Introduction to

Management Science
(Module 1 Part 2)
 Introduction to
Management Science
(Module 1 Part 2)
 Learning Objectives:

1. Define the quantitative analysis process.

2. Identify the different management science techniques.
 Quantitative Analysis Process
- procedures for finding the “best” or optimal
solution/s (Anderson et al., 2019)

• Model Development
• Data Preparation
• Model Solution
• Report Generation
 Model Development
Models are representations of real objects or situations
Three forms of models are:
• Iconic models - physical replicas (scalar representations) of real objects

• Analog models - physical in form, but do not physically resemble the object
being modeled
 Model Development
• Mathematical models - represent real world problems through a system of
mathematical formulas and expressions based on key assumptions, estimates,
or statistical analyses

❖ A linear programming model :

Max Z = 5x1 + 7x2

s.t. x1 < 6
where: Yt = actual value of the time series in period t 2x1 + 3x2 < 19
n = number of periods in the time series
x1 + x2 < 8

x1 > 0 and x2 > 0

 Model Development
Generally, experimenting with models (compared to experimenting with the real
situation):
• requires less time
• is less expensive
• involves less risk

The more closely the model represents the real situation, the accurate the
conclusions and predictions will be.
 Mathematical Models

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

objective, such as maximizing profit or minimizing cost

• Consider a simple production problem. Suppose x denotes the number of

units produced and sold each week, and the firm’s objective is to maximize
total weekly profit. With a profit of P500 per unit, the objective function is 500x.
 Mathematical Models

Constraints – a set of restrictions or limitations, such as production capacities

• To continue our example, a production capacity constraint would be necessary

if, for instance, 6 hours are required to produce each unit and only 48 hours
are available per week. The production capacity constraint is given by 6x < 48.

• The value of 6x is the total time required to produce x units; the symbol
indicates that the production time required must be less than or equal to the
48 hours available.
 Mathematical Models
Uncontrollable Inputs – environmental factors that are not under the control of the
decision maker
• In the preceding mathematical model, the profit per unit (P 500), the production
time per unit (6 hours), and the production capacity (48 hours) are
environmental factors not under the control of the manager or decision maker.

Decision Variables – controllable inputs; decision alternatives specified by the

decision maker, such as the number of units of a product to produce.
• In the preceding mathematical model, the production quantity x is the controllable
input to the model.
 Mathematical Models

A complete mathematical model for our simple production problem is:

Maximize 500x (objective function)

subject to: 6x < 48 (constraint)
x>0 (constraint)

[The second constraint reflects the fact that it is not possible to manufacture
a negative number of units.]
 Mathematical Models

Deterministic Model – if all uncontrollable inputs to the model are known and
cannot vary

Stochastic (or Probabilistic) Model – if any uncontrollable are uncertain and

subject to variation

Stochastic models are often more difficult to analyze.

• In our simple production example, if the number of hours of production time
per unit could vary from 3 to 6 hours depending on the quality of the raw
material, the model would be stochastic.
 Mathematical Models

Cost/benefit considerations must be made in selecting an appropriate

mathematical model.

Frequently a less complicated (and perhaps less precise) model is more

appropriate than a more complex and accurate one, due to cost and ease of
solution considerations.
FLOWCHART OF THE PROCESS OF TRANSFORMING MODEL
INPUTS TO OUTPUT

Uncontrollable Inputs
(Environmental Factors)

Controllable
Output
Inputs Mathematical
(Projected
(Decision Model
Results)
Variables)
 Data Preparation

Data preparation is not a trivial step, due to the time

required and the possibility of data collection errors.

A model with 50 decision variables and 25 constraints

could have over 1300 data elements.

Often, a fairly large data base is needed.

Information systems specialists might be needed.

 Model Solution
The analyst attempts to identify the alternative (the set of decision variable
values) that provides the “best” output for the model.

The “best” output is the optimal solution.

If the alternative does not satisfy all of the model constraints, it is rejected as
being infeasible, regardless of the objective function value.

If the alternative satisfies all of the model constraints, it is feasible and a

candidate for the “best” solution.
 Model Solution
▪ Trial-and-Error Solution for Production Problem
Production Projected Total Hours Feasible
Quantity Profit of Production Solution
0 0 0 Yes
2 1000 12 Yes
4 2000 24 Yes
6 3000 36 Yes
8 4000 48 Yes
10 5000 60 No
12 6000 72 No
A variety of software packages are available for solving mathematical models.
• Microsoft Excel
• LINGO
 Model Solution
Model Testing and Validation
Often, goodness/accuracy of a model cannot be assessed until solutions are
generated.
Small test problems having known, or at least expected, solutions can be used
for model testing and validation.
If the model generates expected solutions, use the model on the full-scale
problem.
If inaccuracies or potential shortcomings inherent in the model are identified,
take corrective action such as:
• Collection of more-accurate input data
• Modification of the model
 Report Generation
A managerial report, based on the results of the model, should be prepared.

The report should be easily understood by the decision maker.

