Beruflich Dokumente
Kultur Dokumente
2012
Introduction to Management
Science
Introduction to Modeling
Management Science
Management science
Is a scientific approach to decision making. Makes
extensive use of mathematical/statistical models
Quantitative Analysis
Potential Reasons for a Quantitative Analysis
Approach to Decision Making
The problem is complex for informal methods.
The problem is very important.
The problem is new.
Alternatively, the problem is repetitive.
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Decision Models
Decision models :
Generally mathematical representations.
Provide analytical framework for evaluating
modern business problems.
Provide techniques applicable in many areas Accounting, Economics, and Finance
Logistics, Management, and Marketing
Production, Operations, and Transportation
Decision Models
Decision models subject to
Limitations
Assumptions
Simplifications
Real
World
Management
Situation
Analysis
Managerial
Judgment
Results
Interpretation
Symbolic
World
Abstraction
Model
Decisions
Intuition
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A decision variable
A controllable variable (e.g. inventory items to
order)
A parameter
A measurable quantity that is known and
inherent to the problem (e.g. Selling price of a
product)
Decisions
(Controllable)
Parameters
(Uncontrollable)
Model
Performance
Measure(s)
Consequence
Variable(s)
Decision models
Relate decision variables (controllable inputs)
with fixed or variable parameters (uncontrollable
inputs).
Frequently seek to maximize or minimize some
performance measures (objective function)
subject to constraints.
The values of the decision variables that provide
the mathematically-best output are referred to as
the optimal solution for the model.
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Deterministic
Models
Probabilistic
Models
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2. Solution.
3. Interpretation.
Developing a model
Select and develop a decision model
Select appropriate problem variables
Develop relevant mathematical relation for
consideration and evaluation
Steps in Decision
Modeling
Acquiring input data
Collect accurate data for use in model.
Possible data sources are:
Official company reports.
Accounting, operating, and financial information.
Views, and opinions from knowledgeable
individuals.
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Steps in Decision
Modeling
Developing a solution
Solution of set of mathematical expressions
Alternative trial and error iterations
Complete enumeration of all possibilities
Utilization of an algorithm/heuristic
Series of steps repeated until satisfactory solution
is attained
Steps in Decision
Modeling
Testing a solution
Prior to implementation of model solution,
testing solution.
Testing of solution is accomplished by
examining and evaluating:
Data utilized in model by acquiring new data
The model itself
Steps in Decision
Modeling
Interpretation and What-if Analysis
(Analyzing the results and sensitivity
analysis)
Vary data input values and examine differences
in various optimal solutions
Make changes in model parameters and
examine differences in various optimal
solutions
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Steps in Decision
Modeling
Possible Problems
in Decision Modeling
Defining the problem
Conflicting viewpoints
Impact on other departments
Real life is too ambiguous a jungle
Problems that change quickly
Developing a model
Beginning assumptions
Fitting textbook models
Understanding/accepting a model
Possible Problems
in Decision Modeling
Acquiring data
Availability
Accesibility
Relevance
Quality
Missing data
Developing a solution
Complex mathematics
Giving only-one answer (insight is important)
Failing to remember there are assumptions
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Possible Problems
in Decision Modeling
Testing the solution/analyzing
results/implementing results
Problems about realization/implementation
Time dimension (no immediate effects)
Resistance for change
Example: Yesilayirlar
Yeilayrlar Development Corporation
(YDC) is a small real estate developer that
builds only one style house. The selling price
of the house is 115,000TL.
Land for each house costs 55,000TL and
lumber, supplies, and other materials run
another 30,000TL per house. Total labor
costs are approximately 20,000TL per house
The salaries of the employees and the office
rents sum up to 40,000TL per month.
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Example: Yesilayirlar
Revenue per house = r(x) = 115000x
Costs
Fixed cost = F = 40000
Variable costs per house
= v(x) = (55000 + 30000 + 20000)x = 105000x
Total costs = c(x) = F + v(x) = 40000 + 105000x
Break-even point
r(x) = c(x)
115000x = 40000 + 105000x
Solving, x = 4 houses
Example: Yesilayirlar
What is monthly profit if 12 houses are sold?
p(x) = 115000x 105000x 40000
p(x) = 10000x 40000
p(12) = 10000(12) 40000 = 80000TL
Thousands of TLs
1200
Total Revenue =
115000x
1000
800
600
Total Cost =
40000 + 105000x
400
200
0
2
3
4
5
6
7
8
Number of Houses Sold (x)
10
10