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Using Mathematics to Solve Some Problems in Industry

Kathryn E. Stecke,

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 K.E. STECKE
Using Mathematics to Solve Some Problems in Industry

Using Mathematics to Solve Some Problems in

Industry
Kathryn E. Stecke
University of Texas at Dallas
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School of Management
Richardson, TX 75083-0688
kstecke@[Link]

Abstract
This paper describes how some industrial problems can be solved using relatively simple mathematical models.
Models can be used also to provide insight into how industrial system components interact. This paper is useful
for master's level students in that it describes what a model is as well as the modeling function. Master's students
in engineering and MBAs and Ph.D. students who are interested in solving real industry problems should find
this overview of models useful. Different types of industrial problems are discussed. Finally, some models that
address industrial problems, such as inventory models, linear programming, network flow, decision analysis,
queueing models, and simulation are examined. Future industrial modeling situations are described.

Editor's note: This is a pdf copy of an html document which resides at [Link]
Stecke/ (Volume 5, Number 2, January 2005)

1. Introduction areas of mathematics as well as the variety of industrial

problems to which mathematics has come to aid.
Mathematics has been called the language of science.
Mathematics is used to solve many real-world prob- What does it mean to model a particular system? First
lems in industry, the physical sciences, life sciences, one needs to abstract the essence of a situation and
economics, social and human sciences, engineering, then represent it mathematically. This representation
and technology, for example. Mathematics was used is then mathematically manipulated to provide some
to build many of the ancient wonders of the world, useful information. Finally, the knowledge gained
such as the pyramids of Egypt, the Great Wall of Chi- from this information should be translated into an ac-
na, the hanging gardens of Babylon, the Taj Mahal of tion for the system, situation, or problem at hand. A
Agra, and the like. nice overview of modeling as well as developing
modeling skills is provided in Powell (2001).
Early modern industrial engineering modeling tools
were developed by Taylor, the Gilbreths, and Gantt. 2. Types of Models
They proposed procedures to improve operations and
check the progress of multiple work activities. The
Some mathematical models are used to generate pos-
early project management techniques included project
sible candidate decisions or solutions to problems.
evaluation and review technique and the critical path
Other models can be used to evaluate particular, pos-
method. These are still used today to help manage
sible sets of decisions (see Suri, 1985).
large projects.

Early mathematics (computations, statistics, and ac- 3. Generative Models

counting) has been applied to operations problems,
in administration and in managing technical activities, Mathematical techniques such as linear, integer, dy-
by public administrators, engineers, and managers. namic, and nonlinear programming generate solutions
The focus of this contribution is on the use of mathe- to particular problems. Other generative models in-
matics to solve industrial problems. We discuss many clude differential equations, network flow models,

