MANAGEMENT SCIENCE o Comprehension

 Knowing and understanding the

ins and outs of business activities
o Cleverness
 Skill and ability
o Creative production
 To produce should be an art of also
(To express/deliver intention or
meaning)
 Management + Science
o Business scientifically managed
 World of Business
 Management Science o Business – profit and non-profit
o Business operations which include seeking activities of those engaged in
accounting relies on management to be purchasing or selling goods and
successful services to satisfy society’s needs and
o What needs to be done, tasks to be done wants
to achieve business goals o Steve Jobs – Great things in business
o The discipline that adapts the scientific are never done by one person, they’re
approach for problem solving to help done by a team of people.
managers make informed decisions o William Feather – BUSINESS and
o Its goal is to recommend the course of LIFE are like a bank account – you
action that is expected to yield the best can’t tale out more than you put in.
outcome with what is available o Business Process
 3 C’s of Management
o Conduct operations
 Needed process in running the
business
o Coordination
 Allocating jobs to bring harmony
in the whole operation for
systematic delivery of outputs
o Control
 Having power of all systems and
subsystems within the business
entity to regulate and manipulate
possible difficulties or any
business predicament
 Science
o Field of learning and discipline
o To take into account possible solutions
and offer explanations
o Made good business transactions and
decisions better
 3 C’s of Science (Its conceptual
components)  THE JOB
 o Management Key Concepts  Process of planning, organizing,
 Organizations – People working staffing, directing, and controlling
together and coordinating their activities of others
actions to achieve specific goals  Mobilizing and utilizing physical
 Goal – A desired future condition and human resources for achieving
that the organization seeks to organizational goals
achieve o Modern view-point
 Management – The process of  Prime mover of organization,
using organizational resources to making it functional and
achieve the organization’s goals productive
by:  Process of creating conductive and
 Planning proper internal environment in the
 Organizing organization
 Leading  Process of coping with changing
 Controlling external environment by relating
strengths and weaknesses of
organization with it

 MANAGER VS LEADER

 BUSINESS PROCESS

 MANAGEMENT
o Traditional view-point
 Art of getting things done by
others
  Objective: To improve
economic efficiency,
especially labor
productivity
 Earliest attempts to apply
science to the
engineering process and
to management
 Any system of
organization that clearly
spelled out the functions
of individuals and groups
 INTRODUCTION  Believed that money
o Definition motivated people at work
 Management Theories – set of (fair day’s pay = fair day’s
general rules that guide managers work – pay is linked to the
to manage an organization amount produced)
 Theories are explanations  He introduced the
that assist employees to Differential Piece Rate
effectively relate to the System of paying wages to
business goals and implement workers
effective means to achieve the
same
o General Management Theories

 Management Science
o Overview
 Theory of Scientific  Concerned with developing and
Management (Frederick W. applying models and concepts that
Taylor, 1856-1915) may prove useful in helping to
 Scientific Management – term illuminate management issues and
was coined in 1910 to solve problems
describe the system of  Can be done on 3 levels:
industrial management  Fundamental Level – lies in
created and promoted by 3 mathematical disciplines:
Frederick and his followers  Probability
 Also called Taylorism –  Optimization
theory of management  Dynamic Systems
that analyzed and Theory
synthesized workflows
  Modeling Level – builds  Total Quality Management
models, gathers data, and (TQM) – focuses on improving
analyzes them mathematically quality throughout an organization
 Application Level – Has  Management Information
strong aspirations to make a Systems (MIS) – provides
practical impact information about the organization
 Management Science Approach  Steps in Management Science Process
o Scientific method that provides o Observation – identification of a
executive departments with a problem that exists (or may occur soon)
quantitative basis for decisions in a system or organization
regarding operations (Philip McCord o Definition of the Problem – problem
Morse) must be clearly and consistently
o Logic and common sense are basic defined, showing its boundaries and
components in supporting the decision- interactions with the objectives of the
making process organization
o Use of techniques such as (US Army o Model Construction – development of
Pamphlet 660-3) the functional mathematical
 Statistical Inference relationships that describe the decision
 Mathematical Programming variables, objective function, and
 Probabilistic Models constraints of the problem
 Network and Computer Science o Model Solution – models solved using
o Pros and Cons management science techniques
 Contributions o Model Implementation – actual use of
 Techniques that help with the model or its solution
production management –
scheduling, budgeting, and
inventory
 Techniques that help with
operations management –
development programs,
aircraft scheduling
 Limitations
 Not a substitute for
management
 Doesn’t deal with the people
aspect of an organization  Decision Models and Management
 Management Science Theory Science
o Uses rigorous quantitative techniques to o Mathematical Model for Inventory
maximize the use of organizational Management, 1915 (F.W. Harris)
resources o Statistical Procedures for Sampling
 Quantitative Management – and Quality Control, 1930s (Dodge,
utilizes linear programming, Romig, and Shewart)
modeling, and simulation systems o Statistical Sampling Theory, 1935
 Operations Management – (Tippett)
techniques to analyze all aspects of o Operations Research (OR) Groups –
the production system OR applications in warfare
o Linear Programming, 1947 (George
Dantzig)

