If you are looking for special tricks to know how to minimize cost using Excel solver with example, you’ve come to the right place. This article will discuss the details of all the examples of minimizing cost. Letâ€™s follow the complete guide to learn all of this.

## What Is Solver in Excel?

Solver is a Microsoft Excel add-in program. The Solver is part of the What-If Analysis tools that we can use in Excel to test different scenarios. We can solve decision-making issues using the Excel tool Solver by finding the most perfect solutions. They also analyze how each possibility impacts the worksheetâ€™s output.

## How to Add Solver to Excel

You can access **Solver** by choosing **Data âžª Analyze âžª Solver**. Sometimes it may happen that this command isnâ€™t available, you have to install the **Solver add-in** using the following steps:

- First of all, choose the
**File**tab.

- Secondly, select
**Options**from the menu.

- Thus, the
**Excel Options**dialog box appears. - Here, go to the
**Add-Ins**tab. - At the bottom of the
**Excel Options**dialog box, select**Excel Add-Ins**from the**Manage**drop-down list and then click**Go**.

- Immediately, the
**Add-ins**dialog box appears. - Then, place a checkmark next to
**Solver Add-In**, and then click**OK**.

- Another way: Also, we can install the
**Solver add-in**using the**Developer**tab. Just follow along. - Initially, proceed to the
**Developer**tab. - Secondarily, click on
**Excel Add-ins**on the**Add-ins**group.

- Again, it opens the
**Add-ins**wizard. - After that, do the similar tasks that weâ€™ve done above.

- Once you activate the add-ins in your Excel workbook, they will be visible on the ribbon.
- Just move to the
**Data**tab. - And, you can find the
**Solver add-ins**on the**Analyze**group.

**Read More: **How to Do Portfolio Optimization Using Excel Solver

## How to Use Solver in Excel

Before going into more detail, hereâ€™s the basic procedure for using **Solver**:

- First of all, set up the worksheet with values and formulas. Make sure that you have formatted cells correctly; for example, the maximum time you canâ€™t produce partial units of your products, so format those cells to contain numbers with no decimal values.
- Next, choose
**Data âžª Analysis âžª Solver**. The**Solver Parameters**dialog box will appear. - Afterward, specify the target cell. The target cell also is known as the objective.
- Then, specify the range that contains the changing cells.
- Specify the constraints.
- If necessary, change the Solver options.
- Let the
**Solver**solve the problem.

## Introduction to Solver Parameters

The **Excel Solver** determines the best solution based on the objective cell formula.

Firstly, letâ€™s get introduced to the nomenclatures used in the **Solver Parameters** dialog box. While using the solver, thatâ€™ll be beneficial. These are the definitions for the terms:

**Objective Cell:** It is simply a single cell with something like a formula in it. The constraint cellsâ€™ limitations are applied to the decision-based formula in the cell. The objective cellâ€™s value can be decreased, increased, or fixed at the provided threshold.

**Variable Cells:** Variable cells are made up of variable data that the Solver modifies to accomplish the goal.

**Constraint Cells:** These are the constraints that the solution to the situation at hand must adhere to. On the other hand, these are the prerequisites that must be met.

## Example with Excel Solver to Minimize Cost: 2 Suitable Examples

In the following section, we will use two effective and tricky examples of the Excel solver to minimize cost. This section provides extensive details on these examples. In the first example, weâ€™re going to find alternative options for shipping materials keeping total shipping costs at a minimum level. Say a company has warehouses in St. Louis, Los Angeles, and Boston. Six retail outlets are situated all over the United States. These retail outlets take orders from customers. The company then ships products from one of the warehouses. The companyâ€™s target is to meet the product needs of all six retail outlets from available inventory in the warehouses. While shipping products to outlets, the company wants to keep shipping charges as low as possible.

You should learn and apply these to improve your thinking capability and Excel knowledge. We use the Microsoft Office 365 version here, but you can utilize any other version according to your preference.

### 1. Minimize Shipping Cost

Here, we will demonstrate how to minimize shipping costs in Excel. This is the first example of minimizing cost using Excel solver. We will use **SUM** and **SUMPRODUCT** functions for calculating different parameters. Our Excel dataset will be introduced to give you a better idea of what we’re trying to accomplish in this article.

