Setting up Solver for Optimization in Excel

Excel's Solver tool is used for optimization problems where you need to find the best solution given a set of constraints. This tutorial will guide you through setting up Solver in Excel with real-time examples of how to perform optimization tasks.

Step-by-Step Tutorial

Step 1: Install Solver Add-in (if not already installed)

If you do not see Solver in your Excel, you need to enable it. Here's how:

Click on the "File" tab.
Choose "Options."
In the Excel Options dialog box, select "Add-ins."
At the bottom, next to "Manage," select "Excel Add-ins" and click "Go."
Check the box for "Solver Add-in" and click "OK."

Step 2: Set Up the Data

Before using Solver, you need to have data with a formula that you want to optimize. For example, let's assume you want to maximize the total profit of a business given certain constraints like production limits, raw material availability, etc.

Example Setup:

        Product A Price = $50 (in cell A2)
        Product B Price = $70 (in cell A3)
        Product A Units = 1000 (in cell B2)
        Product B Units = 800 (in cell B3)
        Total Profit = =A2*B2 + A3*B3 (in cell B4)

Now, let’s assume that you want to find the optimal number of units for Product A and Product B to maximize the Total Profit, given constraints on raw material and labor.

Step 3: Open Solver

To use Solver, follow these steps:

Go to the "Data" tab on the ribbon.
Click on "Solver" in the "Analysis" group.

Step 4: Define the Objective

In the Solver Parameters dialog box, you'll set the objective (the cell to be optimized), the optimization goal, and the changing variables (the cells Solver can change).

In the "Set Objective" box, enter the cell that contains the formula you want to optimize (e.g., B4 for Total Profit).
Select "Max" to maximize the objective (in this case, Total Profit).
In the "By Changing Variable Cells" box, enter the cells whose values Solver will change (e.g., B2 and B3 for the number of units of Product A and Product B).

Step 5: Set Constraints

Now, add constraints to your model, such as limits on resources (e.g., raw material or labor). You can set constraints on the number of units for each product or on other factors that might limit your optimization.

Click on "Add" to define a constraint.
For example, if you have a maximum labor capacity, enter it in the "Cell Reference" box (e.g., B2 + B3 <= 1500 for total units of Product A and Product B).
Click "OK" to add the constraint. You can add multiple constraints based on your scenario.

Step 6: Solve the Model

Once you’ve defined the objective and constraints, click "Solve" in the Solver Parameters dialog box. Solver will find the optimal solution based on the given conditions.

Step 7: Review the Results

Solver will provide the optimal values for the changing cells (e.g., the number of units for Product A and Product B). Review these results to see the maximum profit you can achieve under the given constraints.

Real-Time Example: Maximizing Profit with Constraints

Scenario

Imagine you are managing a factory that produces two products, Product A and Product B. You want to maximize profit based on the following details:

Product A sells for $50 and uses 3 units of raw material per product.
Product B sells for $70 and uses 5 units of raw material per product.
The total amount of raw material available is 4000 units.
You have 1000 units of labor capacity available, and Product A requires 1 labor hour per unit, while Product B requires 2 labor hours per unit.

Steps to Set Up Solver

In cell A2, enter the price of Product A: $50.
In cell A3, enter the price of Product B: $70.
In cell B2, enter the number of units of Product A (this is the changing variable in Solver).
In cell B3, enter the number of units of Product B (this is the other changing variable in Solver).
In cell B4, enter the formula for Total Profit: =A2*B2 + A3*B3.
In cell B5, enter the total raw material usage: =3*B2 + 5*B3.
In cell B6, enter the total labor usage: =B2 + 2*B3.