalties for
not achieving targets must be specified, and we attempt to minimize the sum of the weighted
infeasibilities.
If constraints are used to construct the goals, then the goals are to minimize the violation of the
constraints. The goals are met when the constraints are satisfied.
The example in this section demonstrates how Mosel can be used for implementing pre-emptive
Goal Programming with constraints. We try to meet as many goals as possible, taking them in
priority order.
Goal programming models are very similar to linear programming models, but whereas linear
programs have one objective, goal programs can have several objectives. Consider the following
example.
Suppose that a company manufactures two products (x1 and x2). The resource requirements and
profit are in the table below
 Product 1 (x1) Product 2 (x2) Available

profit per unit 16 12

labor hours per unit 3 6 72
material per unit 2 1 30

In addition, the company has the following goals.

1. The total profit should be at least 250.
2. It takes time to set up production for product 2, so we like to produce in batches of at
least 5.
3. The current demand for product 1 is 14. Therefore, we would like to produce exactly 14.
This problem appears similar to a linear program but now we have three goals rather than one
objective.
Example 2:- suppose the Ethiopia tourist trading enterprise manufactured different products like
furniture products to the number of demand needs so to calculate the procedure by using the goal
programming model.

Product one Product two target

Labors(hr) 4 2 32
Profit 4 2 48
Demand 7 10
The company incurs a penalty of $1 for each dollar it falls short of the profit. A $2 penalty is
incurred for each hour of overtime, and a $1 penalty is incurred for each hour of labor that is not
used. A penalty of $5/unit is assessed for any shortfall in meeting demand. Formulate an LP to
minimize the penalty.

Solution:- we minimize:

z = s1 + 2e1 + s2 + 5s3 + 5s4

4x1 +2x2 +s1 −e1 = 32 Labor
4x1 +2x2 +s2 −e2 = 48 Profit
x1 +s3 −e3 = 7
x2 +s4 −e4 = 10
In Lindo , we get
x1 = 7, x2 = 10, e1 = 16
We first ask LINDO to min z = s1 such that
4x1 + 2x2 + s1 − e1 = 32
x1 + s2 − e2 = 7
x2 + s3 − e3 = 10
min s1 , st
4x1+2x2+s1-e1=32
x1+s2-e2=7
x2+s3-e3=10
end
min e1 , st
4x1+2x2+s1-e1=32
x1+s2-e2=7
x2+s3-e3=10
s1=0
s2=0
s3=0
end
LINDO basically returns the same answer:
x1 = 7, x2 = 10, e1 = 16
(So we’re not able to get e1 to zero)

Concept
 Goal Programming can be thought of as an extension or generalization of linear
programming to handle multiple, normally conflicting objective measures.
 Each of these measures is given a goal or target value to be achieved.
  Unwanted deviations from this set of target values are then minimized in an achievement
function. This can be a vector or a weighted sum dependent on the goal programming
variant used.
 As satisfaction of the target is deemed to satisfy the decision maker(s), an underlying
satisficing philosophy is assumed.
 Goal programming is used to perform three types of analysis:
 Determine the required resources to achieve a desired set of objectives.
 Determine the degree of attainment of the goals with the available resources.
 Providing the best satisfying solution under a varying amount of resources and
priorities of the goals.

