Lesson 1 – Introduction to Management Science

Management science is the application of a scientific approach to solving management problems in order to help
managers make better decisions. As implied by this definition, management science encompasses a number of
mathematically oriented techniques that have either been developed within the field of management science or been
adapted from other disciplines, such as the natural sciences, mathematics, statistics, and engineering.

Management science is a recognized and established discipline in business. The applications of management science
techniques are widespread, and they have been frequently credited with increasing the efficiency and productivity of
business firms. In various surveys of businesses, many indicate that they use management science techniques, and most
rate the results to be very good. Management science (also referred to as operations research, quantitative methods,
quantitative analysis, and decision sciences) is part of the fundamental curriculum of most programs in business.

Management science encompasses a logical, systematic approach to problem solving, which closely parallels what is
known as the scientific method for attacking problems

1. Observation
The system must be continuously and closely
observed so that problems can be identified
as soon as they occur or are anticipated.
Problems are not always the result of a crisis
that must be reacted to but, instead,
frequently involve an anticipatory or planning
situation. The person who normally identifies
a problem is the manager because managers
work in places where problems might occur.
However, problems can often be identified by
a management scientist, a person skilled in
the techniques of management science and
trained to identify problems, who has been
hired specifically to solve problems using
management science techniques.

2. Definition of the Problem

Once it has been determined that a problem exists, the problem must be clearly and concisely defined.
Improperly defining a problem can easily result in no solution or an inappropriate solution. Therefore, the limits
of the problem and the degree to which it pervades other units of the organization must be included in the
problem definition. Because the existence of a problem implies that the objectives of the firm are not being met
in some way, the goals (or objectives) of the organization must also be clearly defined. A stated objective helps
to focus attention on what the problem actually is.
3. Model Construction
A management science model is an abstract representation of an existing problem situation. It can be in the
form of a graph or chart, but most frequently a management science model consists of a set of mathematical
relationships. These mathematical relationships are made up of numbers and symbols.
4. Model Solution
Once models have been constructed in management science, they are solved using the management science
techniques presented in this text. A management science solution technique usually applies to a specific type of
model. Thus, the model type and solution method are both part of the management science technique. We are
able to say that a model is solved because the model represents a problem. When we refer to model solution,
we also mean problem solution.
5. Implementation
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. This is a critical but often overlooked step in the process. It is not always a given
that once a model is developed or a solution found, it is automatically used. Frequently the person responsible
for putting the model or solution to use is not the same person who developed the model, and thus the user
may not fully understand how the model works or exactly what it is supposed to do. Individuals are also
sometimes hesitant to change the normal way they do things or to try new things. In this situation the model
and solution may get pushed to the side or ignored altogether if they are not carefully explained and their
benefit fully demonstrated. If the management science model and solution are not implemented, then the effort
and resources used in their development have been wasted.
 Lesson 2 – Linear Programming
Many major decisions faced by a manager of a business focus on the best way to achieve theobjectives of the
firm, subject to the restrictions placed on the manager by the operating environment. These restrictions can
take the form of limited resources, such as time, labor, energy, material, or money; or they can be in the form of
restrictive guidelines. One of the most frequent objectives of business firms is to gain the most profit possible or,
in other words, to maximize profit. The objective of individual organizational units within a firm (such as a
production or packaging department) is often to minimize cost. When a manager attempts to solve a general
type of problem by seeking an objective that is subject to restrictions, the management science technique called
linear programming is frequently used. Linear programming is a model that consists of linear relationships
representing a firm’s decision(s), given an objective and resource constraints.

A linear programming model consists of certain common components and characteristics. The model
components include decision variables, an objective function, and model constraints, which consist of decision
variables and parameters. Decision variables are mathematical symbols that represent levels of activity by the
firm.

The objective function is a linear mathematical relationship that describes the objective of the firm in terms of
the decision variables. The objective function always consists of either maximizing or minimizing some value
(e.g., maximize the profit or minimize the cost of producing radios).

The model constraints are also linear relationships of the decision variables; they represent the restrictions
placed on the firm by the operating environment. The restrictions can be in the form of limited resources or
restrictive guidelines. For example, only 40 hours of labor may be available to produce radios during production.
The actual numeric values in the objective function and the constraints, such as the 40 hours of available labor,
are parameters. Parameters are numerical values that are included in the objective functions and constraints.

A Maximization Model Example

Beaver Creek Pottery Company is a small crafts operation run by a Native American tribal council. The company
employs skilled artisans to produce clay bowls and mugs with authentic Native American designs and colors. The
two primary resources used by the company are special pottery clay and skilled labor. Given these limited
resources, the company desires to know how many bowls and mugs to produce each day in order to maximize
profit. This is generally referred to as a product mix problem type.

The two products have the following resource requirements for production and profit per
item produced (i.e., the model parameters):

Product Labor (hr/unit) Clay (lb/unit) Profit (per unit)

Bowl 1 4 P40
Mug 2 3 P50
There are 40 hours of labor and 120 pounds of clay available each day for production.
Summary of LP Model Formulation Steps
Step 1: Define the decision variables
How many bowls and mugs to produce
Step 2: Define the objective function
Maximize profit
Step 3: Define the constraints
The resources (clay and labor) available
A Minimization Model Example

A farmer is preparing to plant a crop in the spring and needs to fertilize a field. There are
two brands of fertilizer to choose from, Super-gro and Crop-quick. Each brand yields a specific
amount of nitrogen and phosphate per bag, as follows:

Brand Nitrogen (lb/bag) Phosphate (lb/bag) Cost per bag

Super-ego 2 4 P6
Crop quick 4 3 P3
The farmer’s field requires at least 16 pounds of nitrogen and at least 24 pounds of phosphate. The farmer wants to
know how many bags of each brand to purchase in order to minimize the total cost of fertilizing.
Summary of LP Model Formulation Steps
Step 1: Define the decision variables
How many bowls and mugs to produce
Step 2: Define the objective function
Maximize profit
Step 3: Define the constraints
The resources (clay and labor) available