CMPS 163: Business Analytics

Introduction

Now that we have seen and applied basic concepts in optimization, such as the objective, decisions, and constraints, we will study and solve a more involved business problem that involves the production of orange juice. Initially our goal is to optimize (minimize) cost under the constraint that the orange juice should be of a certain quality, with the complication that we have many suppliers with different prices for orange juice (made from different oranges), different quantities of orange juice, and different qualities of orange juice. The prices, quantities, and qualities will have to be turned into constraints before we can solve this problem, and we will see how to achieve that. Later on we switch it around and make cost a constraint (fixed) and optimize (maximize) the quality of the orange juice. At the end we study a two very important concepts in business analytics: uncertainty and risk.

Module Objectives

• Implement a complex optimization problem in Excel
• Describe how an objective can become a constraint
• Recognize the big M trick
• Sketch the important role of uncertainty and risk in optimization

Learning Resources

• Module 9 Readings: Chapter 4
• Module 9 Slides: Chapter 4

Learning Activities

• Module 9 Assignment

For Further Study

• Read more about optimization on Wikipedia
• Read more about linear programming on Wikipedia