BUS 2420 Management Science

Instructor: Vincent WS Chow Office: WLB 818 Ext: 7582 E-mail: vwschow@hkbu.edu.hk URL: http://ww.hkbu.edu.hk/~vwschow Office hours:
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Mon day 8:30 9:30 10:30 11:30 12:30 13:30

Tues day

Wednes day

Thurs day

Friday

*
14:30

*
ISEM

*
BUS

15:30 16:30

17:30 17:3018:30 *

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(subject outline)

* Office hours

Subject outline
Subject outline (see handout)
Textbook:
Bernard W. Taylor III, Introduction to Management Science, 10th Edition, Prentice Hall, 2010

Grading: Topics: Tutorials

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Refer to handout

Start from 3rd hr of 3rd week lecture Typically, we assign few questions in each lecture and then taken them up for discussion in the next week session. (to p5) (to p6) 3 How you are being graded?
(lecture)

Grading:
Assignments Class Participation
Tutorial performance

15%

Most likely be1-3 assignments Group Memberships (refer to our web site)

15%
20% 50%
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Test
One mid-term exam

Examination
One final exam

How you are being graded?

Students will award marks if they show their works (by submission!) in the tutorial sessions Students are thus strongly encouraged to bring their works to show in tutorials or prepare materials for presentation ..
Note: you may like to approach me later to see how we could improve this process of grading!
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Lecture 1 Introduction to Management Science

What is Management Science? How to apply Management Science technique? Have we seen or used then before? Types of Management Science Models/techniques We start with the most popular Management Science technique:
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Linear Programming

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Management Science
Management science uses a scientific approach to solving management problems. It is used in a variety of organizations to solve many different types of problems. It encompasses a logical mathematical approach to problem solving. History of Management Science

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History of Management Science

It was originated from two sources:
Operational Research Management Information Systems

It is thus more emphasizing on the analysis of solution applications than learning their on how models were derived. Other names for management science: quantitative methods, quantitative analysis and decision sciences.
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Steps in applying Management Science teniques

(1)
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(2)

(3)

(4)

In practice, this step is critical

(5)
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Steps
1. 2. 3. Observation Identification of a problem that exists in the system or organisation. Definition of the Problem Problem must be clearly and consistently defined showing its boundaries and interaction with the objectives of the organisation. Model Construction Development of the functional mathematical relationships that describe the decision variables, objective function and constraints of the problem. Model Solution Models solved using management science techniques. Model Implementation Actual use of the model or its solution.
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4. 5.

Models to be considered in this subject

* * * * * *

* *

* Their Characteristics
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* Topics that will cover in this subject!

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.
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Linear Programming
Or denote as LP Overview of LP How does LP look like? Components of LP General LP format Example 1: Maximizing Z Example 2: Minimizing Z We will talk about more LP formulations and its solutions in next lecture
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Linear Programming - An Overview

Objectives of business firms frequently include maximizing profit or minimizing costs, or denote as Max Z or Min Z
Linear programming is an analysis technique in which linear algebraic relationships represent a firms decisions given a business objective and resource constraints. Steps in application: 1- Identify problem as solvable by linear programming. 2- Formulate a mathematical model of managerial problems. 3- Solve the model.
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4 Components of LP
1. Decision variables: mathematical symbols (to p16) representing levels of activity of a firm. 2. Objective function: a linear mathematical relationship describing an objective of the firm, in terms of decision variables, that is maximized (to p17) or minimized 3. Constraints: restrictions placed on the firm by the operating environment stated in linear relationships of the decision variables. (to p18) 4. Parameters: numerical coefficients and constants used in the objective function and (to p19) constraint equations. (to p13) 5. Non-negativity (or necessary) constraints 15

Example of Decision Variables

Decision Variables: It is used to represent decision problem to be solve
Let,

x1=number of bowls to produce/day x2= number of mugs to produce/day How of them are needed is depended on the nature of the problem!
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Objective Functions
It is used to represent the type of problems we are to solve
In this subject, we only emphasize to either
1. Maximizing a profit margin or 2. Minimizing a production cost

Example: An Objective function maximize Z = $40x1 + 50x2

Refer to how much we made for each x is produced
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Constraints
It is also referred to resource constraints They are to indicate how much resources made available in a firm Example:
Resource Constraints: 1x1 + 2x2 40 hours of labor 4x1 + 3x2 120 pounds of clay
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Non-negativity constraints
We assumed that all decision variables are carried out positive values (why?) Example:
Non-negativity Constraints:

x10; x2 0
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Sample of LP
Let xi be denoted as xi product to be produced, and i = 1, 2
or Let and x1 be numbers of product x1 to be produced x2 be numbers of product 21 to be produced

Decision variables

Cost

Maximize Z=$40x1 + 50x2

subject to 1x1 + 2x2 40 hours of labor 4x2 + 3x2 120 pounds of clay x1, x2 0 Constraints
Objective function

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General LP format
Max/Min Z : cixi

subject to
aij xij (=, , ) bj , j = 1,., n xij 0, for i=1,,m, j=1,,n
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General steps for LP formulation It means there are total of m decision variables n resource constraints
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Steps for LP formulation

Step 1: define decision variables Step 2: define the objective function Step 3: state all the resource constraints Step 4: define non-negativity constraints

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Example 1: Max Problem

A Maximisation Model
Example The Beaver Creek Pottery Company produces bowls and mugs. The two primary resources used are special pottery clay and skilled labour. The two products have the following resource requirements for production and profit per item produced (that is, the Resource Requirements model parameters).
Product Bowl Mug Labor (hr/unit) 1 2 Clay (lb/unit) 4 3 Profit ($/unit) 40 50

Resource available: 40 hours of labour per day and 120 pounds of clay per day. How many bowls and mugs should be produced to maximizing profits give these labour resources? LP formulation
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Max LP problem

Step 1: define decision variables Let x1=number of bowls to produce/day x2= number of mugs to produce/day Step 2: define the objective function maximize Z = $40x1 + 50x2 where Z= profit per day Step 3: state all the resource constraints

1x1 + 2x2 40 hours of labor ( resource constraint 1) 4x1 + 3x2 120 pounds of clay (resource constraint 2) Step 4: define non-negativity constraints x10; x2 0
Complete Linear Programming Model: \ maximize Z=$40x1 + 50x2 subject to 1x1 + 2x2 40 4x2 + 3x2 120 x1, x2 0

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Example 2: Min Z
A farmer is preparing to plant a crop in the spring. There are two brands of fertilizer to choose from, Supper-gro and Crop-quick. Each brand yields a specific amount of nitrogen and phosphate, as follows:

Chemical Contribution Nitrogen (lb/bag) 2 4 Phosphate (lb/bag) 4 3

Brand Super-gro Crop-quick

The farmers field requires at least 16 pounds of nitrogen and 24 pounds of phosphate. Super-gro costs $6 per bag and Crop-quick costs $3 per bag. The farmer wants to know how many bags of each brand to purchase in order to minimize the total cost of fertilizing. LP formulation (to p26)
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Min Z
Step 1: define their decision variables

x1 number of bags of Super-gro, x2 number of bags of Crop-quick.

Step 2: define the objective function

Minimise Z 6x1 3x2

Step 3: state all the resource constraints

2x1 4x2 16, (resource 1) 4x1 3x2 24 (resource 2)

Step 4: define the non-negativity constraints

x1 0, x2 0 Overall LP: Minimise Z 6x1 3x2 subject to 2x1 4x2 16, 4x1 3x2 24, x1 0, x2 0

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