Subject Code: BBMASCIX

Subject Title: Management Science

Subject Description: The course puts emphasis on the understanding of different analytical
and quantitative tools and models such as: linear programming models
and other algorithms, inventory and production models, decision
making process under uncertainty and risks, decision tree construction
and analysis and network models and PERT-CPM. The theories of the
models will be used to examine the design and implementation in order
to obtain sound decisions.

No. of Units: 3

Class Schedule: FIN101 Synchronous:

Asynchronous:

DISCLAIMER: The information content provided in this course material is designed to provide
helpful information on the subjects discussed. Some information is compiled from different
materials and summarized from different books. Some information is based from contributors'
perspective and understanding. References are provided for informational purposes only and do not
constitute endorsement of websites or other sources. Readers should be aware that the
websites/electronic references listed in this course material may change. Hence, the contributors do
not claim any information presented in the materials and do not reflect their own work.

Course Learning Outcomes:

At the end of this course, the student will be able to:

1. Comprehend deeply the principles, concepts, and functions and processes of the various
quantitative tools and models for decision making.
2. Create a project plan that optimizes profit, time and cost in contemporary business.
3. Apply quantitative analysis in real life situations.
4. Formulate linear programming models.
5. Solve optimal solutions of linear programming models.
6. Demonstrate the process of solving decision theory problem.
7. Propose solutions to relevant issues for decision making.
8. Solve and graph systems of linear equations and inequalities.
9. Apply the reliability of forecasting model.

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
About the Instructor: April Annie Joy L. Homoroc, MBA, PhD cand.
College Professor- Department of Business Administration

Contact Information:
Mobile number: 09675715276
Email: [email protected]
Social Media: Facebook/Messenger- April Homoroc

Topics: (Week 8-13)

WEEK 8
Module 8: FORECASTING
1. 4 types of forecasting
2. Elements of Good Forecasting
3. Components of Time series
4. Smoothing methods

WEEK 9
Module 9: TREND PROJECTION
1. Graphical Method
2. Least Square
3. Box Jenkins

WEEK 10
Module 10: QUALITATIVE APPROACHES
1. Biography
2. Ethnography
3. Phenomenology
4. Grounded theory
5. Case study

WEEK 11
Module 11: DECISION ANALYSIS
1. Steps in decision-making
2. Types of decision-making environments
3. Decision making under uncertainty
4. Decision making under risk
5. Decision trees

WEEK 12-13
Module 12: INVENTORY MODELS
1. Importance of inventory control
2. Inventory decisions

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
 MODULE 8: FORECASTING

I. Pre-test / Activity:
In your One note, answer the question, is it good to be an advance thinker?

II. Learning Outcomes

Solve optimal solutions of linear programming models.

III. Content:
FORECASTING is a decision-making tool used by many businesses to help in budgeting,
planning, and estimating future growth. In the simplest terms, forecasting is the attempt to predict
future outcomes based on past events and management insight.

4 Types of Forecasting
1. Straight line- Constant growth rate
2. Moving average- Repeated forecasts
3. Simple linear regression- Compare one independent with one dependent variable
4. Multiple linear regression- Compare more than one independent variable with one dependent
variable

Elements of Good Forecasting

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
What is Time Series?
Time series forecasting uses information regarding historical values and associated patterns to
predict future activity. Most often, this relates to trend analysis, cyclical fluctuation analysis, and
issues of seasonality.

Components of Time series

Any observed time series plot can be broken down into four (4) components:
1. Trend: This is the main component of a time series which results from long term effect. The
trend can be positive or negative depending on whether the time series exhibits an increasing or
a decreasing long-term pattern.
2. Seasonal Variations: Seasonal variations occurs when the time series exhibits regular
fluctuations in predictable fixed time intervals.
3. Cyclic Variations: These are irregular oscillatory movements which are non-seasonal
component that varies in a recognizable cycle.
4. Noise: This component is unpredictable and erratic in nature.

Smoothing methods
Data smoothing uses an algorithm to remove noise from a data set, allowing important patterns to
stand out. It can be used to predict trends, such as those found in securities prices. Different data
smoothing models include the random method, random walk, and the moving average

IV. Activity
Write a 1 slide presentation answering the question, ”how is it important to use forecasting in
business operations?”

V. Evaluation / Assessment
Essay/Reflection Paper

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
VI. Other Reading Materials

VII. References

• Nocon, R.C. & Nocon, E.G. (2016). Essential Mathematics for the Modern World.
Philippines: C & E Publishing, Inc.

