Management Science Concept, Primarily there are five

Characteristics characteristics of management

and science. These five characteristics
Tools. are as follows:

1. Functional relationships
Management science is an examination from an overview
interdisciplinary study that involves of systems
and helps in decision making and
problem-solving in human It is a well-known fact that the
organizations. It is found to have activity of one department will have
strong links to multiple streams such some of the other effects on the
as economics, management, activity of another department. This
engineering, business consulting, etc. is why it is necessary to identify all
the interactions which are important
The scope of management science is and find out their impact on your
wider than the main disciplines put organization as a whole.
together because it encompasses
much more than solving problems and In the initial phases, the functional
developing models. Management relationship of management science
science is known to make a much projects deliberately expanded in
greater contribution to a broader order to have significant interaction
area that is the application of between their parts and also between
management science models for the their related components and it is
purpose of decision making at all ensured that all of them are combined
levels of management may it be top, in a single statement of the problem.
middle or lower management levels.
The entire area which is under the
There are three best combinations control of the manager is examined by
which help for planning organizing systems overview. These are the
controlling and directing the activities process which provides the basis for
of companies which are: starting inquiries into the problems
which are affecting
1. Experience of manager the performance at multiple levels.
2. Business forecasting
3. The output from the
mathematical model 2. Interdisciplinary approach
 Management Science
Concept,
Characteristics
and
Tools.
The primary principle of management
science is that it looks at a problem This is the third characteristic of
from multiple angles and approaches it management science which says that
from multiple directions. With this because there are multiple disciplines
simple principle, it is able to solve involved in management science it may
multiple problems. be possible that while solving one
problem your problem may surface.
For example, a chemical scientist
might solve a problem with the help of Because many problems are
different theories while an engineer interrelated with each other all of
might look at the manufacturing them must be approached with
process, or a mathematician might different perspectives and the first
approach the problem with different thing is to realize that a problem
mathematical relationships between exists. However, it should be noted
consumer demand and manufacturing that all the interrelated problems
department. cannot be solved in one way and
different ways should be used.
A chartered accountant may see the
problem in inventory management This is to ensure that maximum
relationship between cost component benefits are obtained.
and the balance sheet of the
organization by considering different 4. Using the modeling process
costs such as the cost of overheads, approach for solving problems
expenses, direct labor costs, etc.
Management science makes the use of
This is why it is emphasized that a systematic approach in order to
management is an interdisciplinary solve a problem. It also uses a
approach because of modeling process approach which is a
the individual aspects that a problem type of mathematical model in order
can have are understood and solved by to solve a problem.
different experts in different fields
like biological, accounting, economics, 5. Application of science to decision
mathematics, engineering, statistical, making
psychological, etc.
As stated earlier, management
3. Understand and uncover science uses science and combines it
different problems for studies: with the decision making process.
 Management Science
Concept,
Characteristics
and
Tools.
There are many decisions taken day in
and day out in a business. These A decision tree is a mathematical
decisions are complex and based on model that is used to solve
different departments as well as decision-making problems and is
different models and situations in represented with the help of a tree.
business.
3. Network models
Most of the time because of the
complexity of the problem, the These are the tools that are designed
company requires the use of for controlling complex projects and
management science to solve the also for their planning. CPM and pert
problem. This decision-making process or common techniques of network
is important to the company and models. CPM is a method that is used
should be applied carefully because to solve the problem of cost control
they affect the organization at and time, on the other hand, pert is a
multiple levels. research and development project.
This is the reason why the use of
management science is very crucial in 4. Mathematical programming
decision making.
Mathematical programming is an
Management science tools attempt to maximize the level of
attainment of one goal to pre-set
The following are a few of the tools limitations and requirements.
which are designed specifically to Mathematical engineering has
solve the problems of management extensive applications in the field of
with the help of management science. military engineering, business
economics and public service.
1. Decision matrices
Mathematical programming is used
A decision matrix is used to solve primarily as an aid to the allocation
problems involving investment and problems’ solution.
allocation. Few numbers of solutions
can be found with the help of tabular 5. Branch and bound
representation which is known as a
decision matrix. Whether there is an infinite or large
number of problems an alternative
2. Decision tree exists for a certain problem then this
 Management Science
Concept,
Characteristics
and
Tools.
method is used. This is the step by When the units or system change with
step method to solve complex time then Markov chains are used to
problems at the managerial level. predict the outcome.

