MANAGEMENT SCIENCE

TECHNIQUES
MGT 208

Mr. John Llenord C. Villanueva

Batangas State University
The National Engineering University
CABEIHM
Email: [email protected]
 Do this for 5 minutes.
Create a word or a phrase that best describe each Graphic English.
Learning Targets:
The students will be able to:
1. understand the concept of management science and its important in
business;
2. explain the major characteristics of management science and how it is
applied in problem solving;
3. explain the importance of models in decision-making process; and
4. explain and identify the appropriate management science techniques in
managerial problems.

Essential Question:
What is the importance of management science course in
business and other organizations?
Management Science
Ø It is the application of a scientific approach to solving management
problems in order to help managers make better decisions.
Ø Management Science is applying analytical principles, procedures,
and instruments to problems concerning device processes in order to
offer optimal answers to the problems for those in charge of the
processes.
Ø Management Science encompasses a logical approach to problem
solving.
Ø Also known as Operations Research, Quantitative
Methods/Analysis, Systematic Processes, Predictive Study and
Decision-Making Sciences
Characteristics of Management Science
v A main focus on decision making by the managers.
v Usage of the analytical model to the decision-making
phase.
v Examining the condition of the judgment from a
specific viewpoint
v Using methods and expertise from multiple
disciplines.
v A dependency on the mathematical models of shape.
v Computer widespread use.
The Management Science Approach
 OBSERVATION
ü The first step of the management science process is the identification of a
problem that exists in the system (organization). The system must be
monitored continuously and closely so as to identify problems as soon as
they arise.
ü The problem may be result of a crisis or anticipatory or planning situation
which can normally be identified by the managers or management scientists.

PROBLEM DEFINITION
ü The problem must be clearly and concisely defined. The limits and the degree
of the problem must be included.
ü The existence of the problem implied that the objective are not being met.
Hence, the goals of the organization must ne clearly defined.
 MODEL CONSTRUCTION
v 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 (functional relationship consisting of variables, constants,
equations and inequalities). Model types are deterministic & probabilistic.
v A variable is a symbol used to represent an item that can take on any value.
Parameters are known, constant values that are often coefficients of
variables in equations.

Example: Consider a business firm that sells a product. The product costs $5
to produce and sells for $20. If 𝒙 represents the number of products sold,
define the functional relationship for profit, 𝒁.
Let us assume that the product is made from steel and that the business firm has 100 pounds
of steel available. If it takes 4 pounds of steel to make each unit of the product, we can develop
an additional mathematical relationship to represent steel usage:
 MODEL SOLUTION
ü Once models have been constructed, they are solved using management
science techniques which usually applies to a specific type of model.
ü 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.
ü A management science solution can be either a recommended decision or
information that helps a manager make a decision.

IMPLEMENTATION
Ø It is the actual use of the model once it has been developed or the solution to
the problem the model was developed to solve.
Ø 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.
Example: Consider a business firm that sells a product. The product costs $5
to produce and sells for $20. If 𝒙 represents the number of products sold,
define the functional relationship for profit, 𝒁.
The product is made from steel and that the business firm has 100 pounds of steel available. If
it takes 4 pounds of steel to make each unit of the product, develop an additional
mathematical relationship to represent steel usage as constraint:

Information and Data:

Business firm makes and sells a steel product
Product costs $5 to produce
Product sells for $20
Product requires 4 pounds of steel to make
Firm has 100 pounds of steel
Business Problem:
Determine the number of units to produce to make the most profit, given the
limited amount of steel available.
Variables 𝑥 = number of units to produce (decision variable)
𝑍 = total profit (in $)

Model 𝑍 = 20𝑥 − 5𝑥 (Objective Function)

4𝑥 = 100 𝑙𝑏 of steel (Resource Constraint)

Parameters $20, $5, 4 𝑙𝑏𝑠, 100 𝑙𝑏𝑠 (known values)

Specification of Model:
Maximize 𝑍 = 20𝑥 − 5𝑥
Subject to 4𝑥 = 100
Model Solution

Considering the constraint equation:

4𝑥 = 100
𝑥 = 25

Substitute this value into the objective function (profit):

𝑍 = 20𝑥 − 5𝑥
𝑍 = 20 25 − 5 25
𝑍 = 375

The business firm should produce 25 units to yield a

maximum profit of $375.
You TRY: Consider a model in which two products, 𝒙 and 𝒚, are produced.
There are 100 pounds of material and 80 hours of labor available. It requires
2 pounds of material and 1 hour of labor to produce a unit of x, and 4 pounds
of material and 5 hours of labor to produce a unit of y. The profit for x is $30
per unit, and the profit for y is $50 per unit. If we want to know how many
units of x and y to produce to maximize the profit, write the model and
determine the solution.
Information and Data:
Business Problem:
Variables
Model
Parameters
Specification of Model:
Model Solution:
Management Science Techniques
LINEAR PROGRAMMING
ü It is a problem solving approach developed for situations where we require
to determine an optimum solution given some limitations or constraints in
what we are able to do.

INTEGER LINEAR PROGRAMMING

ü It is an approach used for problems that can be set up as linear programmes
with the additional requirement that some or all of the decision variables
take integer values.
ü A mixed-integer programming model is one where some but not all of the decision
variables are required to have integer values. A pure-integer programming model is
one where all the decision variables are required to have integer values and a zero-
one integer programming model is the one where all the decision variables are to
integer valued and are to have values either zero or one.
Management Science Techniques
GOAL PROGRAMMING
ü When several conflicting priorities need to be addressed concurrently, it
needs more effective resource. Goal programming is a specific methodology
for coping with such situations, usually in linear programming.

