II. Business Analytics: Optimization & Production Planning

Question 1

Why do we use optimization models?

Answer 1

For quantitative decision support. Optimization models support decision-making regarding pre-defined objectives and existing constraints (e.g. on capacities or costs).

Question 2

State the components of an optimization problem and their relation to the optimization model.

Answer 2

• Input data:
  
  • Indices: Elements of an index set, which is used to enumerate parameters and decision variables and to distinguish between similar types.
  • Parameters: Information, which is given in a specific optimization model; input values
• Decision:
  
  • Decision variables: Represent the decisions in the model, define all alternative decisions; not determined beforehand. The values of the decision variables are output values.
• Objective:
  
  • Objective function: Defines the value to be optimized in the model; indicates how much a variable contributes to this value; can be maximized or minimized
• Constraints:
  
  • Constraints restrict the feasibility of certain decisions according to pre-defined conditions.

Question 3

How does the “for all …” symbol look like and how is it used?

Answer 3

This symbol is the switched “A” sign used in the fashion as can be seen below.

Question 4

What do we need for a specific integer or linear program?

Answer 4

1. Decision variables
2. Objective function
3. Constraints

Question 5

What do we need for an algrebaic integer or linear program?

Answer 5

1. Indices
2. Parameters
3. Decision variables
4. Objective function
5. Constraints

Question 6

Which constraint must nearly always be given?

Answer 6

X_i >= 0 [For all] Vi = 1, … , I

Question 7

What is a chase strategy?

Answer 7

• Production volume equals demand in each period
• Reactive approach
• Production volume is adapted to the demand each period using overtime
• No inventory

Question 8

What is a level strategy?

Answer 8

• Constant production volume (average demand)
• Increasing and decreasing inventory levels
• Inventory costs

Question 9

What problem is solved by aggregate planning?

Answer 9

• Problem: time-dependent demand - How much to produce when?
• Actions:
  
  • Overtime vs. reduced hours, outsourcing
  • Increasing and decreasing in inventories
• Characteristics
  
  • Aggregate product types
  • Global capacities (factory specific)
  • Planning horizon: several months, one to two years

Question 10

How do we make sure that demand is fulfilled in aggregate planning?

Answer 10

Through the inventory balance equation.

Question 11

What is lotsizing and what are relevant solution strategies?

Answer 11

Question 12

What are the two strategies regarding lot-sizing?

Answer 12

• “Lot for Lot” and “Lot-size = Production capacity”

Question 13

What are the characteristics of lot-sizing?

Answer 13