6. Dynamic programming: 9. Simulation models

The primary aim of dynamic These simulation models are used for
programming is to consider decisions the purpose of analysis of complex
that are sequential. Usually, a dynamic systems which do not yield results by
programming approach to decision the use of other models. Message
making is made sequential in nature primary and descriptive type
and if it is not sequential then it can simulation model which management
be remade in order to be considered science uses and all other models fail.
as sequential. It is considered a very
powerful tool of decision making. 10. Queuing model

7. Game theory It is also termed as the waiting line

model in which different problems
This is the branch of mathematics have different queues and have
that is used for the analysis of developed special descriptive models
different strategies that deal with a in order to predict their performance.
competitive situation where the case
of the outcome of the participant’s
choice and his actions depend entirely
on the actions of the other
Management Science: Concept,
participants.
Characteristics, Tools and
Application Management Science
Game series primary satellite and
different contacts of business, war, Management Science
and biology and in business it is
specifically used in case of · interdisciplinary study
management science decisions.
· known to use multiple scientific and
John Forbes nash jr is attributed to research-based principles and analytical
the formation of game theory. methods

8. Markov chains · acts as a medium

 Management Science
Concept,
Characteristics
and
Tools.
The scope of management science is problems for studies
wider than the main disciplines put
together because it encompasses much There are multiple disciplines involved in
more than solving problems and management science, it may be possible
developing models. that while solving one problem on your
problem may be surfaced.
Three best combinations which help
for planning organizing controlling and 4. Using the modeling process approach
directing the activities of companies: for solving problems

1. Experience of Manager Management science makes the use of a

systematic approach in order to solve a
2. Business Forecasting problem.

3. The output from mathematical model 5.Application of science to decision

making
Levels in which management science
research can be conducted: Management science uses science and
combines it with the decision making
· Fundamental Level process. Most of the times because of
the complexity of the problem, the
· Modeling Level
company requires the use of management
· Application Level science to solve the problem.

Management Science: Characteristics 10 Tools for Management Science

1. Functional relationships 1. Decision matrices ➔ A table that

examinations from an overview of evaluates a set of options against a set of
systems criteria.

It is a well known fact that the activity ➔ This is used to develop a quantitative
of one department will have some other score.
effects on the activity of another
2. Decision Tree a mathematical model
department.
that is used to solve decision-making
2. Interdisciplinary approach problems and is represented with the
help of a tree.
Management science looks at a problem
from multiple angles and approaches it 3. Network Models ➔ tools that are
from multiple directions. designed for controlling complex projects
and also for their planning.
3.Understand and uncover different
Example: CPM and PERT
 Management Science
Concept,
Characteristics
and
Tools.
4. Game Theory ➔ branch of ● A 50 percent chance that tomorrow will
mathematics that is used for the be sunny again.
analysis of different strategies that deal
with a competitive situation where the ● A 30 percent chance that tomorrow
case of the outcome of the participant’s will be cloudy.
choice and his actions depend entirely on
● A 20 percent chance that tomorrow
the actions of the other participants.
will be rainy.
Example: Imagine two competing
6. Mathematical Programming ➔
companies: Company A and Company B.
Mathematical programming is used
Both companies want to determine
primarily as an aid to the allocation
whether they should launch a new
problems’ solution.
advertising campaign for their products.
If both companies start advertising, ➔ finding an optimal solution for
each company will attract 100 new allocation of limited resources to
customers. If only one company decides perform competing activities. The
to advertise, it will attract 200 new optimality is defined with respect to
customers, while the other company will important performance evaluation
not attract any new customers. If both criteria, such as cost, time, and profit.
companies decide not to advertise,
neither company will engage new Example: Linear programming
customers.
7. Simulation models ➔ used for the
5. Markov Chains ➔ When the units or purpose of analysis of complex systems
system change with time then Markov which do not yield result by the use of
chains are used to predict the outcome. other models.

