MANAGEMENT

SCIENCE
 Introduction
O Management science is applying a scientific approach
to problem-solving management to help managers
make better choices.
O As suggested by this concept, management science
includes a variety of mathematically based strategies
that have either been developed within the area of
management science or adopted from other disciplines
such as mathematics, natural sciences, statistics, and
engineering. This module offers an introduction to the
methods that make up the philosophy of management
and explains their contributions to crisis management.
O Management science is a proven and recognized
discipline in industry.
O Management science techniques implementations
are common, and they have also been credited with
growing the company firms' performance and
profitability. Several suggest that they use
management science methods in different
organization surveys, and the majority consider the
findings to be quite good.
O Management science (also referred to as operations
research, systematic processes, predictive study and
decision-making sciences) is part of the core
curriculum in most business programs.
 Learning Outcomes
O After studying this module, you should be able to:
O Define management science and describe its
importance in business.
O Explain the major characteristics of management
science and how it is applied in problem solving.
O Explain the importance of models in decision
making process.
O Explain and identify the appropriate management
science technique in managerial problems.
What is Management Science?
O Management Science is the discipline that
adapts the scientific approach for problem
solving to help managers make informed
decisions. The goal of Management Science
Techniques is to recommend the course of
action that is expected to yield the best
outcome with what is available.
 Major Characteristics
of Management Science
O A main focus on decision making by the managers.
O Usage of the analytical model to the decision-
making phase.
O Examining the condition of the judgment from a
specific viewpoint
O Using methods and expertise from multiple
disciplines.
O A dependency on the mathematical models of
shape.
O Computer widespread use.
Management Science approach
to Problem Solving
 Problem Solving
O Problem solving can be defined as the process
of identifying a difference between the actual
and the desired state of affairs and then taking
action to resolve the difference.
O For problems important enough to justify the
time and effort of careful analysis, the
problem-solving process involved the seven
steps.
 Problem Solving
1. Identify and define the problem.
2. Determine the set of alternative solutions.
3. Determine the criterion or criteria that will
be used to evaluate the alternatives.
4. Evaluate the alternatives.
5. Choose an alternative.
6. Implement the selected alternative.
7. Evaluate the results to determine whether a
satisfactory solution has been obtained.
 Decision Making
O Decision-making is a method of deciding
between two or more possible courses of
action necessary to accomplish a particular
goal.
O Decision-making is a systematic process and
can be described simply by defining the
problem, searching for alternative courses of
action, evaluating alternatives and choosing
one alternative.
O System configuration comprises of three associated
components: inputs, procedures, and outputs.
O The inputs (people, raw materials, money) enter the
system. Processes transform inputs into outputs
(processes may use resources, operating procedures,
workers, machines). Outputs exit the machine
(Products, Customers served).
O Systems approach involves finding and defining all the
elements mentioned and the real world relationships
between them. This method is the presumption required
to use management science methods, since they allow
the precise definition of a problem. System approach
allows mathematical formulation of the problem.
O Let us consider the following example of the decision-
making process. For the moment assume that you are
currently unemployed and that you would like a
position that will lead to a satisfying career.

O Suppose that your job search has resulted in offers from

companies in Sunjin, Malvar; TOSOH Polyvin Inc.,
Lipa City; Taiwan Fructose Phils. Inc., Tanauan City;
and Sonion, Sto. Tomas City. Thus, the alternatives for
your decision problem can be stated as follows:

O Accept the position in Malvar.

O Accept the position in Lipa City.
O Accept the position in Tanauan City.
O Accept the position in Sto. Tomas City.
 Criteria/ Criterion
O Criteria, standard, norms, accepted,
benchmark, basis.
O Are the preferences of the decision maker;
something that is used as a reason for making
a judgment or decision.
Illustration 1:

When you were choosing the course to take in

College
Illustration 2:
O If I would like to purchase a laptop my
criteria for buying it would be:
O Price (Cheaper)
O Quality
O Durable
O Advanced high tech operating system
O Black
O Thin
O With 5 USB hubs, with RGB cable connector,
etc
O It must be user friendly
Illustration 3:

When you are trying to decide which car to buy, what is important to us that
will help us determine which car will best fit our situation?
O Style
O Comfort
O Sound (noise it can create)
O Gas mileage
O Speed
O Manual/transmission
O Price
O Payment terms availability
O Reliability
O Fashion trend
O “I need the car to look cool so that I can impress women.”
O “I need the car to be reliable so that I don’t have to worry about
breakdowns in traffic.”
Types of decision problems
O Single-criterion decision problems are
problems in which the objective is to find the
best solution with respect to one criterion.
O Multi-criteria decision problems are
problems that involve more than one criterion.
Steps in decision making process

1. Structuring the problem.

a. Define the problem.
b. Identify the alternatives.
c. Determine the criteria/criterion.
Steps in decision making process

2. Analyzing the problem.

a. Evaluate the alternatives.
b. Choose an alternative
THE RELATIONSHIP
BETWEEN PROBLEM
SOLVING AND
DECISION MAKING
AN ALTERNATE CLASSIFICATION OF THE
DECISION-MAKING PROCESS
Two basic forms of the problem analysis phase:

O Qualitative Analysis is based primarily on the

manager’s judgment and experience; it
includes the manager’s intuitive “feel” for the
problem and more an art than a science.
Two basic forms of the problem analysis phase:

O Quantitative Analysis focuses on the

quantitative facts or data associated with the
problem. It includes the development of
mathematical expressions that describe the
objectives, constraints, and other relationships
that exist in the problem. Then, by using one
or more quantitative methods, the analyst will
make a recommendation based on the
quantitative aspects of the problem.
Some of the reasons why a quantitative approach
might be used in the decision-making process:

O The problem is complex, and the manager

cannot develop a good solution with the aid
of quantitative analysis.
O The problem is especially important, like
when a large amount of money is involved,
and the manager desires a thorough
analysis before attempting to make a
decision.
Some of the reasons why a quantitative approach
might be used in the decision-making process:

O The problem is new, and the manager has

no previous experience from which to
draw.
O The problem is repetitive, and the manager
saves time and effort by relying on
quantitative procedures to make routine
decision recommendations.
THE ROLE OF QUALITATIVE AND QUANTITATIVE
ANALYSIS
 Models and Modeling
O Model is a generalized reflection of the natural
world, and only significant and appropriate
objects or properties can be included in the
model, whereas modeling is the method of
treating and explaining real-life problems in
mathematical terms.
 Models and Modeling
O Management science follows a rational,
structured approach to problem solving that
strongly resembles what is known as the
analytical process of problem-solving. This
approach, as illustrated in a generally
recognized and ordered series of steps follows:
(1) observation, (2) problem definition, (3)
model construction, (4) model solution, and
(5) solution implementation.
 Observation
O The first phase in the cycle of handling
management science process is to recognize a
problem that occurs within the organization.
The system must be monitored continuously
and closely so as to identify problems as soon
as they arise.
Definition of the Problem
O When a problem has been established, the
problem must be described explicitly and in a
clear manner. Defining a problem incorrectly can
easily lead to either no solution or inappropriate
solution. Hence the limitations of the problem
and the extent to which it pervades other units of
the organization should be included in the
definition of the problem. It's evident that we
need to know the production process details and
all the appropriate information.
 Model Construction
O A concept in management science is a
theoretical representation of an actual issue
scenario. It can be in the form of a graph or
diagram, but most commonly a model in
management science consists of a series of
mathematical links. The numbers and symbols
form these mathematical relationships.
 Model Construction
O Two types of models exist: determinist and probabilistic.
O All aspects are known with certainty in deterministic
models. There is no question that deterministic models are
ideal, however they can give a fairly decent estimation of
truth.
O There is a particular degree of ambiguity in the
probabilistic models. This is tempting to neglect the small
degree of ambiguity and to use deterministic models
instead of probabilistic models. In case of high uncertainty
we should consider random variables rather than
constants.
 Model Solution
O When models have been developed in management
science, the methods described in this text are used to
solve them. A technique for a management science
solution usually applies to a particular type of model.
O Therefore, the form of concept and the process of
solution are also part of the scientific management
research. We also mean problem solution when we
refer to model solution. The typical goal of the most
problems is to find an optimal solution, that is, the
best of all feasible solutions (solutions that meet all
the constraints).
Implementation of Solution Result

O Implementation is the actual use of the model

once it has been developed or the solution to the
problem the model was developed to solve.
O This is actually the main goal of management
and the original purpose of the whole process -
not the model itself, but adjustment of reality
according to the recommendations ensuing from
the results of the modeling process. In case we
do not use the results in the real production
process, all our effort was absolutely vain.
Implementation of Solution Result

O On the contrary, if we constructed the model

in a wrong way and we did not validate it, the
applied results could seriously harm the real
system. In order to achieve the best
management results, each step must be
carefully considered and cannot be skipped.
 Models
O Model is a selected simplified representation
of the essential or relevant entities of some
specific reality and their characteristics. Basic
types of models are Iconic, Analogue,
Symbolic
 Models
O An iconic model is a physical replica of a real
object. (e.g., miniature of buildings)
O An analog model is physical in form but do not
have the same physical appearance as the object
being modeled. (e.g., diagram, charts, tables)
O A mathematical model includes the
representation of a problem by a system of
symbols and mathematical relationships or
expressions. It is a critical part of any
quantitative approach to decision making.
Flowchart of the Process of Transforming
Model Inputs into Output
Example:
The total profit from the sale of a product can be
determined by multiplying the profit per unit by
the number of units sold. If the profit per unit of
selling smart phones is P500, then the total profit
P for selling x number of units is
P = 500x.
O Objective Function is a mathematical
expression that describes the problem’s
objective.
O Constraints are restrictions such as available
of resources, materials and labor that should
be considered in decision making.
O Uncontrollable inputs such as environmental
factors which can affect both the objective
function and the constraints.
O Controllable inputs are inputs that are
completely controlled or determined by the
decision maker. These are the decision
alternative specified by the manager and are
also referred to as the decision variables of the
model.
FLOWCHART FOR THE PRODUCTION
MODEL
Management Science Techniques