INFORMS Transactions on Education 5:2(1-8) 1 © INFORMS ISSN: 1532-0545

 K.E. STECKE
Using Mathematics to Solve Some Problems in Industry
decision analysis, number theory, tabu search, genetic 7. Industrial Planning Problems
algorithms, fluid dynamics, and game theory. Gener-
ative models help to resolve complex situations and Many types of planning problems are solved using
can provide candidate solutions. Assumptions always mathematics. Aggregate planning problems involve
have to be made that simplify the problem, in order making decisions on workforce and capacity over a
to get a solution. Assumptions can make the original long period of time, say over a year's time period. See
problems unrealistic. Often the simplifying assump- Nahmias (2005). These decisions are made assuming
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tions may have no bad effect on the applicability of a a forecast of demand, and provide constraints on the
found solution. Modeling skills help a person to devel- actual day-to-day operations. Many such real, large,
op a model that can really be used by industry. aggregate production planning problems are solved
using linear programming.
4. Evaluative Models
In automated manufacturing, a variety of planning
problems need to be solved before actual production
Other types of mathematical models can be used to
can begin. In particular, a set of part types has to be
evaluate solutions to various industrial problems ac-
selected to be machined over some upcoming period
cording to different, relevant performance measures.
of time. (Integer programming can be used to select a
Some evaluative models include queueing models and
candidate set of part types. Simulation or queueing
queueing network theory, Petri nets, decision models,
models or Petri nets can be used to evaluate candidate
data envelope analysis, simulation, and perturbation
solutions (sets of part types) according to the appropri-
analysis. Many of these are discussed in subsequent
ate measures of performance).
sections.
The cutting tools required for each operation of each
5. Models and Solution Algorithms selected part type have to be allocated to some machine
or machines, again before production can begin.
It is important to distinguish models and solution al- Nonlinear integer programming has been used to solve
gorithms. A model describes a situation. Models are such problems. Again, simulation or queueing theory
a (usually mathematical) representation of a problem. or Petri nets have been used to evaluate the goodness
A solution algorithm finds one (or more) solutions to of the solutions.
the situation or problem. There could be a variety of
algorithms or methods to solve the problem.
8. Industrial Scheduling Problems
For example, as we will see soon, the total cost equa-
There are many types of scheduling problems. The
tion is a model for an inventory problem. We could
solutions to aggregate capacity planning problems
"solve" this model either using calculus, or by setting
provide constraints to detailed scheduling problems.
up a spreadsheet, or perhaps just by graphing it in
For example, the number of workers of different types
Excel.
and different skill levels may have been decided at an
aggregate level. These workers need to be allocated to
6. Industrial Design Problems (usually) 8-hour shifts over 5-day work weeks, perhaps
over several shifts/day. Also these workers may need
These and other mathematical models have been used to be allocated to workstations (machines or equip-
to solve a variety of industrial problems. Some indus- ment).
trial design problems include the design of aircraft
and automobiles (using computational fluid dynamics, The aggregate production planning problems are ac-
for example) and the design of a manufacturing system tually quite simple ... because so much information
(using closed queueing networks or simulation, for has been aggregated! Linear programming then suf-
example). fices to provide a good solution.

However, disaggregating and detailed minute-by-

minute scheduling is a very difficult problem, because

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 K.E. STECKE
Using Mathematics to Solve Some Problems in Industry
there are usually so many (too many) scheduling When a company invests in inventory, it costs money.
possibilities to consider. Unless a workforce scheduling The inventory carrying cost for each item is iC, where
problem is very small, it is very difficult to optimize C is the purchase (or variable) cost of each item and i
to find a very good solution (workforce schedule). is the inventory carrying charge as a percentage. Costs
Often, heuristics, or rules of thumb, are used to try to that go into i include the opportunity cost of capital,
find an acceptable feasible schedule. warehouse costs, insurance on the inventory, finance
costs, waste, and obsolescence.
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The difficulty of the scheduling problems increases