Real life situation: Imagine you had ➔ it shows you how the answer was
access to thirty years of weather data. derived; it enables you to trace from
You start at the beginning, noting that cause to effect; and it allows you to
Day 1 was sunny. You keep going, noting generate explanations for decisions Not
that Day 2 was also sunny, but Day 3 was only reveals an answer, it makes you
cloudy, then Day 4 was rainy, which led understand what causes it. Why does it
into a thunderstorm on Day 5, followed by not able to pass through step 2… step 3…
sunny and clear skies on Day 6. You do and so on.
this over the entire 30-year data set
(which would be just shy of 11,000 days) 8. Branch and bound ➔ Whether there
and calculate the probabilities of what is an infinite or large number of
tomorrow's weather will be like based on problems an alternative exists for a
today's weather. For example, if today is certain problem then this method is
sunny, then: used. This is the step by step method to
 Management Science
Concept,
Characteristics
and
Tools.
solve complex problems of managerial ASSIGNMENT MODELS
level.
● Manpower assignment
9. Dynamic Programming ➔ The ● machine assignment
primary aim of dynamic is an approach to ● Product planning
decision making is made sequential in
nature and if it is not sequential then it GOAL PROGRAMMING
can be remade in order to be considered
● Different investment analyses
as sequential.
● Decisions relating to advertising
1. Real life examples investment
● Economic predictions
● In Google Maps to find the shortest
path between source and the series of INVENTORY MODELS
destination (one by one) out of the
● Inventory management is an
various available paths.
important factor in sales in every
10. Queuing model ➔ Also called “waiting organization.
line” model in which different problems ● inventory models’ raw materials
which have different queues and have inventory planning for retail
developed special descriptive models in inventory
order to predict their performance.
DYNAMIC PROGRAMMING
MANAGEMENT SCIENCE
● Sales distribution
APPLICATION
● Complex system analysis
MARKET ANALYSIS ● inventory planning
● planning production
● Market strategy planning
● Program planning NETWORK MODELS
● Preventive maintenance
● pipeline routing
LINEAR PROGRAMMING ● project budgeting
● project scheduling
● Product Mix ● communication network
● Oil Refinery
● Operations
● Capital Budgeting
● Advertising Media Assignment

TRANSPORTATION AND
 Management Science
Concept,
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and
Tools.
secure long-term financing.

FORECASTING Forecasts can exhibit patterns or

trend:
Forecasting–is a prediction of something
that is likely to occur in the future.

A variety of forecasting methods A trend is a long-term and upward

exist,and their applicability is movement of the item being forecasted.
dependent on the:
–Random variations are movements that
–time frame of the forecast are not predictable and follow no pattern.

–the existence of patterns in the –A cycle is an undulating movement in

forecast (i.e.,seasonal trends,peak demand, up and down, that repeats itself
periods),and over a lengthy timespan

–the number of variables to which the –A seasonal pattern is an oscillating

forecast is related. movement in demand that occurs
periodically in the short run and is
repetitive.
Forecasting Components:
Time Frames of Forecast:
Short Range- encompass the immediate Forecasting Methods
future and are concerned with the daily
operations rarely goes beyond a couple The forecasting component determines to
months into the future. a certain extent the type of forecasting
method that can or should be used.
Medium Range- encompasses anywhere Time Series- is a category of statistical
from 1 or 2 months to 1 year. techniques that uses historical data to
–More closely related to a yearly predict future behavior.
production plan and will reflect such
items as peaks and valleys in demand. Regression methods - attempt to develop
a mathematical relationship between the
Long Range- encompasses a period longer item being forecast and factors that
than 1 or 2 years. cause it to behave the way it does.
–It is related to management's
attempt to plan new products for Qualitative methods - use management
changing markets, build new facilities, or judgment, expertise, and opinion to make
 Management Science
Concept,
Characteristics
and
Tools.
forecasts.