O Linear Programming
O This is one of management science's best-
known tools. This strategy describes the
problem as maximizing a linear function
(minimizing) with reference to the set of linear
constraints.
 Management Science Techniques

O Integer Linear Programming

O Additional variable values criteria are applied to the
initial linear process ( i.e., process of linear function
and linear constraints). All or any of the values must
be an integer.
O The particular type of these variables is the binary
variable (0-1 variable) with a value of 0 or 1. We
think about binary integer linear programming in
such a situation. When only those variables are
described as integer (binary) in the model, then we
are thinking about mixed integer linear programming.
Management Science Techniques

O Goal Programming
O When several conflicting priorities need
to be addressed concurrently, it needs
more effective resource. Goal
programming is a specific methodology
for coping with such situations, usually
in linear programming.
 Management Science Techniques

O Nonlinear Programming
O Models used in this field of management
science are close to linear programming
models; but there is a major distinction
between them: nonlinear models include
nonlinear objective function and/or other
nonlinear constraints. Techniques employed
in this field of management science to solve
problems are somewhat distinct from linear
programming approaches.
 Management Science Techniques
O Network Models
O Many problems can be defined as a network (the
collection of nodes and arcs) in graphic terms.
Typical circumstance is a network of transports:
cities (nodes) are linked by roads (arcs) to each other.
O When we evaluate the network (in this case we are
involved, for example, in distances among all the
cities), the goal is always to locate the shortest
distance from one city to all other cities. Some forms
of networks, instead of lengths, can be measured by
capacities and then the dilemma of maximal flow can
be resolved. The most critical factor of several
problems, addressed by the help of network models,
is unit cost and the aim is to find the lowest overall
cost.
 Management Science Techniques

O Project Management
O Managers are responsible for organizing, managing
and overseeing projects in certain cases that consist
of several different jobs or activities undertaken by
a number of teams or persons. It needs different
time for a work to be completed.
O These problems are overcome by two simple
methods: CPM (Critical Path Method) and PERT
(Program Analysis Review Technique). All
approaches allow the issue to be expressed on a
network.
 Management Science Techniques
O Inventory Models
O Inventory control is one of the most common strategies,
helping managers decide what to buy and how much to
buy. The primary purpose is generally to strike an
accurate balance between the expense of keeping
inventory and the cost of implementing an order.
O Owing to the very various actual distribution structures,
there are several specific inventory models. We are
considering two distinct groups of models: deterministic
and probabilistic. The demand rate in deterministic
models is constant over time, while the demand
fluctuates over time in probabilistic inventory models
and can only be represented in probabilistic terms.
 Management Science Techniques
O Waiting Line Models
O This field of management science approaches deals with
the circumstances in which a variety of networks (e.g.
vendors) ought to represent units (e.g. customers). Since
the number of vendors is constrained, some units must
wait in queue for the service.
O Thus the alternative name for the models of the waiting
line: Queuing Models. In actual life, the process of arrival
of units as well as the service times are irregular and the
probabilistic approach is essential. Simple models of
waiting line can be obtained analytically (exact solution
using derivative formulas), while the simulation
technique is needed for complex queuing systems.
 Management Science Techniques
O Decision Analysis
O Such methods may be used to choose
appropriate approaches from a variety of
alternatives to decisions.
O According to the knowledge received by the
manager, management challenges and relevant
methods are classified into three types: decisions
under certainty (deterministic), decisions under
risk (probabilistic) and decisions under
uncertainty. Of this function, we find unique
instruments: decision tables and trees.
 Management Science Techniques
O Theory of Games
O This field is an expansion of the decision making
of two or more decision-makers to the
circumstances. All managers take simultaneous
decisions (selected strategies) to execute an acts
that influences all decision-makers (players), i.e.
their profits, costs etc.
O For certain disputes, two or three decision-makers
will collaborate, while battling with the others. We
will consider a standard case of a strategic game in
economic theory-the oligopoly model.
Management Science Techniques
O Forecasting
O Methods of forecasting support the manager
predicting future elements of the business
operation. Statistics and econometrics deliver
several time series and regression analysis
methods based. The key management task is to
predict potential developments relative to the
system's previous behavior.
 Management Science Techniques
O Markov Analysis
O This approach can be used for explaining a system 's
actions in a complex scenario (system progression over
time).
O If-at a given time point-the device is in one of the
potential states, the device may remain in the current
state or switch into some other state at the following
time point. The transition probabilities are set for
staying in the current state or moving to another state.
O The manager will be confident in the possibility of the
system being in the correct state at the present time.
Markov Analysis is a really strong management
science method with a number of practical
applications.
 Management Science Techniques
Dynamic Programming
O Management also needs to recognize a series of
decisions where each judgment impacts potential
decisions in a major way. Dynamic programming lets
administrators overcome certain forms of challenges
with these complex decision making.
O There is no common paradigm to solve dynamic
programming problems and, thus, the problems are
divided into several classes. One probable
classification takes the deterministic and probabilistic
models into consideration.
O Models also use the sequential problems to describe
the network. The Markov analysis may be viewed as a
complex programming probabilistic process.