Why use Optimization?

Optimization is a rigorous approach which takes into account all of the factors that influence decisions in business:

· Decision variables. These are the things we can change, the things we need to decide upon. For example, how much product will we make? Where? How should we make it? How should we transport it?

· Sensitivities. These are the cost or profit impact of the decisions we make. For example, in a production situation, what is the unit cost of production in Factory A? What is the impact of different suppliers for raw material?

· Constraints. These are the limitations on our decisions. For example, in a logistics problem, each mode of transport has a maximum speed and maximum payload. Operations may be limited to so many hours in a day.

Some problems will not require optimization. For example:

· The problem may be simple, or the answer may be obvious
· There may be no decisions variables; we have no choices

But most problems are complex, and have decisions, and need optimization. In addition many problems change so optimization is required on an ongoing basis.