Forecasting Methods
Time Series Analysis
Time Series Methods The moving average from the demand for
Time series methods tend to be most orders for the last 3 months in the
useful for short-range forecasting, and sequence
relate to only one factor time.
Time Series –Moving Average
Moving Averages
•The moving average method uses several
The 5-month moving average is computed
values during the recent past to develop a
from the last 5 months of demand data,
forecast.
as follows:
•The moving average method is good for
stable demand with no pronounced
behavioral patterns.

Simple Moving Average Time Series –Moving Average

Moving average forecast may be Simple 3 - and 5 - month Moving
computed for specified time period as Average
follows:

N = number of periods in the moving

average Weighted Moving Average
Is a time series forecasting method in
D = data in period which the most recent data are weighted.
Simple Moving Average It may be computed for specified time
Delivery Orders for 10 - month period period using the following:
 Management Science
Concept,
Characteristics
and
Tools.
ADJUSTED DEMAND AND
FORECASTS

Wi = the weight for period i, is between

0% and 100%

∑Wi = 1.00

Di = data in period i

Weighted Moving Average

For example, if the Instant Paper Clip

Supply Company wants to compute a
3-month weighted moving average with a
weight of 50% for the October data, a
weight of 33% for the September data,
and a weight of 17% for August, it is What is Demand Adjustment?
computed as ➢ Use demand adjustments to
manually adjust actual demand
based on existing knowledge of the
ADJUSTED DEMAND AND environment. Demand adjustments
FORECASTS provide a better basis for
➢ Adjustments are changes that you forecasting the future. One set is
make to item quantities for called actual demand and
forecasts and demand—normally represents the demand that is
historical demand. Forecasted imported into the system. The
quantities are those that exist for other set is called adjusted
the current time period and all demand. The adjusted demand
future periods in the planning always uses the same value as the
horizon. Demand history quantities actual demand. If one set is
are those for all past periods different from the other, then an
➢ This diagram illustrates how you adjustment must have been made.
use the workbench to work with Some adjustments are system
quantities in the past and in the generated, and others are entered
future. The current period is manually.
always the first period of all How to adjust demand?
future periods. ● Correct actual demand errors as a
result of problems in imported
 Management Science
Concept,
Characteristics
and
Tools.
demand. overbuying.
● Enter actual demand for new ● External factors such as
products that you are adding competitive actions, environmental
manually for the first time. factors, or economic trends.
● Remove abnormal and ● Analysts' judgments based on
uncharacteristic demand. their experience.
● Remove a system-generated ● Transactions that are imported
filtering adjustment. from external systems.
What are Forecasts Adjustments? ● Data that you enter directly into
➢ Determine the quality of a the data series.
forecast over time by the extent ● Collaborative forecasting
to which the new actual sales adjustments.
match, or track to the forecast. FORECAST RELIABILITY
Because the statistical forecast ➢ We need to keep in mind that a
only represents a projection that forecast is relevant only in its
is based on past results, known capacity of enabling us to achieve
future events result in actual sales other goals, such as improved
being different from the forecast. on-shelf availability, reduced food
Forecast adjustments might include: waste, or more effective
● Specific discrete events, such as a assortments.
contract order or a planned
warehouse opening. ➢ Forecasting is an important part
● Events that are planned by the of any planning activity, it still
organization, such as specific represents only one cogwheel in
promotions. the planning machinery, meaning
These adjustments could be that there are other factors that
positive, such as an increase in may have a significant impact on
sales from the promotion; the outcome. Oftentimes the
negative, such as sales taken away importance of accurate
(cannibalized) by promoted items, forecasting is truly crucial, but
or sales moved in time because of from time to time other factors
promotions; or a combination of are more important to attaining
both, with specific items being the desired results.
promoted for a few periods and Valuable insights from measuring
then the sales cannibalized due to forecast accuracy you need to
understand:
 Management Science
Concept,
Characteristics
and
Tools.
1. The role of demand forecasting in of the reasons why it is so difficult to do