Introduction to Management Science

 Management Science (MS)

o a body of knowledge that uses
quantitative approaches to decision
making (Anderson et al., 2019)
o similarly, it is an approach in decision
making based on the scientific method
which makes use of quantitative
analysis
o also known as Operations Research
(OR is widely used during the WW2),
Decision Science, Quantitative
Methods, Quantitative Analysis,
Business Analytics (Taylor, 2006)
o Frederick W. Taylor (1856 – 1915) is
the founder of Management Science
 American inventor and engineer
 One of the earliest proponents of
management science
 Initiated the scientific management
revolution on early 1900s using
quantitative methods for
management
 Aims to find ways to control
dissatisfied workers and ensure the
productivity such as:
 Schedule
 Administrative Management  Routines
Theory (Henri Fayol)  Scientific management
 Bureaucratic Theory of o (Taylor, 2016) The objective of
Management (Max Weber) management science is to solve the
 Behavioral Theory of decision-making problems both in
Management – Hawthorne public and private sectors by
Effect (Elton Mayo) developing mathematical models
  Option 2: accept the position
in Makati
Historical Development  Option 3: accept the position
of Management Science in QC
 Option 4: accept the position
 Started: World War II Period
in Manila
o Numbers of scientists or experts
 3: The four options are evaluated
utilized scientific methods to solve
in terms of:
problems on war
 Starting salary
 Flourishing in business and industry due to:  Potential for advancement
o Numerous methodological (e.g. simplex  Job location
method for solving linear programming  4: Rate each criteria (e.g. poor,
problems) fair, average, good, and excellent)
o Virtual explosion in computing power  Subjective kaya medyo
(technology improvement which mahirap i-quantify
provided to much more access to data)
 7 Steps of Problem Solving
o The first 5 steps are the process of
decision-making
 1: Define the problem.
 2: Determine the set of
alternative solutions.
 3: Determine the criteria for  5: After careful evaluation of data,
evaluating alternatives. option 3 is selected.
 4: Evaluate the alternatives.  6: To have a satisfying a career
 5: Choose an alternative (make a position, take the offer in Q.C.
decision). Now, think of ways of how to
 Quantitative solutions and sustain it. (e.g. engage in
qualitative considerations to professional development, research
get the best solution and training, participate in the
Corporate Social Responsibility
----------------------------------------- (CSR), etc.
 6: Implement the decision.  7: Does option 3 (having a starting
 7: Evaluate the results. salary of P36,000; a good potential
o There is a dash line to compare or for advancement and an excellent
evaluate the desired (first 5 steps) to the job location) ensure a satisfying
actual results (steps 6 and 7). Then you career position?
take action to resolve the difference.  An Alternate Classification of the
o Example: Decision-Making Process
 1: How to have a satisfying career
position?
 2: There are different offers from
companies in Taguig, Makati, QC
and Manila.
 Option 1: accept the position o Single-criterion decision problems –
in Taguig problems in which objective is to find
 the best solution with respect to one Quantitative Analysis Process
criterion
o Multicriteria decision problems –  Our attempts to develop procedures to
develop/find the best or optimal solution/s
problems that involve more than one
(Anderson et al., 2019)
criterion
 Analysis Phase of Decision Making 4 Steps to Consider in Quantitative Analysis
o Qualitative Analysis Process
 Based largely on the manager’s
judgement and experience  Model Development
 Includes the manager’s intuitive o to present the problem mathematically
feel for the problem o understand that models or approximate
 More of an art than a science presentations are integral part of every
 Can be used for relatively simple day life
problems o models are representations of real
o Quantitative Analysis objects or situations
 Analyst will concentrate on the o 3 Forms of Models (Anderson, et. Al)
quantitative facts or data  Iconic models: physical replicas
associated with the problem (scalar representations) of real
 Analyst will develop mathematical objects
expression that describe the
objectives, constraints, and other
relationships that exist in the
problem
Toy car and toy airplane representations of a real
 Analyst will use one or more car and an aircraft
quantitative methods to make a  Analog models - physical in form,
recommendation but do not physically resemble the
 Used for more complex problems object being modeled
 Role of Qualitative and Quantitative
Analysis

