Abstract
In this paper, an overview of theoretical and methodological issues in simplex method-based sensitivity analysis is proposed. The paper focuses somewhat on developing shortcut methods to perform Linear Fractional Programming (LFP) sensitivity analysis manually and in particular changes in the parameter of the LFP model. Shortcut methods for conducting sensitivity analysis have been suggested. Simple examples are given to illustrate this proposed method.
Highlights
Many managerial decisions hinge on the issue of how to make the most of the company’s resources of raw material, manpower, time, and facilities
When we are dealing with sensitivity analysis, we are initially looking into changes might happen to the parameters of Linear Fractional Programming (LFP) model
What happens to the cash position, for example, if sales fall by 5%? What happens if primary supplier increases raw material prices by 12%?
Summary
Many managerial decisions hinge on the issue of how to make the most of the company’s resources of raw material, manpower, time, and facilities. LFP can offer managers the capability of building scenarios through its extensive “what if” analysis and sensitivity analysis facilities. When we are dealing with sensitivity analysis, we are initially looking into changes might happen to the parameters of LFP model. These possible changes would imply to investigate the changes in Right-Hand-Side of the model constraints and the coefficient of the objective function [1,2]. It is crucial to figuring out how sensitive the optimal solution is to some changes in the model parameters [1,2]. Sensitivity analysis, (post-optimality), looks at “what if” questions scenarios. What happens to the cash position, for example, if sales fall by 5%? What happens if primary supplier increases raw material prices by 12%?
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