The report should include:

• the recommended decision
• other pertinent information about the results (for example, how sensitive the
model solution is to the assumptions and data used in the model)
 Management Science Techniques

Linear Programming Simulation

Integer Linear Programming Decision Analysis
Nonlinear Programming Goal Programming
PERT/CPM Analytic Hierarchy Process
Inventory Models Forecasting
Waiting Lines Markov-Process Models
Distribution/Network Models
 Management Science Techniques
Linear programming is a problem-solving approach developed for situations involving
maximizing or minimizing a linear function subject to linear constraints that limit the
degree to which the objective can be pursued.

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
recommendations be integer values.

Network models are specialized solution procedures for problems in transportation

system design, information system design, project scheduling, …..
 Management Science Techniques

Project scheduling: PERT (Program Evaluation and Review Technique) and CPM
(Critical Path Method) help managers responsible for planning, scheduling, and
controlling projects that consist of numerous separate jobs or tasks performed by a
variety of departments, individuals, and so forth.

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.
Management Science Techniques

Waiting line (or queuing) models help managers

understand and make better decisions
concerning the operation of systems involving
waiting lines.

Simulation is a technique used to model the

operation of a system. This technique employs
a computer program to model the operation and
perform simulation computations.
Management Science Techniques

Decision analysis can be used to determine

optimal strategies in situations involving several
decision alternatives and an uncertain pattern of
future events.

Forecasting methods are techniques that can be

used to predict future aspects of a business
operation.
 Management Science Techniques
Goal programming is a technique for solving multi-criteria decision problems,
usually within the framework of linear programming.

Analytic hierarchy process is a multi-criteria decision-making technique that

permits the inclusion of subjective factors in arriving at a recommended decision.

Markov-process models are useful in studying the evolution of certain systems

over repeated trials (such as describing the probability that a machine, functioning
in one period, will function or break down in another period).
Management Science Techniques
Methods Used Most Frequently

Linear programming

Integer programming

Network models (such as transportation and

transshipment models)

Simulation
Sample problems on Management
Science Techniques
 *Linear Programming Problem (Maximization)

Production must be scheduled for two types of machines, machine 1

and machine 2. One hundred twenty hours of time can be scheduled for
machine 1, and 80 can be scheduled for machine 2. Production during
the scheduling period is limited to two products, A and B. Each unit of
product A requires 2 hours of process time on each machine. Each unit
of product B requires 3 hours on machine 1 and 1.5 hours on machine
2. The profit is P200 per unit of product A and P250 per unit of product
B. Both types of products can be readily marketed; consequently,
production should be scheduled with the objectives of maximizing profit
 *Linear Programming Problem (Minimization)

A feed supplier mixes feed for pigs which requires at least 80 kg of

nutrient A, at least 12 kg of nutrient B and at least 14 kg of nutrient C.
Mico, the supplier, has available soybean meal which costs P150 per
50-kg sack and contain 20 kg of nutrient A, 2 kg of nutrient B and 2 kg of
nutrient C. He can also supply enriched darak which costs P140 per 50-
kg sack and contains 10 kg, 2 kg and 3 kg nutrients A, B and C
respectively. How many sacks of each ingredient should be used to mix
animal feed which satisfies the minimum requirements at minimum cost?
 *Network Models (Transportation Problem)
A national firm has three factories and four warehouses. The cost of manufacturing a
given product is the same at each of the factories, the cost of shipping the product
from the different factories to the warehouses varies. The transportation costs, factory
capacities, and warehouse requirements are given in the table.
FACTORY FACTORY
WAREHOUSE CAPACITY
W1 W2 W3 W4
15 24 11 12 5000
F1
25 20 14 16 4000
F2
12 16 22 13 7000
F3
WAREHOUSE 3000 2500 3500 4000
REQUIREMENT
 *Network Models (Assignment Problem)
A firm has five jobs that must be assigned to five work crews. The cost of each
work crew to do each job is given by the cost matrix shown:

1 2 3 4 5
1 41 72 39 52 25

2 22 29 49 65 81

3 27 39 60 51 40

4 45 50 48 52 37

5 29 40 45 26 30
 *Project Scheduling (PERT/CPM)
A social project manager is faced with a project with the following activities:

Activity Description Duration

Social work team to live in village 5w
Social research team to do survey 12w
Analyse results of survey 5w
Establish mother & child health program 14w
Establish rural credit programme 15w
Carry out immunization of under fives 4w
How long will it take to complete this project ?
 References
Anderson, D. R., Sweeney, DJ., Williams, T.A., Camm, J.D., Cochran, J.J., &
Ohlmann, J.W. (2019). An Introduction to Management Science: Quantitative
Approaches to Decision Making. Singapore: Cengage Learning Asia Pte Ltd.

Hillier, F. A. (2008). Introduction to Management Science: A Modeling and Case Studies

Approach with Spreadsheets. New York: McGraw-Hill Irwin.

Taylor, B. W. (2007). Introduction to Management Science, 9th Edition. Singapore:

Pearson Education South Asia.