attaining business results. forecast accuracy comparisons between
2. What factors affect the attainable companies or even between products
within the same company.
forecast accuracy.
3. How to assess forecast quality.
➢ Forecasts are more accurate
4. How the main forecast accuracy when sales volumes are high
metrics work. ➢ Forecast accuracy improves with
5. How to monitor forecast accuracy. the level of aggregation
1. The role of demand forecasting in ➢ Short-term forecasts are more
attaining business results accurate than long-term
forecasts
Good demand forecasts reduce
➢ Forecasting is easier in stable
uncertainty. In retail distribution and
businesses
store replenishment, the benefits of good
3. How to assess forecast quality
forecasting include the ability to attain
excellent product availability with As stated in the introduction, the first
reduced safety stocks, minimized waste, step is assessing your business results
as well as better margins, as the need for and the role forecasting plays in attaining
clearance sales are reduced. Further up them. If forecasting turns out to be a
the supply chain, good forecasting allows main culprit explaining disappointing
manufacturers to secure availability of business results, you need to assess
relevant raw and packaging materials and whether your forecasting performance is
operate their production with lower satisfying.
capacity, time and inventory buffers. 4. How the main forecast accuracy
metrics work
Forecast bias is the difference between
forecast and sales. If the forecast
over-estimates sales, the forecast bias is
considered positive. If the forecast
under-estimates sales, the forecast bias
is considered negative. If you want to
examine bias as a percentage of sales,
then simply divide total forecast by total
sales – results of more than 100% mean
2. What factors affect the attainable that you are over-forecasting and results
below 100% that you are
forecast accuracy
under-forecasting.
There are several factors that have an
impact on what level of forecast accuracy
can realistically be attained. This is one
 Management Science
Concept,
Characteristics
and
Tools.
units. It can, for example, be used
for comparing the results of
different forecast models applied
to the same product. However, the
Mean absolute deviation (MAD) is
MAD metric is not suitable for
another commonly used forecasting
metric. This metric shows how large an comparison between different
error, on average, you have in your data sets.
forecast. However, as the MAD metric 3. MAPE is better for comparisons
gives you the average error in units, it is as the forecast error is put in
not very useful for comparisons. An relation to sales. However, as all
average error of 1,000 units may be very
products are given the same
large when looking at a product that sells
weight, it can give very high error
only 5,000 units per period, but marginal
for an item that sells 100,000 units in the values when the sample contains
same time. many slow-movers. By using a
volume-weighted MAPE, more
importance is placed on the
high-sellers. The downside of this,
is that even very high forecast
Mean absolute percentage error (MAPE) errors for slow-movers can go
is akin to the MAD metric, but expresses unnoticed.
the forecast error in relation to sales
volume. Basically, it tells you by how many
percentage points your forecasts are off,
Linear Regression Forecast(LRF)
on average. This is probably the single
Is a statistical tool used to help predict
most commonly used forecasting metric in
future values from past values. It is
demand planning.
commonly used as a quantitative way to
determine the underlying trend and when
prices are overextended.
Using Linear Regression to Predict an
Outcome
Statistical researchers often use a linear
5. How to monitor forecast accuracy
relationship to predict the ( average)
1. Forecast bias tells you whether
numerical value of Y for a given value of X
you are systematically over- or
using a straight line ( called the
under-forecasting. The other
regression line).
metrics do not tell you that.
2. MAD measures forecast error in
 Management Science
Concept,
Characteristics
and
Tools.
If you know the slope and the y-intercept finished products, used in the process of
of that regression line, then you can plug producing a final product.
in a value for x and predict the average
value for Y. In other words, you predict ( The Functions of Inventory
the average) Y from x.
● Meet anticipated demand
Simple Linear regression ● Smooth production requirements
● Protect against stock-outs
Is commonly used in forecasting and ● Help hedge against price increase
financial analysis- for a company to tell ● Permit operations
how a change in the GDP could affect ● Take advantage of of quantity
sales, for example. discounts