The speedometer of an automobile is an analog

mode, the position of the needed le on the dial
represent the speed of the automobile; The point
where the mercury ends tell us the temperature is
o Generally, experimenting with models
(compared to experimenting with the
real situation):
 Quantitative Analysis and Decision-
 requires less time
Making (Used for Management Science)
 is less expensive
o Potential reasons for a Quantitative
 involves less risk
Analysis Approach to Decision-Making o Herbert A. Simon, Noble Prize
 The problem is complex.
Winner in Economics and an Expert
 The problem is very important.
in Decision-Making: “Mathematical
 The problem is new.
models doesn’t have to be exact; it just
 The problem is repetitive. (Can
has to be close enough to provide better
help us save time)
 results than can be obtained by profit per unit by the quantity
common sense.” sold
 The more closely the model  Constraints – a set of restrictions
represents the real situation, the or limitations, such as production
accurate the conclusions and capacities
predictions will be.  To continue our example, a
o Mathematical models - represent real production capacity constraint
world problems through a system of would be necessary if, for
mathematical formulas and expressions instance, 6 hours are required
based on key assumptions, estimates, or to produce each unit and only
statistical analyses; enables us to make 48 hours are available per
inferences about a situation by week. The production
studying/analyzing the model capacity constraint is given by
 For trend projection equation: 6x < 48.
 The value of 6x is the total
time required to produce x
units; the symbol indicates
that the production time
required must be less than or
equal to the 48 hours
available.
 For trend projection equation:  Uncontrollable Inputs –
environmental factors that are not
under the control of the decision
maker
 In the preceding mathematical
model, the profit per unit (P
500), the production time per
unit (6 hours), and the
 Objective Function - a production capacity (48
mathematical expression that hours) are environmental
describes the problem’s objective, factors not under the control
such as maximizing profit or of the manager or decision
minimizing cost maker.
 Consider a simple production  Decision Variables – controllable
problem. Suppose x denotes inputs; decision alternatives
the number of units produced specified by the decision maker,
and sold each week, and the such as the number of units of a
firm’s objective is to product to produce.
maximize total weekly profit.  In the preceding mathematical
With a profit of P500 per unit, model, the production
the objective function is 500x. quantity x is the controllable
 500x = total weekly profit input to the model.
earned by selling x units  A complete mathematical model
 Total weekly profit from the for our simple production problem
sale of a product can be is:
determined by multiplying the
 o Data preparation is not a trivial step,
due to the time required and the
possibility of data collection errors.
o A model with 50 decision variables and
Non-negativity or implicit constraint 25 constraints could have over 1300
(the second one is referred to as such) data elements.
o Often, a fairly large data base is needed.
 The second constraint reflects o Information systems specialists might
the fact that it is not possible be needed.
to manufacture a negative  Model Solution
number of units. o Solution procedure that can be
 Deterministic Model – if all
employed to find the best solution for
uncontrollable inputs to the model
the given model
are known and cannot vary
o The analyst attempts to identify the
 Stochastic (or Probabilistic)
alternative (the set of decision variable
Model – if any uncontrollable are
values) that provides the “best” output
uncertain and subject to variation
for the model.
 often more difficult to analyze
o The “best” output is the optimal
 In our simple production
solution.
example, if the number of
hours of production time per o If the alternative does not satisfy all of
unit could vary from 3 to 6 the model constraints, it is rejected as
hours depending on the being infeasible, regardless of the
quality of the raw material, objective function value.
the model would be stochastic o If the alternative satisfies all of the
 Cost/benefit considerations must model constraints, it is feasible and a
be made in selecting an candidate for the “best” solution.
appropriate mathematical model. o Trial-and-Error Solution for
 Frequently a less complicated (and Production Problem
perhaps less precise) model is  For solving mathematical models,
more appropriate than a more one can use MS Excel, Lingo, or
complex and accurate one, due to any software packages that does
cost and ease of solution the same.
considerations.
 Flowchart of the Process of
Transforming Model Inputs to
Output

