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Lesson 1 Prepared By: Asst. Prof. Sherylyn T. Trinidad: The Management Science

Management science is a scientific approach to solving management problems through logical steps: 1) Observation to identify problems 2) Defining problems clearly 3) Constructing mathematical models to represent problems 4) Solving models to find solutions or descriptive results 5) Implementing solutions or applying results to address original problems

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Erine Contrano
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394 views17 pages

Lesson 1 Prepared By: Asst. Prof. Sherylyn T. Trinidad: The Management Science

Management science is a scientific approach to solving management problems through logical steps: 1) Observation to identify problems 2) Defining problems clearly 3) Constructing mathematical models to represent problems 4) Solving models to find solutions or descriptive results 5) Implementing solutions or applying results to address original problems

Uploaded by

Erine Contrano
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We take content rights seriously. If you suspect this is your content, claim it here.
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LESSON 1

Prepared by: Asst. Prof. Sherylyn T. Trinidad

THE MANAGEMENT
SCIENCE
WHAT IS MANAGEMENT SCIENCE?

MANAGEMENT
Management science is a recognized and established discipline in business
Management science (also referred to as operations research, quantitative
methods,
quantitative analysis, and decision sciences) is part of the fundamental

SCIENCE curriculum of most


programs in business.
Management science is a scientific approach to solving management
problems.
Management science can be used in a variety of organizations to solve
many different types of problems.
Management science encompasses a logical approach to problem solving
1 Observation

2 Definition of Problem

3 Model Construction

4 Model Solution

5 Implementation of Solution

THE MANAGEMENT SCIENCE APPROACH TO


PROBLEM SOLVING
1. OBSERVATION
Identification of a problem that exists in the system (organization)

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

the problem must be clearly and

concisely defined.
3. MODEL CONSTRUCTION
Model - 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.
EXAMPLE:
A business firm that sells a product. The product costs $5 to produce and sells
for $20. A model that computes the total profit that will accrue from the items
sold is:
Z = $20x - 5x

In this equation, x represents the number of units of the product that are sold,
and Z represents the total profit that results from the sale of the product.
VARIABLE
used because no set numeric value has
been specified for these items.

DEPENDENT VARIABLE
value is dependent on the number of units sold

INDEPENDENT VARIABLE
value is not dependent on anything else
PARAMETERS
constant values that are generally
coefficients of the variables (symbols) in
an equation

DATA
(i.e., pieces of information) from the problem environment.

FUNCTIONAL RELATIONSHIP
The equation as a whole is
Because only one functional relationship exists in this example, it is also the model.
In this case the relationship is a model of the determination of profit for the firm.
However, this model does not really replicate a problem. Therefore, we will expand
our example to create a problem situation.

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:

4x = 100 lb. of steel


This equation indicates that for every unit produced, 4 of the available 100
pounds of steel will be used. Now our model consists of two relationships:

4x = 100
Z = $20x - 5x

We say that the profit equation in this new model is an objective function,
and the resource equation is a constraint. In other words, the objective of the
firm is to achieve as much profit, Z, as possible, but the firm is constrained from
achieving an infinite profit by the limited amount of steel available. To signify
this distinction between the two relationships in this model, we will add the
following notations:
maximize Z = $20x - 5x
subject to 4x = 100
This model now represents the manager’s problem of determining the
number of units to produce. You will recall that we defined the number
of units to be produced as x. Thus, when we determine the value of x, it
represents a potential (or recommended) decision for the manager.
Therefore, x is also known as a decision variable. The next step in the
management science process is to solve the model to determine the value
of the decision variable.
4. MODEL SOLUTION
When we refer to model solution, we also mean problem solution.
For the example model developed in the previous section,

maximize Z = $20x - 5x
subject to 4x = 100

the solution technique is simple algebra. Solving the constraint equation


for x, we have
4x = 100
x = 100/4
x = 25 units
Substituting the value of 25 for x into the profit function results in the total profit:

Z = $20x - 5x
= 20(25) - 5(25)
= $375

Thus, if the manager decides to produce 25 units of the product and all 25 units sell, the
business firm will receive $375 in profit. Note, however, that the value of the decision variable does
not constitute an actual decision; rather, it is information that serves as a recommendation
or guideline, helping the manager make a decision.

Some management science techniques do not generate an answer or a recommended decision.


Instead, they provide descriptive results: results that describe the system being modeled.
FOR EXAMPLE, SUPPOSE THE BUSINESS FIRM IN OUR EXAMPLE DESIRES TO KNOW THE AVERAGE NUMBER OF UNITS SOLD EACH MONTH
DURING A YEAR. THE MONTHLY DATA (I.E., SALES) FOR THE PAST YEAR ARE AS FOLLOWS:

MONTHLY SALES AVERAGE 40 UNITS (480 ÷ 12). THIS RESULT IS NOT A DECISION; IT IS INFORMATION THAT DESCRIBES WHAT IS
HAPPENING IN THE SYSTEM. THE RESULTS OF THE MANAGEMENT SCIENCE TECHNIQUES IN THIS TEXT ARE EXAMPLES OF THE TWO
TYPES SHOWN IN THIS SECTION: (1) SOLUTIONS/DECISIONS AND (2) DESCRIPTIVE RESULTS.
5. IMPLEMENTATION
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.
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.

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