INTRODUCTION TO

MANAGEMENT SCIENCE

AIS 132
COURSE DESCRIPTION
The course is an introduction to quantitative methods and their applications to management problems.
It involves the study and application of various mathematical techniques in optimization of scarce resources,
particularly those that will help management make sound business decisions. It includes the analyses, and
interpretation of data and facts. The approach consists of problem definition, model development, data collection,
model implementation using the data, model validation, result analysis, and using the findings to make managerial
decisions.
COURSE OBJECTIVES
The course aims to develop and enhance the student’s ability to analyze, interpret, and make use of mathematical
tools and models in making effective business decisions.
After completing this chapter, the student should be able to:
• Describe the quantitative analysis approach.
• Present and apply various quantitative methods in practice.
• Discuss possible problems in using quantitative analysis.
• Recognize applications of the concepts and techniques covered.
• Discuss the relevance, managerial considerations, advantages and limitations of the quantitative tool.
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Introduction
➢ Mathematical tools have been used for thousand of years
(e.g. calculator, graphing paper, ruler, and micrometer)
➢ Quantitative analysis can be applied to wide variety of problems.
➢ One must understand the specific applicability of the technique, its limitations, and its
assumptions.

Examples of Quantitative Analysis

1. Taco Bell saved over Php3 millions using forecasting and scheduling quantitative analysis
model.
2. ABC Television increased revenues by over Php5 millions by using quantitative analysis to
develop better sales plan.
3. PH Airlines saved over Php10 millions using quantitative analysis models to quickly recover
from weather delays and other disruptions.
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Management Science Techniques
❖ Linear Programming
❖Project Scheduling
❖Inventory Models
❖Simulation
❖Breakeven Analysis
❖Forecasting
What is Management Science? – it is the study of problem-solving and decision-making in
organizations. It’s a scientific approach to managerial decision making whereby raw data are
processed and interpreted resulting in meaningful information.

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Management science also referred to as operations research,
quantitative methods and analysis, and decision sciences.
Quantitative factors – might be different investment alternatives, interest
rates, inventory levels, demand, or labor cost.
Qualitative factors – such as the weather, state, and federal legislation, and
technology breakthroughs should also be considered.
- Information may be difficult to quantify but can affect the decision-making process.

Management scientist (Decision-maker) – is a person skilled in the

application of management science techniques.
A model is an abstract mathematical representation of a problem situation.
A variable is a symbol used to represent an item that can take on any value.

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Key reasons why management science is important:
1. Effective decision making – management science provides
organizations with tools and techniques to analyze complex problems and make
informed decisions. By using mathematical models and data analysis,
management science helps managers evaluate different options, identify
problem areas, and predict outcomes.
2. Efficiency and productivity – by analyzing current processes and comparing
them with other possibilities, management science helps organizations identify
areas for improvement and design measures to evaluate the effectiveness of
existing processes.
3. Planning and organizing – management science helps organizations plan
and organize their resources effectively. It provides a systematic approach to set
standards, reduce uncertainty, and provide direction within the organization.
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Key reasons why management science is important:

4. Problem solving – the quantitative approach of management science

allows organizations to solve complex problems by analyzing feasibilities,
constraints, and costs.
5. Maximizing results with minimum effort and resources – management
science aims to achieve maximum results with minimum effort and resources.
By applying scientific methods and analyzing various factors of production,
organizations can enhance efficiency and optimize resource allocation.

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 The Quantitative Analysis Approach
Defining the Problem

Developing a Model

Acquiring Input Data

Developing a Solution

Testing the Solution

Analyzing the Results

Implementing the Results

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 Defining the Problem
Need to develop a clear and concise statement that gives
direction and meaning to the following steps:

- This may be the most important and difficult step.

- It is essential to go beyond symptoms and identify true causes.
- May be necessary to concentrate on a few of the problems.
(selecting the right problem is very important)
- Specific and measurable objectives may have to be developed.
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 Developing a Model
Quantitative analysis models are realistic, solvable, and
understandable mathematical representations of a situation.

Equation Interpretation
Y = β0 + β1x, where β0 is called the y–intercept and β1 is called the slope. β0 is the value of y when x =
0, and β1 is the change in y when x increases by 1 unit.
Types of Models:
1. Scale models – physical (e.g. building or condominium that engineers may construct or
develop) representation of a model. (e.g. car, tools, or machinery that manufacturers may
produce)
2. Schematic models – a blueprint of a particular model, that can be applied in real-situation.
(e.g. graphical diagram, drawing, or image of device or mechanical parts).
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 Developing a Model

✓Models generally contain variables (controllable, and uncontrollable e.g.

weather condition, absence of personnel), and parameters.
✓Controllable variables (e.g. sales, demand, expenses) are generally the
decision variables, and unknown quantities whose values must be
determined.
✓Parameters are known quantities whose values are usually given, and that
are part of the problem.

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 Acquiring Input Data

Input data must be accurate – GIGO rule

Data may come from a variety of sources such as company reports, company
documents, interviews, on-site direct measurement, or statistical sampling.

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 Developing a Solution

❖The best (optimal) solution to a problem is found by interpreting the model

variables until a solution is found that is practical and can be implemented.
❖Common techniques are:
- Solving equations
- Trial and error (trying various approaches and picking the best result
- Complete enumeration (trying all possible values)
- Using a algorithm (a series of repeating steps to reach a solution)

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 Testing the Solution

Both input data and the model should be tested for accuracy
before analysis and implementation.
- New data can be collected to test the model.
- Result should be logical, consistent, and represent the
real situation.

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 Analyzing the Results

Determine the implications of the solution.

- Implementing results often requires change in an organization
- The impact of action or changes needs to be studied and understood before
implementation.

Sensitivity analysis – determines how much the results of the analysis will
change if the model or input data changes.

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 Implementing the Results
Implementation incorporates the solution into the company.
- implementation can be challenging
- people can resist changes
- many quantitative analysis efforts have failed because a good,
workable solution was not properly implemented.

Changes occur over time, so even successful implementations must be

monitored to determine if modifications are necessary.

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 *END*

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