Variables TYPES OF INVENTORIES

At the heart of a regression model is the
relationship between two different RAW MATERIALS
variables, called the dependent and
independent variables. For instance , Materials that are needed to turn your
suppose you want to forecast sales for inventory into a finished product are raw
your company and you’ve concluded that materials.
your company’s sales go up and down
depending on the changes in GDP. wORK-IN-PROcESS

INVENTORY MODEL ● materials that have been partially

completed through the production
a mathematical model that helps business process.
in determining the optimum level of ● includes raw materials, labor, and
inventories that should be maintained in a overhead costs.
production process.
TYPES OF INVENTORIES
DEMAND
Finished goods
INDEPENDENT DEMAND- finished
goods, items that are ready to be sold the third group of inventory owned by a
manufacturer and consist of products
DEPENDENT DEMAND-components of that are ready for sale
 Management Science
Concept,
Characteristics
and
Tools.
overhaul/ mro Inventory Counting Systems

● Also known as Maintenance, two-bin system- involves the storage of

Repair, and Operating Supplies, goods in two bins, one of which contains
● required to assemble and sell the working stock and the other containing
finished product but is not built reserve stock.
into the product itself.
Barcode inventory system
Importance of Effective Inventory
Management using barcode technology are more
accurate and efficient than those using
● A system to keep track of manual processes.
● inventory
● A reliable forecast of demand ABC Classification System
● Knowledge of lead times
● Classifying inventory according to
Reasonable estimates of: some measure of importance and
allocating control efforts
● Holding cost accordingly.
● Ordering cost
● Shortage cost A- VERY IMPORTANT

Classification System B- MODERATE IMPORTANT

Inventory Counting Systems C- LEAST IMPORTANT

Periodic inventory system -Physical ECONOMIC ORDER QUANTITY

count of items made at periodic intervals MODEL

● Most widely used and traditional

means for determining how much
Perpetual inventory system- Keeps track to order in a continuous system.
of inventory balances continuously, with ● Also referred to as the economic
updates made automatically whenever a lot size model
product is received or sold.
 Management Science
Concept,
Characteristics
and
Tools.
FORMULA FOR Assumptions of EOQ Model

EOQ IS:EOQ = 2Do/C ● Demand is known with certainty

and its relatively constant over
where:
time
● Lead time for the receipt of
D = Annual Demand (units)
orders is constant
o = Ordering Cost ● No shortages are allowed
● The order quantity is received
C = Carrying cost (per unit) at all once

Sample Problem KEY INVENTORY TERMS:

A T.V manufacturer buys a wooden

cARRYING COST
cabinet amounting to P400 per set. The
total monthly needs are 417 units. Cost
amount that a business spends on
per order is P50.00. The desired annual
holding inventory over a period of
return on investment is 10%. Also, rent &
time.
insurance per unit per year is P10.

ORDERING COST

D = ? 5.004 are the expenses incurred to create

and process an order to a supplier.
o = ? 50
Total inventory COST
C = ? 50
the total cost associated with
ordering and carrying inventory, not
including the actual cost of the
EOQ = 2Do/C inventory itself.

Solution SHORTAGE COST

D = 417 units (12) = cost when demand exceeds supply also

 Management Science
Concept,
Characteristics
and
Tools.
known as stock-out costs. Economic Order Quantity
(EOQ)
LEAD TIME it denotes the period The Economic Order Quantity
between the initiation of a certain inventory management method is one
of the oldest and most popular. EOQ
process and its completion.
lets you know the number of inventory
units you should order to reduce costs
based on your company holding costs,
ordering costs and rate of demand.
VARIOUS INVENTORY MODEL
USED IN INDUSTRY
2. Inventory Production
Quantity
WHAT IS INVENTORY CONTROL?
First off, it helps to know what
inventory control is all about.
Also known as Economic Production
Inventory control helps your business
Quantity, or EPQ, this inventory
maintain the right amount of
control model tells you the number of
inventory while reducing costs. The
products your business should order in
goal with inventory control, also known
a single batch, in hopes of reducing
as stock control, is to get the most
holding costs and setup costs. It
profit from your inventory with the
assumes that each order is delivered
least amount of investment. You want
by your supplier in parts to your
to make sure you have enough
business, rather than in one full
inventory in stock so that you can
product.
keep customers happy, but you don’t
want to waste money ordering
3. ABC Analysis
inventory that might not sell.
Inventory is categorized into either
group A, B or C. So how do you know
So how do you figure out your ideal
which category to put inventory
inventory number?
under? It’s based on the 80/20 rule,
also known as the Pareto Principle.
By using an inventory control model.

