Introduction to Management Science

(2nd Discussion)
Chapter Outline Management Science in Practice
1. Introduction • Linear Programming
2. What is Management Science? • Project Scheduling
3. The Quantitative Analysis Approach • Inventory models
4. How to Develop a Quantitative Analysis • Waiting line or Queuing models
Model • Simulations
5. Possible Problems in the Quantitative • Decision Analysis
Analysis Approach • Forecasting
6. Implementation - Not Just the Final Step • Markov-Process models

Learning Objectives What is Management Science?

• Describe the quantitative analysis
approach Management Science - is a scientific approach to
• Apply quantitative analysis in a real managerial decision making whereby raw data
situation are processed and manipulated resulting in
• Present various quantitative methods in meaningful information
practice
• Describe the use of modeling in
quantitative analysis
• Use computers and spreadsheet models to
perform quantitative analysis
• Discuss possible problems in using
Management science also referred to as
quantitative analysis
operations research, quantitative methods and
• Perform a break-even analysis
analysis, and decision sciences.
Introduction
Quantitative factors might be different
• Mathematical tools have been used for
investment alternatives, interest rates,
thousands of years
inventory levels, demand, or labor cost.
• Quantitative analysis can be applied to a
wide variety of problems
Qualitative factors such as the weather, state
• It's not enough to just know the
and federal legislation, and technology
mathematics of a technique
breakthroughs should also be considered.
• One must understand the specific
• Information may be difficult to quantify
applicability of the technique, its
but can affect the decision-making process
limitations, and its assumptions
Management scientist is a person skilled in the
Examples of Quantitative Analyses
application of management science techniques
• Taco bell saved over $150 million using
forecasting and scheduling quantitative
A model is an abstract mathematical
analysis models
representation of a problem situation
• NBC television increased revenues by over
$200 million by using quantitative analysis
A variable is a symbol used to represent an item
to develop better sales plans
that can take on any value
• Continental Airlines saved over $40 million
using quantitative analysis models to
quickly recover from weather delays and
other disruptions
The Quantitative Analysis Approach Acquiring Input Data
1. Defining the Problem
2. Developing a Model Input data must be accurate - GIGO rule
3. Acquiring input Data
4. Developing a Solution
5. Testing the Solution
6. Analyzing the Results
7. Implementing the Results

Defining the Problem

Need to develop a clear and concise statement

that gives direction and meaning to the following Data may come from a variety of sources such as
steps: company reports, company documents,
interviews, on-site direct measurement, or
• This may be the most important and
statistical sampling
difficult step
• It is essential to go beyond symptoms and
identify true causes Developing a Solution
• May be necessary to concentrate on only
• The best (optimal) solution to a problem is
a few of the problems - selecting the right
found by manipulating the model variables
problems is very important
until a solution is found that is practical
• Specific and measurable objectives may
have to be developed can be implemented.
• Common techniques are
o Solving equations
Developing a Model
o Trial and error - trying various

Quantitative analysis models are realistic, approaches and picking the best
solvable, and understandable mathematical results
o Complete enumeration - trying all
representations of a situation
possible values
o Using an algorithm - a series of
repeating steps to reach a solution

Testing the Solution

Both input data and the model should be tested

for accuracy before analysis and implementation
• New data can be collected to test the
model
• Models generally contain variables • Results should be logical, consistent, and
(controllable and uncontrollable) and represent the real situation
parameters
• Controllable variables are generally the
decision variables and are generally
unknown
• Parameters are known quantities that are
a part of the problem
Analyzing the Results References:
Melad, A. (2021). Introduction to Management Science (part 1)
Determine the implications of the solution [YouTube Video]. Retrieved from
• Implementing results often requires https://www.youtube.com/watch?v=6z4Di1HaCvw
change in an organization Melad, A. (2021). Introduction to Management Science (part2)
• The impact of actions or changes needs to [YouTube Video]. Retrieved from
be studied and understood before https://www.youtube.com/watch?v=OMI6NHzrlds&t=6s
implementation

Sensitive Analysis determines how much the

results of the analysis will change if the model or
input data changes
• Sensitive models should be very
thoroughly tested

Implementing the Results

Implementation incorporates the solution into

the company
• Implementation can be very difficult
• People can resist changes
• Many quantitative analysis efforts have
failed because a good, workable solution
was not properly implemented

Changes occur over time, so even successful

implementations must be monitored to
determine if modifications are necessary.

Modeling in the Real World

Quantitative analysis models are used

extensively by real organizations to solve real
problems
• In the real world, quantitative analysis
model can be complex, expensive, and
difficult to sell.
• Following the steps in the process is an
important component of success.

How to Develop a Quantitative Analysis Model

• An important part of the quantitative
analysis approach
• Let's look at a simple mathematical model
of profit

Profit = Revenue - Expenses