when the goods that need to be manufactured are Also, there are costs involved every time an order is
considered. The production of every product type (i.e., placed for Q units of the product. These costs include
an automobile) requires many components (e.g., to telephone calls, faxes, stamps, i.e., all costs involved
assemble). The production of every component may in placing an order. The portion of time that the clerks
require many operations of different types (i.e., milling, spend in placing the orders needs to be considered.
drilling, forming, and tapping). Each operation re- Other costs per order may include expediting costs
quires some time to process it, some workstation to per order or setup costs per batch.
process it on, and somebody to perform the operation.
There is a partial precedence among the operations: Let S be the ordering or setup cost per order. If Q items
some operations have to be finished before others can are ordered every time an order is placed, D/Q is the
begin; for some operations, it doesn't matter which are number of orders per year and SD/Q is the total annual
performed first. ordering cost. With Q/2 = average inventory, for any
Various raw materials have to be on hand to begin order quantity Q, the total annual cost is:
some operations. These are inventory problems, dis-
cussed in the next section. The problem difficulties TC(Q) = SD/Q + iCQ/2+CD.
increase when the due dates for the different products
(or customer orders) need to be considered. Many Graphically, we can see this relationship in Figure 1.
different mathematical models have been used to solve If the total annual cost includes the sum of the annual
both the variety of industrial scheduling problems and ordering cost and annual inventory carrying cost, we
to evaluate the goodness of proposed solutions. Of can see the following tradeoff. If Q is large, the annual
course a wide variety of performance measures exist. inventory carrying cost is high, but the annual ordering
Each is appropriate under different circumstances and cost is low. Conversely, if Q is small, the annual inven-
for different types of scheduling problems. tory carrying cost is low, but the annual ordering cost
is high. Calculus can be used to determine the optimal
Q, the amount to order (every time an order is placed)
9. Inventory Problems to minimize the sum of the total, relevant, annual costs.
By differentiating TC(Q) with respect to Q, setting the
Another large category of problems, for which many equation equal to zero, and solving for Q, we get the
mathematical models have been proposed to address EOQ, which is
various types of issues, is inventory. Inventories cost
money and are subject to obsolescence. Much is written
about just in time inventory systems; often no invento-
ry is a goal. Yet some inventory is necessary to allow
production operations to run smoothly. Examining this relationship more closely, we can see
some problems one might run into when trying to
To present some basic inventory issues, let's start with operate just in time (JIT). JIT aims to reduce inventory
the most simple inventory problem. Suppose that there and inventory costs by ordering exactly the right
is a constant demand for an expensive product ($C) amount when it is required, usually by ordering small
that is part of an assembly. Given an annual demand amounts. We see from the above discussion that order-
D for this product, calculus can be used to find the ing a small amount each time does decrease inventory
optimal amounts of inventory, Q, to order every time carrying costs. But then orders are placed more often,
an order is placed. We can see the cost tradeoffs in the so total ordering costs increase. JIT only makes econom-
following. ic sense when the cost per order is small.
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 K.E. STECKE
Using Mathematics to Solve Some Problems in Industry
models, while considering deteriorating efficiencies
of existing models. The model uses dynamic program-
ming. Input parameters include material use, energy,
emission factors, and fuel economy over a 36-year time
horizon.

Baker (2000) describes five nice linear programming

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problems and solutions. Insights into the problems

are provided by analyzing the sensitivity of the opti-
mal solutions. Other linear programming problems
and their applications are provided in Hillier and
Lieberman (2005) and Nahmias (2005).
Figure 1: Total Cost as a Function of Order Quantity.

This very basic, simple, inventory model can be gener- 11. Network Flow Models
alized in many ways. Including quantity discounts for
items or transportation costs can increase the complex- 1974 (and 1975) Nobel Prize winners Tjalling Koop-
ity of the equation describing the total annual cost of mans (and L.V. Kantorovich) were the first to propose
dealing with inventory. Another cost component (an- network flow models. In the early days of World War
nual purchase cost) now depends on Q. But quantify- II, Koopmans modeled the problem of moving people,
ing these cost components has many useful purposes. supplies, and equipment from various U.S. bases to
It is important for a firm to know how much it is foreign bases. The goal was to optimize one or more
spending on inventory; the firm has to set reasonable, of: minimizing total transportation cost, minimizing
competitive prices for its items. More important, by total transit time, and/or maximizing defensive effec-
knowing these costs, the firm can make intelligent tiveness. A few years earlier, the Russian mathemati-
decisions concerning its inventory policies to decrease cian and economist Kantorovich used network flow
the total annual cost of dealing with inventories. models to address some important problems in the
Soviet economy. In particular, he investigated the
Other complications of such simple inventory models problems of allocating production levels among facto-
include consideration of the lead time required be- ries and distributing the resulting products among the
tween when an order is placed and when the shipment markets. They seem to be the first to structure and
arrives. Even more complicating is the situation when analyze complex decision problems as network flow
the exact lead time is uncertain. Many additional cost problems.
components often should be considered, such as
transportation or warehouse costs. Glover, Klingman, and Phillips (1992) provide many
examples of network flow model applications. Some
Considering inventory requirements at every stage of applications that they mention include electrical circuit
a complex supply chain is important. Inventory prob- board design, telecommunications, water management,
lems occur when considering an appropriate number the design of transportation systems, metalworking,
of spares to have on hand to be able to cope with dis- chemical processing, aircraft design, fluid dynamic
ruptions of various kinds. analysis, computer job processing, production, market-
ing, distribution, financial planning, project selection,
facility location, and accounting. They also provide
10. Mathematical Programming other, non-industrial applications of network flow
analysis, in the arts, sociology, archaeology, and more.
Mathematical programming has been used often to
provide solutions to many industrial problems. Linear Still other applications of network flow models dis-
and nonlinear programming problems have been de- cussed in Glover et al. (1992) include airline revenue
scribed in earlier sections. A good example can be management, employee shift scheduling, and best use
found in Kim et al. (2003). They develop a life cycle of energy resources. They also provide references for
optimization model to determine optimal vehicle life- actual applications.
times, accounting for technology improvement of new
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 K.E. STECKE
Using Mathematics to Solve Some Problems in Industry
For example, a large automobile manufacturer uses such models to determine optimal flight training
many computer hours every week running a network schedules for pilots. Timing and classroom availabili-
model that determines how many cars of each model ties are considered. An automobile manufacturer uses
type to produce at various plants and after, how many a network flow model to determine optimal batch sizes
automobiles of each type to ship to various cities. See for various plastic components required for car assem-
Figures 2 and 3. bly.
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One major oil company uses a discrete network model