Category A: Inventory under this

Three most
category brings in the most money and
popular inventory management
is only a small amount of your total
models
inventory.
Category B: Unlike Category A
 Management Science
Concept,
Characteristics
and
Tools.
inventory, this B inventory is not vital Work-in Progress
for your business to survive, but it
still matters. It’s 30 percent of your Finished Goods
stock with 25 percent revenue.
Category C: This inventory doesn’t Packing MatMRO Supplies Materials
bring in as much profit as A and B, but
it’s consistent. Inventory controls are
pretty loose here since it brings in
MER
such a small amount of income.
CHANDISING

5 TYPES OF INVENTORY
INVENTORY
Inventory is the raw materials used to
produce goods as well as the goods
NETWORK FLOW MODELS
that are available for sale

3 types of business
Overview!

1. MERCHANDISING
It is the inventory of trading goods ❖ A network is an arrangement of
held by the trader. paths connected at various
points, through which one or
2.mANUFACTURING more items move from one point
to another.
It is the inventory for manufacturing ❖ A network is an arrangement of
and selling of goods paths connected at various
points, through which items
3. SERVICE move .
Not inventorial

NETWORK COMPONENTS
TYPES OF INVENTORY Networks are illustrated as diagrams
consisting of two main components:
MANUFACTURING NODES
NODES
Raw Materials ❖ Nodes represent joint points.
 Management Science
Concept,
Characteristics
and
Tools.
While; The Shortest Route
❖ Branches connect the nodes and Solution approach (1 of 8)
reflect the flow from one point Determine the initial shortest
in the network to another. routes from the origin (node 1) to
the closest node (3).

Example: Network of Railroad Route

Determine all nodes directly

connected to the permanent set.

The Shortest Route Problem

Determine the shortest routes from
the origin to all destinations.

Redefine the permanent set.

Network of Shipping Routes

Continue
 Management Science
Concept,
Characteristics
and
Tools.

The shortest Route Problem Solution

Method Summary.
❖ Select the node with the
shortest direct route from the
origin.
❖ Establish a permanent set with
the origin node and the node
that was selected in step 1.
❖ Determine all nodes directly
connected to the permanent set
nodes.
❖ Select the node with the
shortest route (branch) from
the group of nodes directly
Optimal Solution
connected to the permanent set
nodes.
❖ Repeat steps 3 and 4 until all
nodes have joined the
permanent set.

Computer Solution of the Shortest

Route Problem with QM for windows
Solution Summary
QM for Windows includes modules for
each of the three network flow
models that will be presented in this
chapter: shortest route, minimal
 Management Science
Concept,
Characteristics
and
Tools.
spanning tree, and maximal flow. The of labels if each edge in a
QM for Windows solution for the graph is associated with a
shortest route from node 1 to node 7 label from a finite label set
for the Stagecoach Shipping Company instead of a weight. A
example is shown in Exhibit 7.1. bottleneck edge is the highest
weighted edge in a spanning

tree.

The solution screen in Exhibit 7.1

provides the shortest route from the
start node, 1 (Los Angeles), to the end ●
node, 7 (St. Louis). The shortest
route from any node in the network to
any other node can be determined by
indicating the desired origin and
destination nodes at the top of the
solution screen. For example, the
shortest route from node 1 to node 5
is shown in Exhibit 7.2.

The Minimal Spanning

Tree Problem
The Minimal Spanning Tree Problem

● The minimum labeling spanning

tree problem is to find a
spanning tree with least types