Terminology
 Decision Maker: The decision maker(s) refer to the person(s), organization(s), or
stakeholder(s) to whom the decision problem under consideration belongs.
 Decision Variable: A decision variable is defined as a factor over which the decision
maker has control. The set of decision variables fully describe the problem and form the
decision to be made. The purpose of the goal programming model can be viewed as a
search of all the possible combinations of decision variable values (known as decision
space) in order to determine the point which best satisfies the decision maker’s goals and
constraints.
 Criterion: A criterion is a single measure by which the goodness of any solution to a
decision problem can be measured. There are many possible criteria arising from
different fields of application but some of the most commonly arising relate at the
highest level to
 Cost
 Profit
 Time
 Distance
 Performance of a system
 Company or organizational strategy
 Personal preferences of the decision maker(s)
 Safety considerations
  A decision problem which has more than one criterion is therefore referred to as a
multi-criteria decision making (MCDM) or multi-criteria decision aid (MCDA)
problem. The space formed by the set of criteria is known as criteria space.
 Aspiration Level: The numerical value specified by the decision maker that reflects
his/her desire or satisfactory level with regard to the objective function under
consideration. For example, suppose the company wishes to maximize the profit which
is formulated as: 𝑀𝑎𝑥 𝑧 = 2𝑥1 + 3𝑥2 … (1) Further suppose the management wishes
to have at-least 40,000 as profit, then the above stated objective is required to be re-
written as: 2𝑥1 + 3𝑥2 ≥ 40,000 … (2) Here, 40,000 is the aspiration level with respect
to profit.
 Goal: An objective function along with its aspiration level is called a goal. For example,
the relation (1) is objectives function whereas relation (2) is a goal.
 Goal Deviation: The difference between what we actually achieve and what we desire to
achieve. There are two types of goal deviations:
 Positive deviation or overachievement ◦ Negative deviation or underachievement
 In general goals can be defined in three ways:
 Positive deviation: 𝑓 𝑥 ≤ 𝑎 𝑓 𝑥 − 𝑑 + = 𝑎
 Negative deviation: 𝑓 𝑥 ≥ 𝑎 𝑓 𝑥 + 𝑑 − = 𝑎
 Both deviations: 𝑓 𝑥 = 𝑎 𝑓 𝑥 − 𝑑 + + 𝑑 − = 𝑎
 Remark: In general,, for goal programming irrespective of the type of the goal we can
use both the deviations for each case. However, for the first two cases it is required to
minimize just one of the deviation only.
Formulation
 Desirable vs. Undesirable Deviations: (depend on the objectives)
 Max goals (≥) - the more the better - 𝑑𝑖 +or 𝑝𝑖 desirable.
 Min goals (≤) - the less the better - 𝑑𝑖 −or 𝑛𝑖 desirable.
 Exact goals (=) - exactly equal - both 𝑑𝑖 + (or 𝑝𝑖 ) and 𝑑𝑖 − (or 𝑛𝑖 ) undesirable
 In all the situations, we first identify the undesirable deviation of the expression in the
goal and then attempt to minimize the same.
  In GP, the objective is to minimize the (weighted) sum of undesirable deviations (all
undesirable 𝑑𝑖 + (or) and 𝑑𝑖 − (or 𝑛𝑖) →→ 0).
 For each goal, at least, one of 𝑑𝑖 + (or) and 𝑑𝑖 − (or 𝑛𝑖) must be equal to “0”.
 An optimal solution is attained when all the goals are reached as close as possible to their
aspiration level, while satisfying a set of constraints.

Types
There are two types of goal programming formulations:
 Non Pre-emptive Goal Programming: In this type of problem we try to minimize the
weighted sum of all the undesirable deviations. That is in this type no goal is said to
dominate any other goal. However, it is possible to have different importance for the
deviations by the decision makers. For example, Let us consider the following multi
objective linear programming problem (𝑀𝑂𝑃1):

𝑀𝑎𝑥 𝑃𝑟𝑜𝑓𝑖𝑡 𝑧1 = 2𝑥1 + 3𝑥2

𝑀𝑖𝑛 𝐶𝑜𝑠𝑡 𝑧2 = 𝑥1 + 5𝑥2

𝑠𝑢𝑏𝑗𝑒𝑐𝑡 𝑡𝑜,

𝑥1 + 𝑥2 ≤ 10

𝑥1 − 𝑥2 ≤ 4

𝑥1, 𝑥2 ≥ 0
 The above problem can be converted into a goal programming problem assuming that
the decision maker wishes to have at-least 40,000 profit and the cost should not exceed
the limit of 20,000 represented as follows (𝐺𝑃1):

𝑀𝑖𝑛 𝑑1 − + 𝑑2 +

𝑠𝑢𝑏𝑗𝑒𝑐𝑡 𝑡𝑜,

2𝑥1 + 3𝑥2 + 𝑑1 − = 40,000

𝑥1 + 5𝑥2 − 𝑑2 + = 20,000

𝑥1 + 𝑥2 ≤ 10

𝑥1 − 𝑥2 ≤ 4

𝑥1, 𝑥2 ≥ 0
𝑑1 −, 𝑑2 + ≥ 0
 The above is the representation of non-pre-emptive goal programming problem.
There are two types of goal programming formulations:
 Pre-emptive Goal Programming: Suppose in the above problem after knowing the fact
that the multi-objective scenario restrict to have any such solution which satisfies both
the goals simultaneously, then the decision makers specifies the priorities for both the
goals. Suppose in problem 𝐺𝑃1 the first goal is having the higher priority, say 𝑃1, and
the second goal is having lower priority, say 𝑃2, that is 𝑃1 > 𝑃2. In this situation, the
problem 𝐺𝑃1 is written as follows (𝐺𝑃2):

𝑀𝑖𝑛 {𝑃1𝑑1 −, 𝑃2𝑑2 +}

𝑠𝑢𝑏𝑗𝑒𝑐𝑡 𝑡𝑜,

2𝑥1 + 3𝑥2 + 𝑑1 − = 40,000

𝑥1 + 5𝑥2 − 𝑑2 + = 20,000

𝑥1 + 𝑥2 ≤ 10

𝑥1 − 𝑥2 ≤ 4

𝑥1, 𝑥2 ≥ 0

𝑑1 −, 𝑑2 + ≥ 0

𝑃1 > 𝑃2
 The above is the representation of pre-emptive goal programming problem.