DISTRIBUTION MODELS
ü A distribution problem is a specific category of problem in linear
programming. There are two major categories of distribution problems: the
problem of transportation, and the problem of assignment.
ü The problem of transportation deals with shipping from a variety of
suppliers to a number of destinations while the problem of assignment deals
with determining the right one-to-one option for any of a number of
prospective "candidates" to a number of possible "positions."
 NONLINEAR PROGRAMMING
ü It is a problem solving approach developed for situations where the models
require nonlinear objective function and/or other nonlinear constraints.

NETWORK MODELS
ü A problem solving procedures for problems involving some sort of network
(such as roads or routes) enabling us to quickly and effectively sort out
problems in areas such as transportation system design, information system
design and project scheduling.
ü Many problems can be defined as a network (the collection of nodes and arcs) in
graphic terms. Typical circumstance is a network of transports: cities (nodes) are linked
by roads (arcs) to each other. When we evaluate the network (in this case we are
involved, for example, in distances among all the cities), the goal is always to locate the
shortest distance from one city to all other cities. Some forms of networks, instead of
lengths, can be measured by capacities and then the dilemma of maximal flow can be
resolved. The most critical factor of several problems, addressed by the help of network
models, is unit cost and the aim is to find the lowest overall cost.
Sample Networking Problem: A furniture manufacturer in Roanoke,
Virginia, must deliver a tractor trailer load of furniture to a retail store in
Washington, DC. There are a number of different routes the truck can take
from Roanoke to DC, as shown in the following road network, with the
distance for each segment shown in miles. Determine the shortest route
the truck can take from Roanoke to Washington, DC.
Management Science Techniques
PROJECT MANAGEMENT
ü In many situations, managers are 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. The PERT
(Programme Evaluation and Review Technique) and CPM (Critical Path
Method) techniques help managers carry out their project scheduling
responsibilities.

INVENTORY MODELS
ü Inventory models are used by managers faced with the dual problems of
maintaining sufficient inventories, or stock, to meet demand for goods and, at
the same time, incurring the lowest possible inventory costs.
Management Science Techniques
QUEUING MODELS
ü Waiting-line or queuing models have been developed to help managers
understand and make better decisions concerning the operation of situations
involving queues. Using mathematical models we shall see how queuing
situations can be analyzed to predict factors such as the time a customer may
have to wait in a queue before service, the likely size of queues that may build
up and the effect on queues of changing the service process.

SIMULATION
ü Simulation is a computer-based technique used to model the operation of a
systemn or process so that experimentation can be conducted to evaluate the
consequences of alternative decisions. This technique employs co
Sample Queuing Problem: The local Food King grocery store has eight
possible checkout stations with registers. On Saturday mornings customer
traffic is relatively steady from 8 A.M. to noon. The store manager would
like to determine how many checkout stations to staff during this time
period. The manager knows from information provided by the store’s
national office that each minute past 3 minutes a customer must wait in
line costs the store on average $50 in ill will and lost sales. Alternatively,
each additional checkout station the store operates on Saturday morning
costs the store $60 in salary and benefits. The following table shows the
waiting time for the different staff levels. How many registers should the
store staff and why?
 DECISION ANALYSIS
ü Decision analysis is a formal approach to decision making and can be used to
determine optimal strategies in situations where there are several decision
alternatives and where outcomes or consequences of these decisions are
uncertain.
ü According to the knowledge received by the manager, management challenges and relevant
methods are classified into three types: decisions under certainty (deterministic), decisions
under risk (probabilistic) and decisions under uncertainty. Of this function, we find unique
instruments: decision tables and trees..

THEORY OF GAMES
ü It is an expansion of the decision making of two or more decision-makers to the
circumstances. All managers take simultaneous decisions (selected strategies) to
execute an acts that influences all decision-makers (players), i.e. their profits, costs
etc. For certain disputes, two or three decision-makers will collaborate, while
battling with the others. We will consider a standard case of a strategic game in
economic theory-the oligopoly model.
 FORECASTING
ü Forecasting techniques are used to predict future aspects of a business
operation. It look at time series models which analyze the movement of a
business variable over time; methods of trend projection where it forecast the
future trend in some variable; regression analysis which focuses on trying to
quantitatively explain and predict the movement in a variable; and introduce
a number of qualitative approaches to forecasting.

MULTICRITERIA DECISION MAKING

ü The decision maker needs to consider multiple criteria for many managerial
problems. If we find a solution which improves one criterion, it mostly aggravates
some other criteria. It's practically difficult to modify all the criteria at the same time.
The Management's fair incentive is to consider an acceptable solution. If the list of
alternatives is small, we use alternative assessment approaches. Few problems with
set of constraints and set of objective functions are defined. In this scenario multi-
objective programming approaches have the remedy. Goal programming is the
unique type of this methodology in management science.
 MARKOV ANALYSIS
ü This approach can be used for explaining a system's actions in a complex scenario
(system progression over time). If-at a given time point-the device is in one of the
potential states, the device may remain in the current state or switch into some other
state at the following time point. The transition probabilities are set for staying in
the current state or moving to another state. The manager will be confident in the
possibility of the system being in the correct state at the present time. Markov
Analysis is a really strong management science method with a number of practical
applications.

DYNAMIC PROGRAMMING
ü Dynamic programming lets administrators overcome certain forms of challenges
with these complex decision making. The problems are divided into several
classes. One probable classification takes the deterministic and probabilistic
models into consideration. Models also use the sequential problems to describe
the network. The Markov analysis may be viewed as a complex programming
probabilistic process.