Optimization with Excel Solver Addin - An Overview

What are Solvers Good For?

Solvers, or optimizers, are software tools that help users find the best way to allocate scarce resources. The resources may be raw materials, machine time or people time, money, or anything else in limited supply. The "best" or optimal solution may mean maximizing profits, minimizing costs, or achieving the best possible quality.  An almost infinite variety of problems can be tackled this way, but here are some typical examples:

Finance and Investment

• Working capital managementinvolves allocating cash to different purposes (accounts receivable, inventory, etc.) across multiple time periods, to maximize interest earnings.
• Capital budgetinginvolves allocating funds to projects that initially consume cash but later generate cash, to maximize a firm's return on capital.
• Portfolio optimization -- creating "efficient portfolios" -- involves allocating funds to stocks or bonds to maximize return for a given level of risk, or to minimize risk for a target rate of return.

Manufacturing

• Job shop scheduling involves allocating time for work orders on different types of production equipment, to minimize delivery time or maximize equipment utilization.
• Blending(of petroleum products, ores, animal feed, etc.) involves allocating and combining raw materials of different types and grades, to meet demand while minimizing costs.
• Cutting stock(for lumber, paper, etc.) involves allocating space on large sheets or timbers to be cut into smaller pieces, to meet demand while minimizing waste.

Distribution and Networks

• Routing(of goods, natural gas, electricity, digital data, etc.) involves allocating something to different paths through which it can move to various destinations, to minimize costs or maximize throughput.
• Loading(of trucks, rail cars, etc.) involves allocating space in vehicles to items of different sizes so as to minimize wasted or unused space.
• Schedulingof everything from workers to vehicles and meeting rooms involves allocating capacity to various tasks in order to meet demand while minimizing overall costs.