Topic 4 (Ch5)

Network Modeling
 Introduction
 A number of business problems can be
represented graphically as networks.
 This chapter focuses on several such problems:
– Transshipment Problems
– Shortest Path Problems
– Maximal Flow Problems
– Transportation/Assignment Problems
– Generalized Network Flow Problems
– The Minimum Spanning Tree Problem
 1. Network Flow Problem
Characteristics
 Network flow problems can be represented as a
collection of nodes connected by arcs.
 There are three types of nodes:
– Supply
– Demand
– Transshipment
 We’ll use negative numbers to represent supplies
and positive numbers to represent demand.
 A Transshipment Problem:
The Bavarian Motor Company
+100

Boston $30
$50 2 Newark -200
1

Columbus
+60
3 $40
$40
$35 $30 Richmond
+80
Atlanta 4
+170 5
$25
$45 $50
$35

+70 Mobile
6 J'ville -300
$50 7
 Defining the Decision Variables

For each arc in a network flow model

we define a decision variable as:

Xij = the amount being shipped (or flowing) from node i to node j

For example…
X12 = the # of cars shipped from node 1 (Newark) to node 2
(Boston)
X56 = the # of cars shipped from node 5 (Atlanta) to node 6
(Mobile)
Note: The number of arcs
determines the number of
variables!
 Defining the Objective Function
Minimize total shipping costs.

MIN: 30X12 + 40X14 + 50X23 + 35X35

+40X53 + 30X54 + 35X56 + 25X65
+ 50X74 + 45X75 + 50X76
Constraints for Network Flow Problems:
The Balance-of-Flow Rules
For Minimum Cost Network Apply This Balance-of-Flow
Flow Problems Where:Rule At Each Node:

Total Supply > Total Demand Inflow-Outflow >= Supply or Demand

Total Supply < Total Demand Inflow-Outflow <=Supply or
Demand
Total Supply = Total Demand Inflow-Outflow = Supply or
Demand
 Defining the Constraints
 In the BMC problem:
Total Supply = 500 cars
(Supply >= Demand)
Total Demand = 480 cars
 For each node we need a constraint like this:
Inflow - Outflow >= Supply or Demand
 Constraint for node 1:
–X12 – X14 >= – 200 (Note: there is no inflow for node 1!)

 This is equivalent to:

+X12 + X14 <= 200
 Defining the Constraints
 Flow constraints
–X12 – X14 >= –200 } node 1
+X12 – X23 >= +100 } node 2
+X23 + X53 – X35 >= +60 }
node 3
+ X14 + X54 + X74 >= +80 } node 4
+ X35 + X65 + X75 – X53 – X54 – X56 >= +170 } node 5
+ X56 + X76 – X65 >= +70 } node 6
–X74 – X75 – X76 >= –300 } node 7
 Nonnegativity conditions
Xij >= 0 for all ij
Implementing the Model
See file Fig5-2.xlsm
Optimal Solution to the BMC Problem
+100

Boston $30
$50 2 Newark -200
120 1
20
Columbus 80
+60
3 $40
$40

40 Richmond
+80
Atlanta 4
+170 5

$45
210
70
+70 Mobile
6 J'ville -300
$50 7
 2. The Shortest Path Problem
 Many decision problems boil down to
determining the shortest (or least costly) route
or path through a network.
– Ex. Emergency Vehicle Routing
 This is a special case of a transshipment
problem where:
– There is one supply node with a supply of -1
– There is one demand node with a demand of +1
– All other nodes have supply/demand of +0
 The American Car Association
+0 3.3 hrs
L'burg 5 pts +1
9 Va Bch
11
5.0 hrs
9 pts 2.0 hrs
4 pts
4.7 hrs 2.7 hrs
+0 9 pts
+0 1.1 hrs
4 pts

K'ville 3 pts
5 2.0 hrs G'boro Raliegh
3.0 hrs
9 pts 4 pts 8 10
+0
1.7 hrs
5 pts
A'ville 1.5 hrs
6 +0 3 pts 2.3 hrs
+0 3 pts
Chatt. 2.8 hrs
3 7 pts
2.0 hrs Charl.
8 pts 7
1.7 hrs
+0
3.0 hrs
4 pts 4 pts
1.5 hrs
G'ville 2 pts
4
Atlanta +0
B'ham 2 2.5 hrs
3 pts
1 2.5 hrs
3 pts +0
-1
 Solving the Problem
 There are two possible objectives for this
problem
– Finding the quickest route (minimizing travel
time)
– Finding the most scenic route (maximizing the
scenic rating points)
See file Fig5-7.xlsm
 The Shortest Path Problem
 Using the balance-of-flow rule, the LP model
to minimize the driving time in this problem is
represented as:

