Input–output modeling in the business analysis

Input–output (I–O) approach originated in the pioneering work of Wassily Leontief before the World War II. Traditionally, this approach has been used almost exclusively for macroeconomic analysis. Its use in the business decision making has been very modest in the past. This paper presents the two-stage optimization model in the business analysis, where the discrete deterministic programming is used in the first stage and enterprise I–O analysis together with the linear programming in the second stage of the business optimization. All three approaches, although each well known in literature and practice, bring possibilities of some new solutions if they are used in combination as suggested in this paper. In the second part of the paper the application to aluminium plant in Solvenia is presented. The purpose of the two-stage optimization is to establish optimal purchasing quantities of input elements and production and selling quantities of outputs in the multiphase business process in aluminium industry for a certain number of time periods.