• Nocon, R. (2018). Essential Mathematics for The Modern World. South Triangle, Q.C. : C
& E Publishing, Inc

• Anderson, D. (2016). Quantitative Methods for Business. Boston, MA, USA : Cengage
Learning

• Broverman, S. (2015). Mathematics of Investment and Credit. Winsted, CT : ACTEX

Publications, Inc

• Sullivan, M. (2016). College Algebra. USA: Pearson Education Inc

• Liu, K., Li, L. & Tan, F. (2017). A Scheduling Model and Its Implementation Based on
Intelligent Public Transportation System. Retrieved November 2017 from
https://www.computer.org/csdl/proceedings/icscse/2017/1401/00/index.html
• Zacharenia, G., Dimitrios, K., Georgios, K., Ioannis, E., & Christos, D. (2017). A DSS
model for IoT-based intelligent transportation systems. Retrieved December 2017 from
https://www.computer.org/csdl/proceedings/isspit/2017/4662/00/index.html

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
 MODULE 9: TREND PROJECTION

II. Pre-test / Activity:

In your One note, write your idea about projection?

II. Learning Outcomes

Solve optimal solutions of linear programming models.
Demonstrate the process of solving decision theory problem.

III. Content:
TREND PROJECTION
The trend projection method is based on the assumption that the factors liable for the past trends in
the variables to be projected shall continue to play their role in the future in the same manner and to
the same extent as they did in the past while determining the variable's magnitude and direction.

Graphical Method: It is the simplest statistical method in which the annual sales data are plotted on
a graph, and a line is drawn through these plotted points. A free hand line is drawn in such a way that
the distance between points and the line is the minimum. Under this method, it is assumed that future
sales will assume the same trend as followed by the past sales records. Although the graphical method
is simple and inexpensive, it is not considered to be reliable. This is because the extension of the trend
line may involve subjectivity and personal bias of the researcher.

Fitting Trend Equation or Least Square Method: The least square method is a formal technique
in which the trend-line is fitted in the time-series using the statistical data to determine the trend of
demand. The form of trend equation that can be fitted to the time-series data can be determined either
by plotting the sales data or trying different forms of the equation that best fits the data. Once the data
is plotted, it shows several trends. The most common types of trend equations are:
Linear Trend: when the time-series data reveals a rising or a linear trend in sales, the following straight
line equation is fitted:
S = a + bT
Where S = annual sales; T = time (years); a and b are constants.

Exponential Trend: The exponential trend is used when the data reveal that the total sales have
increased over the past years either at an increasing rate or at a constant rate per unit time.

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
Box-Jenkins Method: Box-Jenkins method is yet another forecasting method used for short-term
predictions and projections. This method is often used with stationary time-series sales data. A
stationary time-series data is the one which does not reveal a long term trend. In other words, Box-
Jenkins method is used when the time-series data reveal monthly or seasonal variations that reappear
with some degree of regularity.
Thus, these are the commonly used trend-projection methods that tell about the trend of demand for
a product and are based on a long and reliable time-series data.

IV. Activity
Write in a short bond paper, “Which method of trend projection is the most effective? Explain your
answer.”

V. Evaluation / Assessment
Essay/Reflection Paper

VI. Other Reading Materials

VII. References

• Nocon, R.C. & Nocon, E.G. (2016). Essential Mathematics for the Modern World.
Philippines: C & E Publishing, Inc.

• Nocon, R. (2018). Essential Mathematics for The Modern World. South Triangle, Q.C. : C
& E Publishing, Inc

• Anderson, D. (2016). Quantitative Methods for Business. Boston, MA, USA : Cengage
Learning

• Broverman, S. (2015). Mathematics of Investment and Credit. Winsted, CT : ACTEX

Publications, Inc

• Sullivan, M. (2016). College Algebra. USA: Pearson Education Inc

• Liu, K., Li, L. & Tan, F. (2017). A Scheduling Model and Its Implementation Based on
Intelligent Public Transportation System. Retrieved November 2017 from
https://www.computer.org/csdl/proceedings/icscse/2017/1401/00/index.html
• Zacharenia, G., Dimitrios, K., Georgios, K., Ioannis, E., & Christos, D. (2017). A DSS
model for IoT-based intelligent transportation systems. Retrieved December 2017 from
https://www.computer.org/csdl/proceedings/isspit/2017/4662/00/index.html

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
 MODULE 10: QUALITATIVE APPROACHES

III. Pre-test / Activity:

In your One note, write your answer to the question, “how to measure quality?”

