What types of problems exhibit these kinds of characteristics? A surprisingly broad range, as the following list shows: For example, you might require that advertising be less than 10% of total expenses or that the discount to customers be a number between 40% and 60%. Optionally, there are one or more constraint cells that must satisfy certain criteria. These changing cells might include items such as units sold, shipping costs, or advertising expenses. Solver adjusts these cells to find the optimal solution for the target cell formula. The target cell formula contains references to one or more changing cells (also called unknowns or decision variables). This formula could be a calculation, such as total transportation expenses or net profit. They have a single target cell that contains a formula you want to maximize, minimize, or set to a specific value. These problems cover many different fields and situations, but they all have the following characteristics in common: Many problems, however, require nothing less than the Solver approach. It would be overkill, for example, to use Solver to compute net profit given fixed revenue and cost figures.
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Solver is a powerful tool that most Excel users don't need. You then can save these solutions under different scenarios, as described later in this chapter. This means that you can find a solution that is the maximum or minimum possible.įor complex problems, Solver can generate multiple solutions. Solver seeks not only a desired result (the "goal" in Goal Seek), but also the optimal one. These conditions are constraints on the solution. For example, you can tell Solver to find a solution that not only maximizes profit, but also satisfies certain conditions, such as achieving a gross margin between 20% and 30%, or keeping expenses less than $100,000. Solver enables you to set up constraints on the adjustable cells. You can use up to 200 adjustable cells in all. Solver enables you to specify multiple adjustable cells. In fact, Solver brings a number of advantages to the table:
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However, the fact that Goal Seek and Solver are both iterative doesn't make them equal. The program looks at how the results change with each new iteration and, through some sophisticated mathematical trickery, it can tell (usually) in what direction it should head for the solution. However, this cyclic iteration isn't just guesswork on Solver's part. This means that Solver tries a solution, analyzes the results, tries another solution, and so on. Solver, like Goal Seek, uses an iterative method to perform its magic. Solver is a sophisticated optimization program that enables you to find the solutions to complex problems that would otherwise require high-level mathematical analysis. For these bigger challenges, you need a more muscular tool. Often a problem will have more than one solution, and your challenge will be to find the optimal solution (that is, the one that maximizes profit, or minimizes costs, or matches other criteria). You'll usually face formulas with at least two and sometimes dozens of variables. Most problems in business aren't as easy as the Goal Seek examples.