MANAGEMENT SCIENCE 4. Evaluate the alternatives.

5. Choose an alternative.
INTRODUCTION 6. Implement the selected alternative.
Management science —applying a scientific approach to 7. Evaluate the results to determine whether a satisfactory
problem-solving management to help managers make better solution has been obtained
choices Decision Making—a method of deciding between two or more
—includes a variety of mathematically based strategies that have possible courses of action necessary to accomplish a particular
either been developed within the area of management science goal.
or adopted from other disciplines such as mathematics, natural —systematic process and can be described simply by defining the
sciences, statistics, and engineering. problem, searching for alternative courses of action, evaluating
—a proven and recognized discipline in industry. alternatives and choosing one alternative.

—its techniques implementations are common, and they have System configuration comprises of three associated
also been credited with growing the company firms' performance components: inputs, procedures, and outputs.
and profitability. Several suggest that they use management The inputs (people, raw materials, money) enter the system.
science methods in different organization surveys, and the Processes transform inputs into outputs (processes may use
majority consider the findings to be quite good. resources, operating procedures, workers, and machines).
—also referred to as operations research, systematic processes, Outputs exit the machine (Products, Customers served).
predictive study and decision-making sciences Systems approach—involves finding and defining all the
—discipline that adapts the scientific approach for problem elements mentioned and the real-world relationships between
solving to help managers make informed decisions. them. This method is the presumption required to use
management science methods since they allow the precise
The goal of Management Science Techniques is to recommend definition of a problem. The system approach allows the
the course of action that is expected to yield the best outcome mathematical formulation of the problem.
with what is available.
Criteria/ Criterion—standard, norms, accepted, benchmark,
Major Characteristics of Management Science basis; the preferences of the decision maker; something that is
used as a reason for making a judgment or decision.
 A main focus on decision making by the managers.
 Usage of the analytical model to the decision-making Example: If I would like to purchase a laptop my criteria for
phase. buying it would be:
 Examining the condition of the judgment from a specific
viewpoint  Price (Cheaper)
 Using methods and expertise from multiple disciplines.  Quality
 A dependency on the mathematical models of shape.  Advanced high-tech operating system
 Computer widespread use. Types of decision problems
Management Science approach to Problem Solving  Single-criterion decision problems—problems in which
the objective is to find the best solution with respect to
one criterion.
 Multi-criteria decision problems—problems that
involve more than one criterion.

Steps in decision making process

1. Structuring the problem.

a. Define the problem.
b. Identify the alternatives.
c. Determine the criteria/criterion.
2. Analyzing the problem.
a. Evaluate the alternatives.
b. Choose an alternative

Problem Solving—the process of identifying a difference

between the actual and the desired state of affairs and then
taking action to resolve the difference.

To justify the time and effort of careful analysis, the problem-

solving process involved the seven steps:

1. Identify and define the problem.

2. Determine the set of alternative solutions.
3. Determine the criterion or criteria that will be used to
evaluate the alternatives.
THE RELATIONSHIP BETWEEN PROBLEM SOLVING AND
DECISION MAKING

Models and Modeling

Model—generalized reflection of the natural world, and only

significant and appropriate objects or properties can be included
in the model.

Modeling—method of treating and explaining real-life problems

in mathematical terms.

Management science follows a rational, structured approach to

problem solving that strongly resembles what is known as the
analytical process of problem-solving. This approach, as
illustrated in a generally recognized and ordered series of steps
follows:

1. observation 4. model solution

AN ALTERNATE CLASSIFICATION OF THE DECISION-MAKING 2. problem definition 5. solution implementation
PROCESS 3. model construction

Observation—recognize a problem that occurs within the

organization. The system must be monitored continuously and
closely so as to identify problems as soon as they arise.

Definition of the Problem—When a problem has been

established, the problem must be described explicitly and clearly.
Defining a problem incorrectly can easily lead to either no
solution or inappropriate solution. Hence the limitations of the
Two basic forms of the problem analysis phase: problem and the extent to which it pervades other units of the
organization should be included in the definition of the problem.
 Qualitative Analysis is based primarily on the We need to know the production process details and all the
manager’s judgment and experience; it includes the appropriate information.
manager’s intuitive “feel” for the problem and is more
an art than a science. Model Construction—A concept in management science is a
 Quantitative Analysis focuses on the quantitative facts theoretical representation of an actual issue scenario. It can be in
or data associated with the problem; includes the the form of a graph or diagram, but most commonly a model in
development of mathematical expressions that describe management science consists of a series of mathematical links.
the objectives, constraints, and other relationships that The numbers and symbols form these mathematical
exist in the problem; by using one or more quantitative relationships.
methods, the analyst will make a recommendation
Two types of models exist: determinist and probabilistic.
based on the quantitative aspects of the problem.
 All aspects are known with certainty in deterministic
Some of the reasons why a quantitative approach might be used
models. There is no question that deterministic models
in the decision-making process:
are ideal, however they can give a fairly decent
 The problem is complex, and the manager cannot estimation of truth.
develop a good solution with the aid of quantitative  There is a particular degree of ambiguity in the
analysis. probabilistic models. This is tempting to neglect the
 The problem is especially important, like when a large small degree of ambiguity and to use deterministic
amount of money is involved, and the manager desires models instead of probabilistic models. In case of high
a thorough analysis before attempting to make a uncertainty, we should consider random variables
decision. rather than constants.
 The problem is new, and the manager has no previous
Model Solution—When models have been developed in
experience from which to draw.
management science, the methods described in this text are
 The problem is repetitive, and the manager saves time
used to solve them. A technique for a management science
and effort by relying on quantitative procedures to
solution usually applies to a particular type of model.
make routine decision recommendations.
—the form of concept and the process of solution are also part
of the scientific management research. We also mean problem
solution when we refer to model solution. The typical goal of the

THE ROLE OF QUALITATIVE AND QUANTITATIVE ANALYSIS

most problems is to find an optimal solution, that is, the best of
all feasible solutions (solutions that meet all the constraints).

