Solver in Excel

What is Solver in Excel?

Solver is an analysis tool in excel which can be enabled by the addins section of excel, solver tool is used to find out the best solution for problems which can linear or non linear, there are three methods to solve the data in the solver, solver is used to either maximize or minimize any output based on certain impacting variables.

The solver can solve

Optimization (maximize and minimize) problems like maximizing profit, minimizing the cost.
Arithmetic equations.
Linear and non-linear problems.

How to ADD Solver Add-In in Excel?

The solver is the Add-In in the Excel, which is not by default found in the tabs on the ribbon. To activate this command, we have two ways:

You can download this Solver Excel Template here – Solver Excel Template

First click on File Menu

Select Options

Click on Add-ins then Select Solver Add-in and Click on Go

Tick for ‘Solver Add-in’ and click on OK.

On Developers tab->In ‘Add-ins’ group, click on ‘Excel Add-ins’->Tick on ‘Solver Add-in’->Click on ‘OK’.

After you install the ‘Solver Add-in’, we will be finding the ‘Solver’ command on the ‘Data‘ tab in ‘Analyze’ group.

In the ‘Solver Parameters’ Dialog box, this is the terminology used:

Objective Cell: It is the cell where the formula is placed based on the decision and constrained cells and we want this value to be minimized, maximized, or equal to the value as specified. The objective cell must be a single cell and must contain a formula.
Constraints Cells: These are the cells for the factors, which are the limiting factors to solve the problem.
Decision Variable Cells: These are the cells where we want the required values to be put by the solver to get our objective cell maximized, minimized or equal to the specified value as required.

Solver Model: Solver Model consists of constraint and decision variable cells and the formulas interrelating these all.

We have conditions in our life where we want to maximize the value considering the limits of various factors like in business we want to maximize the profits with our limited available stock, manpower, and tools and sometimes we need to minimize the value (i.e. cost) for getting the required output.

We have some problems in our day-to-day life where we can formulate arithmetic equation and we want to find the value of the decision variables. Then we can use the ‘Solver’. In Excel, we can find out the value of up to 200 variables using the solver.

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Various Type of Solving Methods

#1 – GRG Nonlinear

It stands for Generalized Reduced Gradient Nonlinear. It is the best method when we need to solve the nonlinear problem. A nonlinear problem may have more than one feasible region, or set of similar values for the decision variables, where all of the constraints are satisfied.

#2 – Simplex LP

LP here stands for linear problems. This method is faster than the GRG Nonlinear method and is used for linear problems.

#3 – Evolutionary

We use this method for problems that are non-smooth while we use the above two methods for smooth problems.

How to Use Solver in Excel? (with Examples)

The solver is a Microsoft Excel add-in program that we can use for what-if analysis in excel. Solver finds an optimal (maximum or minimum) value for a formula in one cell — called the objective cell — subject to constraints, or limits, on the values of other formula cells on a worksheet. Solver works with a group of cells, called decision variables or simply variable cells, which are used in computing the formulas in the objective and constraint cells. Solver adjusts the values in the decision variable cells to satisfy the limits on constraint cells and produce the result you want for the objective cell.

Below are some of the examples to understand this tool in a better manner.

You can download this Solver Excel Template here – Solver Excel Template

Example #1

Suppose we have an arithmetic equation to solve. The equation is

56=2X-5+Y²

We want to find the value of X and Y in the equation.

First, we need to formulate the same on the excel sheet as follows and then use the ‘Solver’ command.

Example #2

In this example, we want to maximize the profit by using the limited row material (Chassis, Picture Tube, Speaker Cone, Power Supply, Electronics) for making various products (TV Set, Stereo, Speaker) which yield different profits. We want the total profit to be maximized.

Clicking on ‘Solver’ command in ‘Analyze’ group placed on the ‘Data’ tab. We get the ‘Solver Parameters’ dialogue box and we specify the reference of Objective Cell to C18, Decision Variable Cells to C6:E6 and two constraints conditions that ‘Inventory left’ (G10:G14) must be greater than or equal to 0 and Quantity of Various products i.e. TV Set, Stereo, Speaker (C6:E6) (Decision Variable Cells) must be greater than or equal to 0.

We found the solution that we must produce 250 TV Sets, 50 Stereo and 50 Speaker then we can get the Profit of Rs. 28000 and can use our resources efficiently.