 Data Preparation
o Preparation of the data required by the
model
  Integer linear programming is an
approach used for problems that can be set
up as linear programs with the additional
requirement that some or all of the decision
recommendations be integer values.
 Network models are specialized solution
procedures for problems in transportation
system design, information system design,
o Model Testing and Validation project scheduling
 Often, goodness/accuracy of a  Project scheduling: PERT (Program
model cannot be assessed until Evaluation and Review Technique) and
solutions are generated. CPM (Critical Path Method) help
 Small test problems having known, managers responsible for planning,
or at least expected, solutions can scheduling, and controlling projects that
be used for model testing and consist of numerous separate jobs or tasks
validation. performed by a variety of departments,
 If the model generates expected individuals, and so forth.
solutions, use the model on the  Inventory models are used by managers
full-scale problem. faced with the dual problems of maintaining
 If inaccuracies or potential sufficient inventories to meet demand for
shortcomings inherent in the goods and, at the same time, incurring the
model are identified, take lowest possible inventory holding costs.
corrective action such as:  Waiting line (or queuing) models help
 Collection of more-accurate managers understand and make better
input data decisions concerning the operation of
 Modification of the model systems involving waiting lines.
 Report Generation  Simulation is a technique used to model the
o A managerial report, based on the operation of a system. This technique
results of the model, should be employs a computer program to model the
prepared. operation and perform simulation
o The report should be easily understood computations
by the decision maker.  Decision analysis can be used to determine
o The report should include: optimal strategies in situations involving
 the recommended decision several decision alternatives and an
 other pertinent information about uncertain pattern of future events.
the results (for example, how  Forecasting methods are techniques that
sensitive the model solution is to can be used to predict future aspects of a
the assumptions and data used in business operation.
the model)  Goal programming is a technique for
Management Science Techniques solving multi-criteria decision problems,
usually within the framework of linear
 Linear programming is a problem-solving programming.
approach developed for situations involving  Analytic hierarchy process is a multi-
maximizing or minimizing a linear function criteria decision-making technique that
subject to linear constraints that limit the permits the inclusion of subjective factors in
degree to which the objective can be arriving at a recommended decision.
pursued.
 Markov-process models are useful in  Project Scheduling (PERT/CPM)
studying the evolution of certain systems o A social project manager is
over repeated trials (such as describing the faced with a project with the
probability that a machine, functioning in following activities:
one period, will function or break down in
another period).
 Frequently Used Methods
o Linear programming
o Integer programming
o Network models (such as transportation
and transshipment models)
o Simulation

Sample problems on Management Science

Techniques

 Linear Programming Problem

(Maximization)

 Network Models (Transportation

Problem)

 Network Models (Assignment

Problem)