II. Learning Outcomes

Solve optimal solutions of linear programming models.
Demonstrate the process of solving decision theory problem.

III. Content:
QUALITATIVE FORECASTING APPROACH

It is a statistical technique to make predictions about the future which uses expert judgment instead
of numerical analysis. This method of forecasting depends on the opinions and knowledge of highly
qualified and experienced employees to predict the future outcomes.

The types of qualitative forecasting methods are listed below:

1. Executive opinions: The opinions of experts from different departments are considered and
averaged to forecast the future sales. This method of forecasting can be done easily and quickly
without the necessity of elaborate statistics. But the main disadvantage is that it depends on
individual opinions that may not be unanimous and can vary from individual to individual which
could lead to wrong forecasting.

2. Delphi technique: In this method, panels of experts are selected and are individually questioned
about the upcoming events. They do not form a group. For long-range forecasting, this method is
beneficial and very effective. The main disadvantage of this method is that from the returns there is
lack of and low reliability.

3. Consumer surveys: In this method, the survey is conducted directly on the customers on their
purchases. The surveys can be done through telephone contacts, personal interviews or
questionnaires to obtain data from the customers. This method requires extensive statistical analysis
to test regarding the consumer behavior.

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
4. Salesforce polling: In this method, the forecast is done based on the opinions of salespeople who
have steady interactions with the clients. As they are closest to the customers, they can better
predict the requirements of the customers for the future market. The main advantage of this
forecasting method is that it is very simple to use and understand. The information can be
segregated easily into different categories. But the drawback is that the salespeople can be either
optimistic or pessimistic about their predictions and this could lead to inaccurate forecasting.

In general, all the forecasting techniques assume the underlying relationship in the past and predict
the relationship for the future. Most of the techniques are based on some previous data, opinions,
surveys etc.

IV. Activity
Create a 1 slide presentation, Discussing “Which is the more useful method in forecasting?
Qualitative or Quantitative? Explain your answer.”

V. Evaluation / Assessment
Essay/Reflection Paper

VI. Other Reading Materials

VII. References

• Nocon, R.C. & Nocon, E.G. (2016). Essential Mathematics for the Modern World.
Philippines: C & E Publishing, Inc.

• Nocon, R. (2018). Essential Mathematics for The Modern World. South Triangle, Q.C. : C
& E Publishing, Inc

• Anderson, D. (2016). Quantitative Methods for Business. Boston, MA, USA : Cengage
Learning

• Broverman, S. (2015). Mathematics of Investment and Credit. Winsted, CT : ACTEX

Publications, Inc

• Sullivan, M. (2016). College Algebra. USA: Pearson Education Inc

• Liu, K., Li, L. & Tan, F. (2017). A Scheduling Model and Its Implementation Based on
Intelligent Public Transportation System. Retrieved November 2017 from
https://www.computer.org/csdl/proceedings/icscse/2017/1401/00/index.html
• Zacharenia, G., Dimitrios, K., Georgios, K., Ioannis, E., & Christos, D. (2017). A DSS
model for IoT-based intelligent transportation systems. Retrieved December 2017 from
https://www.computer.org/csdl/proceedings/isspit/2017/4662/00/index.html

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
 MODULE 11: DECISION ANALYSIS

IV. Pre-test / Activity:

In your One note, write your answer to the question, “Do you have problem in making decisions for
yourself? Elaborate.”

II. Learning Outcomes

Solve optimal solutions of linear programming models.
Demonstrate the process of solving decision theory problem.

III. Content:
DECISION ANALYSIS
Decision analysis is a systematic, quantitative, and transparent approach to making decisions under
uncertainty. Decision models can incorporate the probabilities of the underlying (true) states of
nature in determining the distribution of possible outcomes associated with a decision

Steps in decision-making

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
Types of decision-making environments
The quality of the decisions made in an organization will dictate the success or failure of the said
business.

So, all the available information and alternatives must be studied before arriving at an important
decision. The process of decision making will help a great deal.

Another factor that affects these decisions is the environment in which they are taken. There are a
few different types of environments in which these decisions are made.

And the type of decision-making environment has an impact on the way the decision is taken.
Broadly there are three basic types of decision-making environment. Let us take a brief look at each
of them.

1] Certainty
Such type of environment is very sure and certain by its nature. This means that all the information
is available and at hand. Such data is also easy to attain and not very expensive to gather.

