MANAGEMENT SCIENCE
BA 35
UNIT I: MANAGEMENT SCIENCE TECHNIQUES problem and develop mathematical expressions
AS TOOLS FOR DECISION-MAKING that describe the objectives, constraints, and other
relationships that exist in the problem and make a
Management Science - an approach to recommendation based on the quantitative aspects
decision making based on the scientific of the problem.
method
- makes extensive use of quantitative analysis. Reasons why a quantitative approach might be
- a variety of names exists for the body of used in the decision-making process:
knowledge involving quantitative approaches to 1. The problem is complex, and the manager
decision making; in addition to management cannot develop a good solution without the
science, two other widely known and accepted aid of quantitative analysis.
names are operations research and decision 2. The problem is especially important (e.g., a
science. great deal of money is involved), and the
- use the terms management science, operations manager desires a thorough analysis before
research, and decision science interchangeably attempting to make a decision.
3. The problem is new, and the manager has no
Problem Solving - is the process of identifying previous experience from which to draw.
a difference between the actual and the 4. The problem is repetitive, and the manager
desired state of affairs and then taking action saves time and effort by relying on quantitative
to resolve the difference. procedures to make routine decision
Problem solving process: recommendations.
1) Identify and define the problem.
2) Determine the set of alternative solutions. Management Science Techniques
3) Determine the criterion or criteria that will be 1. Linear Programming. A problem-solving
used to evaluate the alternatives. approach developed for situations involving
4) Evaluate the alternatives. maximizing or minimizing a linear function subject
5) Choose an alternative. to linear constraints that limit the degree to which
6) Implement the selected alternative. the objective can be pursued.
7) Evaluate the results to determine whether a 2. Integer Linear Programming. An approach used
satisfactory solution has been obtained. for problems that can be set up as linear programs,
with the additional requirement that some or all of
Decision-making - is the term generally the decision variables be integer values.
associated with the first five steps of the 3. Distribution and Network models. A network is
problem-solving process. a graphical description of a problem consisting of
- ends with the choosing of an alternative, which is circles called nodes that are interconnected by lines
the act of making the decision. called arcs. Specialized solution procedures exist for
Decision-making process: these types of problems, enabling us to quickly
1) Define the problem. solve problems in such areas as supply chain design,
2) Identify the alternatives. information system design, and project scheduling.
3) Determine the criteria. 4. Nonlinear programming. Many business
4) Evaluate the alternatives. processes behave in a nonlinear manner.
5) Choose an alternative. - is a technique that allows for maximizing or
minimizing a nonlinear function subject to
The analysis phase of the decision-making nonlinear constraints.
process may take two basic forms: qualitative Ex: the price of a bond is a nonlinear function
and quantitative. of interest rates; the quantity demanded for a
1. Qualitative analysis - is based primarily on product is usually a nonlinear function of the price.
the manager’s judgment and experience; it includes 5. Project Scheduling: PERT/CPM. In many
the manager’s intuitive “feel” for the problem and situations, managers are responsible for planning,
is more an art than a science. scheduling, and controlling projects that consist of
2. Quantitative analysis - concentrates on the numerous separate jobs or tasks performed by a
quantitative facts or data associated with the
MANAGEMENT SCIENCE
BA 35
variety of departments, individuals, and so forth.
The PERT (Program Evaluation and Review
Technique) and CPM (Critical Path Method)
techniques help managers carry out their project
scheduling responsibilities.
6. Inventory models. Are used by managers faced
with the dual problems of maintaining sufficient
inventories to meet demand for goods and, at the
same time, incurring the lowest possible inventory
holding costs.
7. Waiting-line or Queuing models. Have been
developed to help managers understand and make
better decisions concerning the operation of
systems involving waiting lines.
8. Simulation. A technique used to model the
operation of a system.
- employs a computer program to model the
operation and perform simulation computations.
9. Decision Analysis. It can be used to determine
optimal strategies in situations involving several
decision alternatives and an uncertain or riskfilled
pattern of events.
10. Goal programming. A technique for solving
multi-criteria decision problems, usually within the
framework of linear programming.
11. Analytic Hierarchy process. This multi-criteria
decision-making technique permits the inclusion of
subjective factors in arriving at a recommended
decision.
12. Forecasting. Are techniques that can be used
to predict future aspects of a business operations.
13. Markov process models. Are useful in studying
the evolution of certain systems over repeated
trials.
- have been used to describe the probability that a
machine, functioning in one period, will function or
break down in another period.