**Shipping Costs Table:** This table contains the cell range **B4:E10**. This is a matrix that holds per-unit shipping costs from each warehouse to each retail outlet. For example, the cost to ship a unit of a product from Boston to Detroit is **$38**.

**Product needs of each retail store:** This information appears in the cell range **C14:C19**. For example, the retail outlet in Houston needs 225, Denver needs 150 units, Atlanta needs 100 units, and so on.** C18** is a formula cell that calculates the total units needed from the outlets.

**No. to ship from:** Cell range **D14:F19** holds the adjustable cells. These cell values will be varied by Solver. We have initialized these cells with a value of 25 to give Solver a starting value. Column **G** contains formulas. This column contains the sum of units the company needs to ship to each retail outlet from the warehouses. For example, **G14** shows a value of 75. The company has to send 75 units of products to the Denver outlet from three warehouses.

**Warehouse inventory:** Row 21 contains the amount of inventory at each warehouse. For example, the Los Angeles warehouse has 400 units of inventory. Row 22 contains formulas that show the remaining inventory after shipping. For example, Los Angeles has shipped 150 (see, row 18) units of products, so it has the remaining 250 (400-150) units of inventory.

**Calculated shipping costs:** Row 24 contains formulas that calculate the shipping costs.

The solver will fill in the values in the cell range **D14:F19** in such a way that will minimize the shipping costs from the warehouses to the outlets. In other words, the solution will minimize the value in cell **G24** by adjusting the values of cell range **D14:F19** fulfilling the following constraints:

- The number of units demanded by each retail outlet must equal the number shipped. In other words, all the orders will be filled. The following specifications can express these constraints:

**Â Â Â Â C14=G14, C16=G16, C18=G18, C15=G15, C17=G17, and C19=G19**

- The number of units remaining in each warehouseâ€™s inventory must not be negative. In other words, a warehouse canâ€™t ship more than its inventory. The following constraint shows this:
**D24>=0, E24>=0, F24>=0.** - The adjustable cells canâ€™t be negative because shipping a negative number of units makes no sense. The Solve Parameters dialog box has a handy option: Make Unconstrained Variables Non-Negative. Make sure this setting is enabled.
- Letâ€™s walk through the following steps to do the task.

**📌 Steps:**

- First of all, we will be setting some necessary formulas. To calculate
**No. to be shipped**, type the following formula.

`=SUM(D14:F14)`

- Then, press
**Enter**.

- Next, drag the
**Fill Handle**icon up to cell**G19**to fill the other cells with the formula. - Therefore, the output will look like this.

- Afterward, to calculate the total, type the following formula.

`=SUM(C14:C19)`

- Then, press
**Enter**.

- Next, drag the
**Fill Handle**icon to the right up to cell**G20**to fill the other cells with the formula. - Therefore, the output will look like this.

- Afterward, to calculate the shipping costs, type the following formula.

`=SUMPRODUCT(C5:C10,D14:D19)`

- Then, press
**Enter**.

- Next, drag the
**Fill Handle**icon to the right up to cell**F26**to fill the other cells with the formula. - Next, type the following formula in cell
**G26**.

`=SUM(D26:F26)`

- Then, press
**Enter**. - Therefore, the output will look like this.

- To open the
**Solver Add-in**, go to the**Data**tab and click on**Solver**.

- Next, fill the
**Set Objective field**with this value:**$G$26**. - Then, select the radio button of the
**Min**option. - Select cell
**$D$14**to**$F$19**to fill the field**By Changing Variable Cells**. This field will show then**$D$14:$F$19**. - Now,
**Add**constraints one by one. The constraints are:**C14=G14**,**C16=G16**,**C18=G18**,**C15=G15**,**C17=G17**,**C19=G19**,**D24>=0**,**E24>=0**, and**F24>=0**. These constraints will be shown in the Subject to the Constraints field. - Afterward, select the
**Make Unconstrained Variables Non-Negative**check box. - Finally, select
**Simplex LP**from the Select a Solving Method drop-down list.

- Now, click on the
**Solve**button. The following figure shows the**Solver Results**dialog box. Once you click**OK**, your result will be displayed.

- The Solver displays the solution shown in the following figure.