Note
 There are two types of constraints in a goal programming problem: soft constraints and
hard (or rigid) constraints.
 The soft constraints are the constraints corresponding to the goals which has been
obtained by using the aspirations for the objective functions. For example the first two
constraints in the above problems (𝐺𝑃1, 𝐺𝑃2) are soft constraints.
 Hard constraints are the constraints corresponding to the feasible region or the original
constraints in which no violation is acceptable. For example the constraints in problem
𝑀𝑂𝑃1 are hard constraints in the above problems 𝐺𝑃1, 𝐺𝑃2.
Example
Alpha company produces two kinds of fancy products, pen holder and paper tray. Production of
either of them requires 1 hr. production capacity in the plant. The plant has a maximum
production capacity of 12 hrs. per week. The maximum numbers of pen holders and paper trays
that can be sold are 7 and 10 respectively. The gross margin from the sales of pen holder is Rs 90
and Rs 45 for a paper tray. The overtime hours should not exceed 3 hrs. per week if required.
The plant manager has set the following goals in order of importance:
◦ 𝑃1: He wants to avoid any under-utilization of production capacity

◦ 𝑃2: He wants to limit the overtime hours to 3 hrs

◦ 𝑃3: He wants to sell as many pen holders and paper trays as possible. Since the gross margin
from the sale of a pen holder is set at twice the amount of the profit from a paper tray, the
manager has twice as much desire to achieve the sales goal for pen holders as for paper trays.
◦ 𝑃4: The manager wishes to minimize the overtime operation of the plant as much as possible.
Formulation
◦ Let 𝑥1 be the number of pen holders to be produced per week and 𝑥2 be the number of paper
trays to be produced per week, then the above problem can be formulated as:
𝑀𝑖𝑛 𝑃1𝑑1 −, 𝑃2𝑑2 +, 𝑃3 2𝑑3 − + 𝑑4 − ,4𝑑1 +

𝑠𝑢𝑏𝑗𝑒𝑐𝑡 𝑡𝑜

𝑥1 + 𝑥2 + 𝑑1 − − 𝑑1 + = 12

𝑑1 + − 𝑑2 + = 3

𝑥1 + 𝑑3 −=7

𝑥2 + 𝑑4 − = 10

𝑥1, 𝑥2, 𝑑1 −, 𝑑1 +, 𝑑2 +, 𝑑3 −, 𝑑4 − ≥ 0

EXAMPLE PROBLEM

The objective is to solve a problem with two variables x and y (x,y ≥ 0), the constraint

100·x + 60·y ≤ 600

And the three goal constraints
Goal1: 7·x + 3·y ≥ 40
Goal2: 10·x + 5·y = 60
Goal3: 5·x + 4·y ≥ 35
where the order given corresponds to their priorities.

Multiple-Objectives Problem: In most practical cases, decision makers are faced a situation
where they must achieve more than two objectives (those may even be in conflict) at same
time.

Or more than two criteria must be used to evaluate a decision.

Examples:

Production Planning - Maximize Profit/Maximize Market Share

Location Selection - Maximize Sales/Minimize Delivery Cost

Personal Schedule - Maximize GPA/Maximize Income

NONPREEMPTIVE GOAL PROGRAMMING
an Advertisement Example

• A company is considering three forms of advertising.

• Goals
– Goal 1: Spend no more $25,000 on advertising.
– Goal 2: Reach at least 30,000 new potential customers.
– Goal 3: Run at least 10 television spots.
An Advertisement Example
LP Model:

3000X + 800X + 250X £ 25,000

1 2 3

1000X + 500X + 200X ³ 30,000

1 2 3

X ³ 10
1

• Detrimental variables

Ui = the amount by which the left hand side falls short of (under) its right hand side
value.

Ei = the amount by which the left hand side exceeds its right hand side value.
• The goal equations

3000X + 800X + 250X + U – E = 25,000

1 2 3 1 1

1000X + 500X + 200X + U – E = 30,000

1 2 3 2 2

X + U – E = 10
1 3 3

• The objective is to minimize the penalty of not meeting the goals,

• The penalties are estimated to be as follows:
– Each extra dollar spent on advertisement above $25,000 cost the
company $1.
– There is a loss of $5 to the company for each customer not being
reached, below the goal of 30,000.
Each television spot below 10 is worth 100 times each dollar over budget.
• It is assumed that no advantage is gained by over achieving a goal.

Minimize 1E + 5U + 100U
1 2 3
s.t.

3000X + 800X + 250X + U – E = 25,000

1 2 3 1 1

1000X + 500X + 200X + U – E = 30,000

1 2 3 2 2

X + U – E = 10
1 3 3
All variables are non-negative.