CAS5103 Introduction to Management Science Course Outline

I. Introduction
a. Problem Solving and Decision Making
b. Quantitative Analysis
c. Management Science Techniques

Source:

Anderson, D. S. (2016). An Introduction to Management Science: Quantitative

Approaches to Decision Making. Singapore: Cengage Learning Asia Pte
Ltd.

Applied Management Science is the science of solving business problems.

The major reason that MS/OR has evolved as quickly as it has is due to the
evolution in computing power.
Management Science is the discipline that adapts the scientific approach for
problem solving to help managers make informed decisions.

The goal of management science is to recommend the course of action that is

expected to yield the best outcome with what is available.
The basic steps in the management science problem solving process involves:
• Analyzing business situations and building mathematical models to
describe them;
• Solving the mathematical models;
• Communicating/implementing recommendations based on the models
and their solutions.

Problem Solving and Decision Making

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. For problems, important enough to justify the time and
effort of careful analysis, the problem-solving process involved the following
seven steps:

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.

What is decision making?

• is the act of selecting a preferred course of action among alternatives.

• is the term generally associated with the first five steps of the problem-
solving process. Thus, the first step of decision making is to identify and
define the problem. Decision making ends with the choosing of an
alternative, which is the act of making the decision.

Criteria/ Criterion

Criteria, standard, norms, accepted, benchmark, basis.

Criteria – are the preferences of the decision maker.

- something that is used as a reason for making a judgement or

decision.

Illustration 1:
When you were choosing the course to take in College

Illustration 2:
If I would like to purchase a laptop my criteria for buying it would be:
a. Price (Cheaper)
b. Quality
c. Durable
d. Advanced high tech operating system
e. Black
f. Thin
g. With 5 USB hubs, with RGB cable connector, etc
h. 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?
a. Style
b. Comfort
c. Sound (noise it can create)
d. Gas mileage
e. Speed
f. Manual/transmission
 g. Price
h. Payment terms availability
i. Reliability
j. Fashion trend
k. “I need the car to look cool so that I can impress women.”
l. “I need the car to be reliable so that I don’t have to worry about
breakdowns in traffic.”

There are some typical decision criteria:

1. Ease of implementation
2. Cost
3. Ease of modification/scalability/flexibility
4. Employee morale
5. Risk levels
6. Cost savings
7. Increase in sales or market share
8. Return on investment
9. Similarity to existing organization products
10. Increase in customer satisfaction

Types of decision problems:

Single-criterion decision problems are problems in which the objective

is to find the best solution with respect to one criterion.

Multicriteria decision problems are problems that involve more than one
criterion.

• When in a group decision-making situation, it is often helpful to have the

group brainstorm the decision criteria which, as much as possible must
be measurable.
• This helps ensure “buy in” of the decision itself because the criteria is
measurable and not just a “well I feel like we should buy this product
because I like it.”
• You might also weigh the criteria. For example, cost savings might have a
higher weight than ease of use.

Steps in decision making process

 1. Structuring the problem.
a. Define the problem
b. Identify the alternatives
c. Determine the criteria/criterion.

2. Analyzing the problem.

a. Evaluate the alternatives.
b. Choose an alternative.

Two basic forms of the problem analysis phase:

1. Qualitative Analysis is based primarily on the manager’s judgment and

experience; it includes the manager’s intuitive “feel” for the problem and
more of an art than science.
2. 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.
• Although skills in the qualitative approach are inherent in the manager
and usually increased with experience, the skills of the quantitative
approach can be learned only by studying the assumptions and
methods of management science.
• A manager who is knowledgeable in quantitative decision making
procedures is in a much better position to compare and evaluate the
qualitative and quantitative sources of recommendations and ultimately
to combine the two sources in order to make the best possible decision.

Some of the reasons why a quantitative approach is beneficial in the decision-

making process:

1. The problem is complex, and the manager cannot develop a good solution
with the aid of quantitative analysis.
2. 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.
3. The problem is new, and the manager has no previous experience from
which to draw.
 4. The problem is repetitive, and the manager saves time and effort by relying
on quantitative procedures to make routine decision recommendations.

Quantitative Analysis

• Quantitative analysis begins once the problem has been structured.

• To successfully apply this to decision making, the management
scientist must work closely with the manager or the user of the
results.
• Work can begin on developing a model to represent the problem
mathematically.

Models

A Model is a selected simplified representation of the essential or relevant entities

of some specific reality and their characteristics.

Basic types of models:

• Iconic
• Analogue
• symbolic

Model development

Models are representations of real objects or situations and can be presented in

various forms.

1. An iconic model is a physical replica of a real object.

2. An analog model is physical in form but do not have the same physical
appearance as the object being modeled.
3. A mathematical model includes the representation of a problem by a
system of symbols and mathematical relationships or expressions.
4. It is a critical part of any quantitative approach to decision making.

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.

In general, experimenting with models requires less time and is less

expensive than experimenting with the real object or situation. The value of
model-based conclusions and decisions is dependent on how well the model
represents the real situation.

Flowchart of the Process of Transforming Model Inputs into Output:

Objective Function is a mathematical expression that describes the problem’s

objective.

Constraints are restrictions such as available resources, materials and labor

that should be considered in decision making.

Uncontrollable inputs are the factors which the decision-maker has no control
such as environmental factors which can affect both the objective function and
the constraints. If all uncontrollable inputs are known and cannot vary, the
model is referred to as a deterministic model. On the other hand, it these are
uncertain to the decision maker, the model is referred to as stochastic or
probabilistic model.

• inherent intelligence
• health of employees
• strengths
• learning style
• traits
• Talents and skills of the individuals.
 • Crises and disasters
• Technology
• Competitor’s decision or reactions
• Economy
• Market
• Inflation rate
• Government leaders

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. Controllable
inputs can be selected at the discretion of the decision maker to attain the
objective or goal of the decision maker.

• The number of units that must be produced to maximize profit or to

minimize cost.

Management Science Techniques

Listed below are the management science techniques that the course will
cover:

1. Linear Programming is a problem solving approach developed for

situations involving maximizing or minimizing a linear function subjects
to linear constraints that limit the degree to which the objective can be
pursued.
2. Integer Linear Programming is an approach used for problems that can be
set up as linear programs, with the additional requirement that some or
all of the decision variables be integer values.
3. Distribution models are specialized solutions procedures for problems
which can be graphically represented by nodes and arcs.
4. Project Scheduling or PERT/CPM are techniques which help managers
carry out their project scheduling responsibilities.
5. Waiting Line or Queueing Models are developed to help managers
understand and make better decisions concerning the operation of
systems involving lines.
6. Goal Programming is a technique for solving multicriteria decision
problems, usually within the framework of linear programming.
7. Forecasting methods are techniques that can be used to predict future
aspects of a business operation.