and software to decide on the optimal timing of oil
use and distribution from its leased and owned wells
over several years. Another oil company uses an opti-
mization-based network decision support system for
supply, distribution, and marketing planning.

A major US chemical company uses network models

to determine customer zones to be served from its
warehouses, and for different alternative commodity
and freight mode combinations. The Tennessee Valley
Authority uses a discrete network model and solution
procedure to determine the minimum cost refueling
Figure 2: Map of Automobile Plants and Major Markets. schedule for nuclear reactors. Texas uses a network
model to choose the locations of out-of-state tax audit
offices. These collect sales taxes and other taxes owed
Chemical products companies use a network flow
to Texas. The model also assigns states and auditors
model to integrate production, inventory, and distri-
to these offices.
bution operations. They also use it to determine plant
location and sizing.
These are but some of the industrial applications
modeled and solved using networks. Glover et al.
(1992) provide references that detail most of these ap-
plications. Methods to solve these problems, both
discrete and continuous, are also given.

12. Decision Analysis

There are many useful techniques to structure prob-
lems that have multiple objectives. These include
multi-attribute utility theory and the analytic hierarchy
process. These are useful for when a group needs to
make a decision. AHP uses pairwise comparisons of
alternatives to help arrive at a "good or best choice".
Figure 3: A Network Model Representation of Automobile
Plants and Major Markets. Figure 4 shows a flowchart of a decision analysis pro-
cess. Variations of this chart can be conceptualized.
An international pharmaceutical company uses net-
work flow models and software to decide on which A survey by Keefer et al. (2004) provides references
drugs and medications and how much of each that it to many applications of decision analysis methods.
should produce. A lumber company uses a network Some of these applications include real options, pur-
flow model to schedule logs to plants, and logs to chasing equipment, new product strategies, telecom-
products, and logs to markets. The U.S. Air Force uses munication applications, and others.

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 K.E. STECKE
Using Mathematics to Solve Some Problems in Industry
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Figure 4: A Decision Analysis Process Flowchart.

