A primer on Mathematical Optimization – what is it and why do you need it


This blog is about showing how to use AI in planning processes. In this post, I’d like to introduce you to mathematical optimization – the most important AI technique used to guide decision-making. It is the workhorse of AI-based planning. I’ll also mention the ways it helps businesses around the world. And finally – I will list some reasons why you too should use it!

What is mathematical optimization?

A collection of mathematical techniques which help businesses make highly complex business decisions. It captures the features of a decision problem through a so-called optimization model. This in turn is composed of objectives (goals you wish to accomplish), variables (decisions to make) and constraints (rules which need to be followed).

How does it help?

  1. There are three ways in which mathematical optimization can help you make better decisions.
    It can give you such a set of decisions which result in the best possible solution for your business. In many situations, you can actually prove that the solution returned to you is the best available.
  2. It enables planning transparency. You can know the quality of the plans generated upfront, regardless of your measure of quality.
  3. It embraces multiple (conflicting) objectives. You can put a price tag on the trade-offs you need. No more planning wars!

Why should I use it?

There are three major reasons why you should use mathematical optimization in your planning:

  1. It enables you to use your data to generate business value. You’re nearly home if you have enough data to run your planning in MS Excel. Why not extract the most value from it?
  2. Implementation is easier than ever before. Over the last decades, computers and algorithms have accelerated so much that many problems once considered unsolvable now cease to be so. Additionally, to kick off, you only need a person who understands the basics of mathematical optimization to start. There are also many experts available to take you to the next level.
  3. Many of your competitors do, as it consistently delivers business benefits. Mathematical optimization systems are present in nearly all industries worldwide today. Some of the most spectacular success stories include Deutsche Bahn or PwC. It also helps in hospitals and the military.

Are you curious about how to implement mathematical optimization in your company? Stay tuned!