Implementation of Solution Result

Implementation—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 actually the main goal of management and the

original purpose of the whole process - not the model
itself, but adjustment of reality according to the
recommendations ensuing from the results of the
modeling process. FLOWCHART FOR THE PRODUCTION MODEL
 If we constructed the model in a wrong way and we did Management Science Techniques
not validate it, the applied results could seriously harm
the real system. In order to achieve the best (1) Linear Programming
management results, each step must be carefully a. This is one of management science's best-known
considered and cannot be skipped tools. This strategy describes the problem as
maximizing a linear function (minimizing) with
Models—selected simplified representation of the essential or reference to the set of linear constraints.
relevant entities of some specific reality and their characteristics. (2) Integer Linear Programming
Basic types of models are Iconic, Analogue, Symbolic a. Additional variable values criteria are applied to the
(1) An iconic model is a physical replica of a real object. (e.g., initial linear process ( i.e., process of linear function
miniature of buildings) and linear constraints). All or any of the values must
(2) An analog model is physical in form but do not have the be an integer.
same physical appearance as the object being modeled. b. The particular type of these variables is the binary
(e.g., diagram, charts, tables) variable (0-1 variable) with a value of 0 or 1. We think
(3) A mathematical model includes the representation of a about binary integer linear programming in such a
problem by a system of symbols and mathematical situation. When only those variables are described as
relationships or expressions. It is a critical part of any integer (binary) in the model, then we are thinking
quantitative approach to decision making about mixed integer linear programming
(3) Nonlinear Programming
a. Models used in this field of management science are
close to linear programming models; but there is a
major distinction between them: nonlinear models
include nonlinear objective function and/or other
nonlinear constraints. Techniques employed in this
field of management science to solve problems are
somewhat distinct from linear programming
approaches.
Flowchart of the Process of Transforming Model Inputs into (4) Network Models
Output a. Many problems can be defined as a network (the
collection of nodes and arcs) in graphic terms. Typical
Example: The total profit from the sale of a product can be circumstance is a network of transports: cities
determined by multiplying the profit per unit by the number of (nodes) are linked by roads (arcs) to each other.
units sold. If the profit per unit of selling smart phones is P500, b. When we evaluate the network (in this case we are
then the total profit P for selling x number of units is P = 500x. involved, for example, in distances among all the
cities), the goal is always to locate the shortest
Objective Function—mathematical expression that describes the
distance from one city to all other cities. Some forms
problem’s objective.
of networks, instead of lengths, can be measured by
Constraints—restrictions such as available of resources, capacities and then the dilemma of maximal flow can
materials and labor that should be considered in decision be resolved. The most critical factor of several
making. problems, addressed by the help of network models,
is unit cost and the aim is to find the lowest overall
Uncontrollable inputs—such as environmental factors which can cost.
affect both the objective function and the constraints. (5) Project Management
a. Managers are responsible for organizing, managing
Controllable inputs—are inputs that are completely controlled or
and overseeing projects in certain cases that consist
determined by the decision maker. These are the decision
of several different jobs or activities undertaken by a
alternative specified by the manager and are also referred to as
number of teams or persons. It needs different time
the decision variables of the model
for a work to be completed.
b. These problems are overcome by two simple
methods: CPM (Critical Path Method) and PERT
(Program Analysis Review Technique). All approaches
allow the issue to be expressed on a network.
(6) Inventory Models
a. Inventory control is one of the most common
strategies, helping managers decide what to buy and
how much to buy. The primary purpose is generally
 to strike an accurate balance between the expense of (12) Dynamic Programming
keeping inventory and the cost of implementing an a. Management also needs to recognize a series of
order. decisions where each judgment impacts potential
b. Owing to the very various actual distribution decisions in a major way. Dynamic programming lets
structures, there are several specific inventory administrators overcome certain forms of challenges
models. We are considering two distinct groups of with this complex decision making.
models: deterministic and probabilistic. The demand b. There is no common paradigm to solve dynamic
rate in deterministic models is constant over time, programming problems and, thus, the problems are
while the demand fluctuates over time in divided into several classes. One probable
probabilistic inventory models and can only be classification takes the deterministic and probabilistic
represented in probabilistic terms. models into consideration.
(7) Waiting Line Models c. Models also use the sequential problems to describe
a. This field of management science approaches deals the network. The Markov analysis may be viewed as a
with the circumstances in which a variety of networks complex programming probabilistic process.
(e.g. vendors) ought to represent units (e.g.
customers). Since the number of vendors is
constrained, some units must wait in queue for the
service.
b. The alternative name for the models of the waiting
line: Queuing Models. In actual life, the process of
arrival of units as well as the service times are
irregular and the probabilistic approach is essential.
Simple models of waiting line can be obtained
analytically (exact solution using derivative formulas),
while the simulation technique is needed for complex
queuing systems.
(8) Decision Analysis
a. Such methods may be used to choose appropriate
approaches from a variety of alternatives to
decisions.
b. 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.
(9) Theory of Games
a. This field 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 act that influences all
decision-makers (players), i.e. their profits, costs etc.
b. 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.
(10) Forecasting
a. Methods of forecasting support the manager
predicting future elements of the business operation.
Statistics and econometrics deliver several time series
and regression analysis methods based. The key
management task is to predict potential
developments relative to the system's previous
behavior.
(11) Markov Analysis
a. This approach can be used for explaining a system 's
actions in a complex scenario (system progression
over time).
b. 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.
c. 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.