So the manager has all the information he may need to make an informed and well thought out
decision. All the alternatives and their outcomes can also be analyzed and then the manager chooses
the best alternative.

Another way to ensure an environment of certainty is for the manager to create a closed system.
This means he will choose to only focus on some of the alternatives.

He will get all the available information with respect to such alternatives he is analyzing. He will
ignore the other factors for which the information is not available. Such factors become irrelevant to
him altogether.

2] Uncertainty
In the decision-making environment of uncertainty, the information available to the manager is
incomplete, insufficient and often unreliable.

In an uncertain environment, everything is in a state of flux. Several external and random forces
mean that the environment is most unpredictable.

In these times of chaos, all the variables change fast. But the manager must make sense of this
mayhem to the best of his ability. He must create some order, obtain some reliable data and make
the best decision as per his judgment.

3] Risk
Under the condition of risk, there is the possibility of more than one event taking place. Which
means the manager has to first ascertain the possibility and probability of the occurrence or non-
occurrence of the event.

The manager will generally rely on past experiences to make this deduction.

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
In this scenario too, the manager has some information available to him. But the availability and the
reliability of the information is not guaranteed. He must chart a few alternative courses of actions
from the data he has.

Decision tree
A decision tree is a decision support tool that uses a tree-like model of decisions and their possible
consequences, including chance event outcomes, resource costs, and utility. It is one way to display
an algorithm that only contains conditional control statements.

Decision trees typically consist of three different elements:

Root Node:
This top-level node represents the ultimate objective, or big decision you’re trying to make.

Branches:
Branches, which stem from the root, represent different options—or courses of action—that are
available when making a particular decision. They are most commonly indicated with an arrow line
and often include associated costs, as well as the likelihood to occur.

Leaf Node:
The leaf nodes—which are attached at the end of the branches—represent possible outcomes for each
action. There are typically two types of leaf nodes: square leaf nodes, which indicate another decision
to be made, and circle leaf nodes, which indicate a chance event or unknown outcome.

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
IV. Activity
Create a 1 slide presentation containing your own version of Decision Tree, Explain your answer.

V. Evaluation / Assessment
Essay/Reflection Paper

VI. Other Reading Materials

VII. References

• Nocon, R.C. & Nocon, E.G. (2016). Essential Mathematics for the Modern World.
Philippines: C & E Publishing, Inc.

• Nocon, R. (2018). Essential Mathematics for The Modern World. South Triangle, Q.C. : C
& E Publishing, Inc

• Anderson, D. (2016). Quantitative Methods for Business. Boston, MA, USA : Cengage
Learning

• Broverman, S. (2015). Mathematics of Investment and Credit. Winsted, CT : ACTEX

Publications, Inc

• Sullivan, M. (2016). College Algebra. USA: Pearson Education Inc

• Liu, K., Li, L. & Tan, F. (2017). A Scheduling Model and Its Implementation Based on
Intelligent Public Transportation System. Retrieved November 2017 from
https://www.computer.org/csdl/proceedings/icscse/2017/1401/00/index.html
• Zacharenia, G., Dimitrios, K., Georgios, K., Ioannis, E., & Christos, D. (2017). A DSS
model for IoT-based intelligent transportation systems. Retrieved December 2017 from
https://www.computer.org/csdl/proceedings/isspit/2017/4662/00/index.html

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
 MODULE 12: INVENTORY MODELS

I. Pre-test / Activity:
In your One note, write your answer to the question, “Why is inventory important for a business?”

II. Learning Outcomes

Demonstrate the process of solving decision theory problem.
Propose solutions to relevant issues for decision making.

III. Content:
INVENTORY MODELS
Inventory model is a mathematical model that helps business in determining the optimum level of
inventories that should be maintained in a production process, managing frequency of ordering,
deciding on quantity of goods or raw materials to be stored, tracking flow of supply of raw
materials and goods to provide uninterrupted service to customers without any delay in delivery.

Types of Inventory Models

1.Fixed Period Ordering System. It is an inventory control method where orders are periodically
placed, but the order quantity is different every time, and is also called Fixed Period Deficit
Ordering System.
2. Fixed Quantity Ordering System is the inventory control system, wherein the maximum and
minimum inventory levels are fixed, and maximum and fixed amount of inventory can be
replenished at a time when the inventory level reaches the auto set reorder point or the minimum
stock level.

Importance of Inventory Control:

The aim of holding inventories is to allow the firm to separate the process of purchasing,
manufac-turing, and marketing of its primary products. Inventories are a component of the firm’s
working capital and as such represent a current account.