**Read More: **How to Use Excel Solver for Linear Programming

### 2. Minimize Production Cost

This is the second example to minimize cost using Excel solver. With the following dataset, we will mix different raw materials to produce different types of steel, such as regular, exclusive, and super-quality steel. There is data about the availability and cost of these raw materials, as well as their quality rating. Additionally, we established the required amount of production, the price per ton of different classes of steel, and their minimum rating. We also have a parameter called the Linearized Rating. We will use **SUM** and **SUMPRODUCT** functions for calculating different parameters.

Letâ€™s walk through the following steps to minimize production costs using an Excel solver.

**📌 Steps:**

- First of all, we will be setting some necessary formulas. Type the following formula in cell
**F5**.

`=SUM(C5:E5)`

The formula uses the **SUM** function to calculate the total amount of the type 1 Steel (Regular, Exclusive, and Super) that will be produced from the first available resources.

- Then, press
**Enter**.

- Next, drag the
**Fill Handle**icon up to cell**F7**to fill the other cells with the formula. - Therefore, the output will look like this.

- Later, type the following formula for the calculation of the total Regular Steel production amount.

`=SUM(C5:C7)`

- Then, press
**Enter**. - Next, drag the Fill Handle icon up to cell
**E8**to fill the other cells with the formula. - Therefore, the output will look like this.

- Similarly, write down the formula below in cell
**C14**to calculate the Linearized Rating and fill the adjacent cells up to**E14**.

`=SUMPRODUCT($J$5:$J$7,C5:C7)`

- Then, press
**Enter**. - Therefore, the output will look like this.

- After that, type the following formula
**C16,**and fill the cells up to**E16**.

`=C12*C8`

- Then, press
**Enter**. - Therefore, the output will look like this.

- Next, write down the formula below in cell
**I10**to determine the**Revenue**.

`=SUMPRODUCT(C11:E11,C8:E8)`

- Then, press
**Enter**. - Therefore, the output will look like this.

- To calculate the production cost, use the following formula.

`=SUMPRODUCT(I5:I7,F5:F7)`

- Then, press
**Enter**. - Therefore, the output will look like this.

- The following formula will return the
**Profit**.

`=I10-I11`

- Then, press
**Enter**. - Therefore, the output will look like this.

- To open the
**Solver Add-in**, go to the**Data**tab and click on**Solver**.

- After that, to enter the Subject, Changing Variable, and Constraints, please follow the link of Method 1 that will lead you to the process. Iâ€™ll simply explain these inequalities in the following description.
- We want to maximize the profit amount, so we reference the cell that contains profit (
**I12**). - Next, our changing variables are the Steel products, so this range will be
**C5:E7**where the amount of production will be stored. - After that, we added some constraints. The Linearized Raw Rating will be greater than or equal to the Linearized Minimum Required Rating, so the range
**C14:E14**will be greater or equal to C16:E16. - Thereafter, the production amount will be greater than the required amount. So the range
**C8:E8**will be greater than**C10:E10**. - And the usage of raw materials will be lower than the available raw materials. So the range
**F5:F7**will be greater than**H5:H7**.

- After clicking on
**Solve**, you will get the following window. Next, click on**OK**.

- Therefore, you will get the values of how much Raw Materials you should use to get the minimum production cost.
- In addition, you will also get the results of Revenue, Cost of production, and Profit.

**Read More: **How to Do Portfolio Optimization Using Excel Solver

**Download Practice Workbook**

Download this practice workbook to exercise while you are reading this article. It contains all the datasets in different spreadsheets for a clear understanding. Try it yourself while you go through the step-by-step process.

## Conclusion

Thatâ€™s the end of todayâ€™s session. I strongly believe that from now on, you may learn how to minimize cost using Excel Solver with example. If you have any queries or recommendations, please share them in the comments section below. Keep learning new methods and keep growing!

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Hi,

I hope you can help me in that using excel

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Questions

1. In order to minimize total distribution costs, design a facility location model to determine the right location of establishing a distribution center.

2. Design a distribution network and generate an answer report to determine the flow of goods between suppliers and markets.

3. Is it feasible to shut down one supply markets to minimize total costs if you know that the fixed costs are as follows: Belgium (18000 $), China (17000 $), and France (19000$)? Generate an answer report to shows your results.

Hi Ahmed,

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Thanks.