15
Solving the Problem
See file Fig5-7.xlsm

16
 3. The Equipment
Replacement Problem (optional)
 The problem of determining when to
replace equipment is another common
business problem.
 It can also be modeled as a shortest
path problem…
 The Compu-Train Company
 Compu-Train provides hands-on software training.
 Computers must be replaced at least every two years.
 Two lease contracts are being considered:
– Each requires $62,000 initially
– Contract 1:
Prices increase 6% per year
60% trade-in for 1 year old equipment
15% trade-in for 2 year old equipment
– Contract 2:
Prices increase 2% per year
30% trade-in for 1 year old equipment
10% trade-in for 2 year old equipment
 Network for Contract 1
+0 +0
$63,985
2 4
$28,520 $30,231 $33,968
$32,045

-1 1 3 5 +1
$60,363 $67,824
+0

Cost of trading after 1 year: 1.06*$62,000 - 0.6*$62,000 = $28,520

Cost of trading after 2 years: 1.062*$62,000 - 0.15*$62,000 = $60,363
etc, etc….
Solving the Problem
See file Fig5-12.xlsm
 4. Generalized Network Flow Problems
Coal Bank Hollow Recycling
Process 1 Process 2
Material Cost Yield Cost Yield Supply
Newspaper $13 90% $12 85% 70 tons
Mixed Paper $11 80% $13 85% 50 tons
White Office Paper $9 95% $10 90% 30 tons
Cardboard $13 75% $14 85% 40 tons

Newsprint Packaging Paper Print Stock

Pulp Source Cost Yield Cost Yield Cost Yield
Recycling Process 1 $5 95% $6 90% $8 90%
Recycling Process 2 $6 90% $8 95% $7 95%
Contracted demand60 tons 40 tons 50 tons
 Network for Recycling Problem
-70 Newspaper $13
1
$12
95% Newsprint
90% +0 pulp +60
7
80% $5
Mixed $11 Recycling 90%
-50 paper 95%
Process 1 $6
2 5
$13 $8
75% 90% Packing
paper +40
pulp
$9 85% 95% 8
White
85%
-30 office
paper
$6
3 $10 Recycling $8 90%
90% Process 2
$7 Print
6
stock +50
$13 85% 95% pulp
+0 9

-40 Cardboard
$14
4
 Defining the Objective Function
Minimize total cost.

MIN: 13X15 + 12X16 + 11X25 + 13X26

+ 9X35+ 10X36 + 13X45 + 14X46 + 5X57
+ 6X58 + 8X59 + 6X67 + 8X68 + 7X69
 Defining the Constraints-I

 Raw Materials
-X15 -X16 >= -70 } node 1
-X25 -X26 >= -50 } node 2
-X35 -X36 >= -30 } node 3
-X45 -X46 >= -40 } node 4
 Defining the Constraints-II
 Recycling Processes

+0.9X15+0.8X25+0.95X35+0.75X45- X57- X58-X59 >= 0 } node 5

+0.85X16+0.85X26+0.9X36+0.85X46-X67-X68-X69 >= 0 } node 6

 Paper Pulp
+0.95X57 + 0.90X67 >= 60 } node 7
+0.90X57 + 0.95X67 >= 40 } node 8
+0.90X57 + 0.95X67 >= 50 } node 9
Implementing the Model
See file Fig5-17.xlsm
 5. The Maximal Flow Problem
(optional)
 In some network problems, the objective is to
determine the maximum amount of flow that can
occur through a network.
 The arcs in these problems have upper and
lower flow limits.
 Examples
– How much water can flow through a network
of pipes?
– How many cars can travel through a network
of streets?
 The Northwest Petroleum Company
 NPC wants to determine the maximum number of barrels per hour
that can flow from the oil field to the refinery.
4
Pumping Pumping
Station 1 Station 3

3
2

6
6 2

1 Oil Field Refinery 6

4
2
4
3 5
5

Pumping Pumping
Station 2 Station 4
The Northwest Petroleum Company
Pumping Pumping
Station 1 Station 3

3 4
2

6
6 2

1 Oil Field Refinery 6

2
4
4
3 5
5

Pumping Pumping
Station 2 Station 4
Formulation of the Max Flow Problem
MAX: X61
Subject to: +X61 - X12 - X13 = 0
+X12 - X24 - X25 = 0
+X13 - X34 - X35 = 0
+X24 + X34 - X46 = 0
+X25 + X35 - X56 = 0
+X46 + X56 - X61 = 0

with the following bounds on the decision variables:

0 <= X12 <= 6 0 <= X25 <= 2 0 <= X46 <= 6
0 <= X13 <= 4 0 <= X34 <= 2 0 <= X56 <= 4
0 <= X24 <= 3 0 <= X35 <= 5 0 <= X61 <= inf
Implementing the Model
See file Fig5-26.xlsm
 Optimal Solution
Pumping Pumping
Station 1 Station 3
3
3 4
2
5
5 6
6 2 2

1 Oil Field Refinery 6

2
4 2
4 4
4
3 5
5
2
Pumping Pumping
Station 2 Station 4
 Follow-up questions

(see Word file)

p228: 12, 14

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