1 Introduction Chapter 1

2 1.1 What Is Management Science? Management Science is the discipline that adapts the scientific approach for problem solving to help managers make informed decisions. The goal of management science is to recommend the course of action that is expected to yield the best outcome with what is available.

3 The basic steps in the management science problem solving process involves – Analyzing business situations and building mathematical models to describe them; – Solving the mathematical models; – Communicating/implementing recommendations based on the models and their solutions. 1.1 What Is Management Science?

4 Management Science Applications Linear Programming was used by Burger King to find how to best blend cuts of meat to minimize costs. Integer Linear Programming model was used by American Air Lines to determine an optimal flight schedule. The Shortest Route Algorithm was implemented by the Sony Corporation to developed an onboard car navigation system.

5 Management Science Applications Project Scheduling Techniques were used by a contractor to rebuild Interstate 10 damaged in the 1994 earthquake in the Los Angeles area. Decision Analysis approach was the basis for the development of a comprehensive framework for planning environmental policy in Finland. Queuing models are incorporated into the overall design plans for Disneyland and Disney World, which lead to the development of ‘waiting line entertainment’ in order to improve customer satisfaction.

6 1.3 Mathematical Modeling Many managerial decision situations lend themselves to quantitative analyses. A constrained mathematical model consists of – An objective – One or more constraints

7 Desks (D) Chairs (C) Molded steel (M) – Net profit is $50 per desk $30 per chair $6 per pound of molded steel sold – Raw material required 7 pounds of per desk 3 pounds of per chair 1.5 pounds per one pound of molded steel produced. – Raw material available 2000 pounds 1.3 Mathematical Modeling Example NewOffice Furniture produces three products

8 Objective: Determine production mix that maximizes the profit under the raw material constraint and other production requirements (detailed next). Maximize 50D + 30C + 6 M Subject to 7D + 3C + 1.5M  2000 (raw steel) D  100 (contract ) C  500 (cushions available) D, C, M  0(Non-negativity) D and C are integers 1.3 Mathematical Modeling

9 Classification of Mathematical Models Classification by the model purpose – Optimization models – Prediction models Classification by the degree of certainty of the data in the model – Deterministic models – Probabilistic (stochastic) models

10 The Management Science Process The four-step management science process Problem definition Mathematical modeling Solution of the model Communication/implementation of results

Using Spreadsheets in Management Science Models Spreadsheets have become a powerful tool in management science modeling. Several reasons for the popularity of spreadsheets: – Data are submitted to the modeler in spreadsheets – Data can be analyzed easily using statistical and mathematical tools readily available in the spreadsheet. – Data and information can easily be displayed using graphical tools.