Keeney and Raiffa (1976) provide many examples of • Safety of landing aircraft;
decision-making problems under uncertainty. There
• Strategic and operational policy concerning frozen
are often preferences for possible consequences or
blood;
outcomes. Some of their examples are:
• Sewage sludge disposal in the metropolitan Boston
• Electrical power versus air quality; area;
• Airport location; • Selecting a job or profession;
• Heroin addiction treatment; • Transporting hazardous substances;
• Medical diagnostics and treatment; • Development of water quality indices;
• Business problems (profit versus ethics); • Airport development for Mexico City.
• Hospital blood bank inventory control;
Details as well as complete references concerning these
• Air pollution control; examples can be found in Keeney and Raiffa (1976).
• Fire department operations;
• Siting and licensing of nuclear power facilities;

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 K.E. STECKE
Using Mathematics to Solve Some Problems in Industry

13. Queueing Models 15. A Future Industrial Application

Queueing models have been used to investigate indus- A future application falls in the realm of homeland
trial problems for many years. In the 1940s, queueing security. Many supply chains are particularly vulner-
models were used to solve a variety of machine inter- able to disruptions because of their design characteris-
ference problems, i.e., how many repairpersons to as- tics and operating philosophies. Disruption effects on
sign to maintain a system, or how many telephone direct targets could be substantial. Long lasting and
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operators to handle traffic calls. (See Stecke, 1992 and rippling effects could be felt throughout multiple
Palm, 1943) business sectors because of the increase in business
interrelations. A current complex JIT environment
Queueing models are used to analyze tradeoffs con- creates supply chains that integrate many private and
cerning the number of servers versus the waiting time public entities with unclear contingency plans and
of customers. Clearly, if the number of servers is high, roles in a disaster. JIT also provides insufficient buffers
the cost of the servers is high, but the waiting time to absorb unusual system disturbances in supply net-
(cost of customer idle time) is low. Notice that this is works. Since most companies' operations are not flex-
the same kind of tradeoff discussed in the basic inven- ible enough for essential quick responses, disruptions
tory order quantity decision discussed earlier. can create bullwhip and queueing effects. The ampli-
fication of demand variability from a bullwhip effect
Some kinds of queueing problems involve determining can cause increasing negative economic effects further
the appropriate number of service facilities to cover upstream and downstream.
expected demand, as well as determining the efficiency
of servers and the number of servers of different types There is a need to understand these systems to probe
at the service facilities. (See Hillier and Lieberman, for weaknesses, predict outcomes, and test policies.
2005) These are design problems and decisions are The scale and complexities involved pose significant
made in order to provide an appropriate level of ser- problems. Schmitt and Stecke (2003) have applied
vice. Suri (1998) suggests using queueing theory to novel methods of simulating and modeling to synthe-
provide quick solutions to industrial problems. size the huge, dynamic mass of information that flows
in supply networks. They are working with Sandia
National Laboratories in the development of an "agent-
14. Simulation based" model of supply networks of 14,000 manufac-
turing firms in the Pacific Northwest to assess the
Simulation is a potentially very detailed modeling tool economic impact of various disruptions in critical in-
that is widely used to evaluate the solutions to many frastructure. The overall mathematical modeling effort
industrial problems. Many measures of the perfor- should contribute to the U.S.'s effort and ability to
mance of a system are available. A great benefit of prepare for possible attacks on critical infrastructure
simulation is that a model can often be very close to such as electric power, telecommunications, and
reality. This can sometimes result in a complicated transportation, and improve the effectiveness and effi-
simulation model that can take a long time to run. ciency of responses should such attacks occur.
Another drawback is that (without perturbations
analysis), a simulation can model only one system at
a time, with one set of parameters. It is difficult to 16. Acknowledgements
generalize the results from a simulation.
The author would like to thank Sanjay Kumar at the
However, with the detailed modeling capability of University of Texas at Dallas for his help in locating
simulation, the results from the model of a particular some material for this piece. The author would also
system can be quite accurate. Simulation has been a like to thank Erhan Erkut and the Associate Editor for
widely-used, very useful modeling tool. Many exam- their excellent suggestions and comments on the earlier
ples, showcasing the modeling aspects of simulation, submissions of this piece.
can be found in Schriber (1991).

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 K.E. STECKE
Using Mathematics to Solve Some Problems in Industry

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