1. Operations 343 Spreadsheet Modeling Week 15 Quiz Review Homework Review Course Review Lab session

2. Operations 343 Spreadsheet Modeling Models Models describe how we believe a process works Descriptive model (customer waiting in line) describing average wait time, customer arrival rates, customer service rate What we really want: Optimization model Considers costs of speeding up service and/or costs of losing customers due to long waits Objective: maximize profit, subject to constraints (like limits on labor, resources, money) Use Solver to find optimal solution

3. Operations 343 Spreadsheet Modeling Types of Models Production Mix models (like final project) Choosing ideal # of products based on revenues, cost of goods, and subject to constraints (labor, supplies) Key is to formulate as a linear programming problem Profit = 6X 1 + 2X 2 + 4X 3 + 3X 4 where Xi is quantity of each product to manufacture and coefficients are the profit per product

4. Operations 343 Spreadsheet Modeling General Model Format Problem structure: Problem Input Data Changing cells (production plan) Constraints Objective or target to max or min

5. Operations 343 Spreadsheet Modeling Monet Prod. Mix Example

6. Operations 343 Spreadsheet Modeling Sensitivity Analysis Sensitivity Analysis to understand what changes can be made without changing optimal solution and to find what changes have the greatest impact Easiest form: Change your assumptions (inputs, constraints) and see what happens!

7. Operations 343 Spreadsheet Modeling Sensitivity Reports Report output provides amount objective coefficients can change w/o changing optimal solution how the objective changes due to constraint changes Sensitivity Analysis is important - its your job as manager! Make decisions about reallocating resources to achieve better results

8. Operations 343 Spreadsheet Modeling Workforce Scheduling Models Also, dynamic workforce models - add/sub workers, overtime

9. Operations 343 Spreadsheet Modeling Production Process models Like product mix, but some of the production is used to manufacture products, rather than sold Account for units used in production Solve with two sets of changing cells

10. Operations 343 Spreadsheet Modeling Pricing models Goal is to capture the maximum profit - where the number of units sold varies with price. Solver problem: maximizing profit as units and price vary Price is the changing cell Demand (or units) changes based on price and elasticity of the demand curve Profit is (Price - Costs) * Demand

11. Operations 343 Spreadsheet Modeling Profit Model solution Linear demand: D = a - b * P Constant elasticity demand: D = aP b Use known price versus demand data Plot an XY (Scatter) chart Add Trendline (Power trendline option) Obtain demand equation from the chart output Plug in to the Solver model and solve

12. Operations 343 Spreadsheet Modeling Non-Linear Problems A B C D E Global maxima/minima versus local maxima/minima Solver can get “Stuck” on local max/min

13. Operations 343 Spreadsheet Modeling NLP Problems Max: Solver works for concave functions, or ln(f(x)) concave and, constraints are linear Min: Solver works for convex functions and linear constraints Otherwise, Solver may find local max/min. Recommended to try various starting values in the changing cells Related: IF(), MAX(), MIN() or ABS() that depend on changing cell values creates NLP problems

14. Operations 343 Spreadsheet Modeling Integer Programming Changing cells constrained to integer values Special case: binary values of 0 or 1 Solver uses “branch and bound” method to optimize Worst case: Solved by enumerating all possible solutions Example: Capital Budgeting problems Uncheck Assume Linear Model (all the both may work) Round off problems yielding non-integer results

15. Operations 343 Spreadsheet Modeling Capital Budgeting model

16. Operations 343 Spreadsheet Modeling Lockbox Models

17. Operations 343 Spreadsheet Modeling Either Or problems Decision to make 1000 products Trick was to multiply constraint values by 0 or 1 to indicate that we were producing units, or no units Determining which product lines to produce AND How much of each product

18. Operations 343 Spreadsheet Modeling Product Mix with Binary Changing Cells

19. Operations 343 Spreadsheet Modeling Forecasting XY Scatterplots, and Add Trendline Regression analysis Multiple regression Non-Linear regression (curve fitting) (Used Add Trendline, and manipulating the data to turn a non-linear data set into a linear dataset to solve with regression) Data sources used to forecast markets, production quantities

20. Operations 343 Spreadsheet Modeling Visual Basic for Applications Create custom Excel applications Example 1: Restaurant run entirely using Excel. Example 2: $40M pharmaceutical division run entirely using Excel VBA application) Easy: Macros, translated into VBA code Interesting: Development of custom VBA subroutines Development of customer dialogs (user interfaces)

21. Operations 343 Spreadsheet Modeling Subroutines and Functions Subroutines (and functions) to hold program statements sub routinename(optional parameters) end sub function routinename (optional parameters) routinename = expression end function

22. Operations 343 Spreadsheet Modeling Variables Variables hold data values Defined using Dim variablename as type Integer, Long, Single, Double, String, Boolean, Variant Arrays Dim arrayname(elements) as type starts counting from zero, or use Option Base 1 Option Explicit to require Dim for all variables

23. Operations 343 Spreadsheet Modeling Local, Global and Public/Private Variables defined within a subroutine are local to that routine Variables defined at top of module are global to all routines in the module Variables can be made PUBLIC and accessible to routines in other modules Subroutines are PUBLIC by default; can be marked as PRIVATE

24. Operations 343 Spreadsheet Modeling Program Statements Assignment: Variable = expression If - Then … End If If - Then … ElseIf … End If Select Case statement For - Next loop Do While … Loop Do Until … Loop Do … Loop While x Do … Loop Until x

25. Operations 343 Spreadsheet Modeling Built-in Objects MsgBox - simple way to display output InputBox - simple way to prompt and get string input Range(“A1”) - used to read values of worksheet cells, or set new values Range(“A1:B10”).Cells(row,col) - used to read values of worksheet cells, or set new values

26. Operations 343 Spreadsheet Modeling User Forms Create custom user interface dialog boxes For input and selection (checkboxes, listboxes, radio buttons) Can incorporate graphical images into dialog boxes Development of “event handler” code to process mouse clicks and implement the program features with VBA code Can link worksheet buttons to subroutines or user forms

27. Operations 343 Spreadsheet Modeling Error handling, strings, files Introduced error handling concepts, On Error Goto/Resume Introduced string handling functions to process typical business input data (InStr(), Left(), Mid(), Right(), Ucase())

28. Operations 343 Spreadsheet Modeling Big Picture Summary Introduction to Modeling of business processes Introduction to Solver for finding optimal solutions Use of Excel statistical tools for operations and market forecasting Introduction to VBA for developing custom business applications using Excel

29. Operations 343 Spreadsheet Modeling Future Options Advanced modeling and simulation: Practical Management Science Advanced Excel VBA programming: Excel 2000 Programming Advanced Visual Basic programming: Numerous text books and training courses available. VB is the most popular programming language today