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TO Management Science

This document introduces management science and its problem-solving approach. It discusses how management science uses logical and mathematical models to help solve business problems related to areas like production, resource allocation, and scheduling. The management science process involves defining the problem, constructing a model, solving the model, and implementing the solution. An example shows how a bakery problem of determining product mix can be modeled mathematically to maximize profit. Management science techniques include linear programming, probabilistic methods, network models, and forecasting.

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Zein Gonzalez
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51 views

TO Management Science

This document introduces management science and its problem-solving approach. It discusses how management science uses logical and mathematical models to help solve business problems related to areas like production, resource allocation, and scheduling. The management science process involves defining the problem, constructing a model, solving the model, and implementing the solution. An example shows how a bakery problem of determining product mix can be modeled mathematically to maximize profit. Management science techniques include linear programming, probabilistic methods, network models, and forecasting.

Uploaded by

Zein Gonzalez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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INTRODUCTION

TO
MANAGEMENT SCIENCE
Chapter 1- Introduction to Management Science

• The Management Science Approach to Problem Solving


• Model Construction: Production
• Management Science Modeling Techniques
• Breakeven Analysis and Excel Model Example
• Indifference Point Analysis

2 - Chap 01
Applications of Management Science in Business:
Opening a Fairwood Fast Food Restaurant
Business questions:
1. Is it worth doing? (Break-even analysis,
Forecasting)
2.What seating capacity should we build? (Decision
analysis)
3.How much food material to prepare?
(Forecasting)
4. How to schedule the staff to ensure a certain
customer service level?
(Linear programming, Waiting line management)

3 - Chap 01
The Management Science Approach

• Management science uses an objective (logical, scientific and mathematical) approach to


solve management problems.
• It is used in a variety of organizations to solve many different types of problems.
– Investment, resource allocation, production mix, marketing, multi-period scheduling etc.

4 - Chap 01
The Management Science Process

The Management Science Process

5 - Chap 01
Steps in the Management Science Process
• Observation - Identification of a problem that exists in a system
or an organization.
• Definition of the Problem - Problem must be clearly and
consistently defined showing its boundaries and interaction with
the objectives of the organization.
• Model Construction - Development of the functional relationships
that describe the decision variables, objective function and
constraints of the problem.
• Model Solution - Model solved using management science
techniques.
• Model Implementation - Actual use of the model or its solution.

6 - Chap 01
Example of Model Construction
Problem Definition
Information and Data:
- A bakery makes and sells birthday cakes (Cake A and Cake B)
- Cake A costs $100 to produce, Cake B costs $120
- Cake A sells for $200 while Cake B sells for $250
- Cakes A and B require 0.5 and 0.8 pounds of double cream to make,
respectively
- The bakery has 20 pounds of double cream for each day
Business problem: Assuming all cakes produced can be sold out,
determine the numbers of different cakes to produce to make the most
profit given the limited amount of double cream available.
7 - Chap 01
Example of Model Construction
Mathematical Model
Decision Variable: x = number of Cake A to produce
y = number of Cake B to produce
Z = total profit
Model: Z = $200x +$250y- $100x - $120y (objective function)

0.5x +0.8y <= 20 lb of double cream (resource constraint)


Parameters: $200, $100, 0.5 lb, 20 lbs (known values)
Formal specification of model:
maximize Z = $200x + $250y - $100x - $120y
subject to 0.5x +0.8y <= 20
x >= 0, y>= 0 8 - Chap 01
Characteristics of Modeling Techniques
• Linear mathematical programming: clear objective; restrictions on
resources and requirements; parameters known with certainty.
• Probabilistic techniques: results contain uncertainty.
• Network techniques: model often formulated as diagram;
deterministic or probabilistic.
• Forecasting and inventory analysis techniques: probabilistic and
deterministic methods in demand forecasting and inventory
control.
• Other techniques: variety of deterministic and probabilistic
methods for specific types of problems.

9 - Chap 01

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