Inventories are also viewed as a source of near all cash. The purpose is to achieve efficiencies in
areas where costs are involved. The scientific inventory control results in the reduction of stocks on
the one hand and substantial decline in critical shortages on the other.

• Reducing Risk of Production Shortages:

Firms mostly manufacture goods with hundreds of components. The entire production operation can
be halted if any of these are missing. To avoid the shortage of raw material the firm can maintain
larger inventories.

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
 • Reducing Order Cost:

Where a firm places an order, it incurs certain expenses. Different forms have to be completed.
Approvals have to obtained, and goods that arrive must be accepted, inspected and counted. These
costs will vary with the number of orders placed. Smaller the inventories lesser the capital needed to
carry inventories.

• Minimize the Blockage of Financial Resources:

The importance of inventory control is to minimise the blockage of financial resources. It reduces
the unnecessary tying up of capital in excess inventories. It also improves the liquidity position of
the firm.

• Avoiding Lost Sales:

Most firms would lose business without goods on hand. Generally a firm must be prepared to
deliver goods on demand. By ensuring timely availability of adequate supply of goods, inventory
control helps the firm as well as consumers.

• Achieving Efficient Production Scheduling:

The manufacturing process can occur in suffi-ciently long production runs and with preplanned
schedules to achieve efficiencies and economies. By maintaining reasonable level of inventory
production scheduling becomes easier for the management.

• Gaining Quantity Discounts:

While making bulk purchases many suppliers will reduce the price of supplies and component
supplies will reduce the price of supplies and component parts. The large orders may allow the firm
to achieve discounts on regular basis. These discounts in turn reduce the cost of goods and increase
the profits.

• Taking the Advantage of Price Fluctuations:

When the prices of the raw materials are low the firm makes purchases in economic lots and
maintains continuity of operations. By reducing the cost of raw materials and procuring high prices
for its goods the firm maximises profit. This with the help of inventory control the firm takes
advantage of price fluctuations.

• Tiding over Demand Fluctuations:

Inventory control also helps the firm in tiding over the demand fluctuation. These are taken care of
by keeping a safety stock by the firm. Safety stock refers inventories carried to protect against
variations in sales rate, production rate and procurement time. Inventory control aims at keeping the
cost of maintaining safety stock minimum.

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]
 • Deciding timely Replenishment of Stocks:

Inventory control results in the maintenance of necessary records, which can help in maintaining the
stocks within the desired limits. With the help of adequate records, the firm can protect itself against
thefts, wastes and leakages of inventories. These records also help in deciding about timely
replenishment of stocks.

Inventory decisions
Inventory Decision-Making
To be successful, most businesses other than service businesses are required
to carry inventory. In these businesses, good management of inventory is essential.
The management of inventory requires a number of decisions. Poor decision making
regarding inventory can cause:
1. Loss of sales because of stock outs.
2. Depending on circumstances, inadequate production for a period of time.
3. Increases in operating expenses due to unnecessary carrying costs or
loss from discarding obsolete inventory.
4.An increase in the per unit cost of finished goods

IV. Activity
Create a 1 slide presentation, discussing “How to apply Inventory Model in a business?”

V. Evaluation / Assessment
Essay/Reflection Paper

VI. Other Reading Materials

VII. References

• Nocon, R.C. & Nocon, E.G. (2016). Essential Mathematics for the Modern World.
Philippines: C & E Publishing, Inc.
• Nocon, R. (2018). Essential Mathematics for The Modern World. South Triangle, Q.C. : C
& E Publishing, Inc
• Anderson, D. (2016). Quantitative Methods for Business. Boston, MA, USA : Cengage
Learning
• Broverman, S. (2015). Mathematics of Investment and Credit. Winsted, CT : ACTEX
Publications, Inc
• Sullivan, M. (2016). College Algebra. USA: Pearson Education Inc
• Liu, K., Li, L. & Tan, F. (2017). A Scheduling Model and Its Implementation Based on
Intelligent Public Transportation System. Retrieved November 2017 from
https://www.computer.org/csdl/proceedings/icscse/2017/1401/00/index.html
• Zacharenia, G., Dimitrios, K., Georgios, K., Ioannis, E., & Christos, D. (2017). A DSS
model for IoT-based intelligent transportation systems. Retrieved December 2017 from
https://www.computer.org/csdl/proceedings/isspit/2017/4662/00/index.html

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 [email protected]