#### Essential Steps

To define an optimization model in Excel you'll follow these essential steps:

**Organize the data**for your problem in the spreadsheet in a logical manner.- Choose a spreadsheet cell to hold the value of each
**decision variable**in your model. - Create a spreadsheet formula in a cell that calculates the
**objective function**for your model. - Create a formulas in cells to calculate the left hand sides of each
**constraint**. - Use the dialogs in Excel to
**tell the Solver**about your decision variables, the objective, constraints, and desired bounds on constraints and variables. - Run the
**Solver**to find the optimal solution.

Within this overall structure, you have a great deal of flexibility in how you choose cells to hold your model's decision variables and constraints, and which formulas and built-in functions you use. In general, your goal should be to create a spreadsheet that communicates its purpose in a clear and understandable manner.

#### Creating an Excel Worksheet

Assuming that you have organized the data for the problem in Excel, the next step is to create a worksheet where the **formulas for the objective function and the constraints** are calculated. Because decision variables and constraints usually come in logical groups, you'll often want to use cell **ranges in your spreadsheet **to represent them.

In the worksheet below, we have reserved cells B4, C4, D4 and E4 to represent our decision variables X_{1}, X_{2}, X_{3}, and X_{4} representing the number of pallets of each type of panel to produce. The Solver will determine the optimal values for these cells. (Click on the worksheet for a full-size image.)

Notice that the profit for each pallet of panels ($450, $1,150, $800 and $400) was entered in cells B5, C5, D5 and E5, respectively. This allows us to compute the **objective **in cell F5 as:

Formula for cell F5: =B5*B4+C5*C4+D5*D4+E5*E4

or equivalently,

Formula for cell F5: =SUMPRODUCT(B5:E5,B4:E4)

In cells B8:E11, we've entered the amount of resources needed to produce a pallet of each type of panel. For example, the value 15 in cell C9 means that 15 hours of pressing is required to produce a pallet of Pacific style panels. These numbers come directly from the formulas for the constraints shown earlier. With these values in place, we can enter a formula in cell F8 to compute the total amount of glue used for any number of pallets produced:

Formula for cell F8: =SUMPRODUCT(B8:E8,$B$4:$E$4)

We can **copy this formula** to cells F9:F11 to compute the total amount of pressing, pine chips, and oaks chips used. (The dollar signs in $B$4:$E$4 specify that this cell range stays constant, while the cell range B8:E8 becomes B9:E9, B10:E10, and B11:E11 in the copied formulas.) The formulas in cells F8:F11 correspond to the left hand side values of the constraints.

In cells G8:G11, we've entered the available amount of each type of resource (corresponding to the right hand side values of the constraints). This allows us to express the **constraints **shown earlier as:

F8:F11<=G8:G11

This is equivalent to the four constraints: F8<=G8, F9<=G9, F10<=G10, and F11<=G11. We can enter this set of constraints directly in the Solver dialogs along with the **non-negativity conditions**:

B4:E4 >= 0

Click on the links below to see how this model can be solved using Excel's built-in Solver (or Premium Solver) or with FrontLine Systems' flagship Risk Solver Platform product.