Quantitative

Methods for
Decision-Making

Session 1

Sept. 2024

Welcome to the course!

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  What decisions you make daily, both
in life and at work?

 How you take these decisions?

 Can you take work decisions in a

similar way to daily life decisions?

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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How to use data to make a hit TV show

 Who will summarize the video in 30 words?

 What are the typical data points collected by Roy’s team?

 Alpha Senator V/S House of cards? What was the difference in decision-
making?

 In spite of lot of data, the process many a times do not result optimal
results. Why?

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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 Decision Making Example Industries

Google also uses optimization algorithms to improve energy

efficiency in its data centers, cutting down costs and
environmental impact.

Amazon uses network optimization algorithms for route

planning and shipment delivery, minimizing costs and
improving delivery speeds.

Uber uses linear programming and optimization techniques

to allocate drivers efficiently. These techniques minimize
wait times for riders while maximizing drivers’ utilization.

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Reliance leverages linear programming and

inventory management techniques to optimize the
supply chain in its petrochemical and retail
divisions.

TCS employs quantitative risk analysis techniques

like Monte Carlo simulations to manage risks in
large-scale IT projects.

Infosys uses regression analysis and machine

learning models to forecast workforce needs based
on project demands and client requirements.

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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 Introduction

Problem Solving and Decision Making

Quantitative Analysis and Decision-Making

Models of Cost, Revenue, and Profit

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Before we start !!!

Optimization Techniques

&

Quantitative Techniques

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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 Some more optimization

Volume/Space Distance

Energy/Yield

Energy/Time
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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Types of optimization

Multi-objective, Nature inspired, Fuzzy

Versions, Meta-heuristic etc

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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 Some decision-making scenario

 Selecting a supplier based on price, delivery

time, and quality

 What is proper mathematical way to deal

with this problem?

 Structured decision-making through basic

prioritization or scoring models

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Introduction

The body of knowledge involving quantitative approaches to

decision-making is referred to as

• Management Science
• Operations Research
• Decision Science

It had its early roots in World War II

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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 7 Steps of Problem Solving

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Quantitative Analysis and Decision Making

Decision-Making Process

• Problems in which the objective is to find the best

solution with respect to one criterion are referred to as
single-criterion decision problems.

• Problems that involve more than one criterion are

referred to as multicriteria decision problems.

• Example????

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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 Quantitative Analysis

Quantitative Analysis

• The analyst will concentrate on the quantitative facts

or data associated with the problem

• The analyst will develop mathematical expressions

that describe the objectives, constraints, and other
relationships that exist in the problem

• The analyst will use one or more quantitative methods

to make a recommendation

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Quantitative Analysis

What are potential reasons for a Quantitative Analysis Approach

to Decision Making?

Potential Reasons for a Quantitative Analysis Approach to

Decision Making

• The problem is complex.

• The problem is very important.
• The problem is new.
• The problem is repetitive.

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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 So, What is quantitative analysis process..

• Model Development

• Data Preparation

• Model Solution

• Report Generation

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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What are models and modelling?

Models are representations of real objects or

situations

Three forms of models are:

• Iconic models - physical replicas (scalar

representations) of real objects

• Analog models - physical in form, but do not

physically resemble the object being modeled

• Mathematical models - represent real-world

problems through a system of mathematical formulas
and expressions based on key assumptions,
estimates, or statistical analyses

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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 Why models?

Why models?

• requires less time

• is less expensive
• involves less risk

The more closely the model represents the real situation,

the accurate the conclusions and predictions will be.

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Mathematical Models Example

A mathematical model for a simple production problem

is: “X” is decision to take on how much to produce.

Maximize Profit: 10x (objective

function)
subject to: 5x ≤ 40 (constraint)
x ≥ 0 (constraint)
The second constraint reflects the fact that it is not
possible to manufacture a negative number of units.

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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 More on Mathematical Models

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Mathematical Models

Deterministic Model – if all uncontrollable inputs to the

model are known and cannot vary…..
The inputs
Stochastic (or Probabilistic) Model – if any
uncontrollable are uncertain and subject to variation

• Stochastic models are often more difficult to

analyze.
• In our simple production example, if the number of
hours of production time per unit could vary from 3
to 6 hours depending on the quality of the raw
material, the model would be stochastic.

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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 Mathematical Models

Data preparation is not a trivial step, due to the time

required and the possibility of data collection errors.

• A model with 50 decision variables and 25

constraints could have over 1300 data elements!
• Often, a fairly large data base is needed.
• Information systems specialists might be needed.

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Model Solution

The analyst attempts to identify the alternative (the set of

decision variable values) that provides the “best” output for the
model.

The “best” output is the optimal solution

Note- If the alternative does not satisfy all of the model

constraints, it is rejected as being infeasible, regardless of the
objective function value.

Note- If the alternative satisfies all of the model constraints, it is

feasible and a candidate for the “best” solution.

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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 Model Solution

Create a trial-and-error solution for production problem

(Start putting x=0,1,2,3 …..)

Total
Production Projected Hours of Feasible
Quantity Profit Production Solution
0 0 0 Yes
2 20 0 Yes
4 40 20 Yes
6 60 30 Yes
8 80 40 Yes
10 100 50 No
12 120 60 No

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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What is your observation of these

solutions?

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 At last…..report generation

A managerial report, based on the results of the model,

should be prepared.

• The report should be easily understood by the

decision maker.

• The report should include:

• the recommended decision
• other pertinent information about the results (for
example, how sensitive the model solution is to
the assumptions and data used in the model)

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Management Science Techniques

Quantitative Techniques …

• Linear Programming • Decision Analysis

• Integer Linear Programming • Goal Programming
• Nonlinear Programming • Analytic Hierarchy Process
• PERT/CPM • Forecasting
• Inventory Models • Markov-Process Models
• Walking Line Models • Distribution/Network Models
• Simulation • ……..

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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 Some tools to get trained …

 Fundamentals of optimization
 Methods
 Tools
 Software Package
 Business Applications
 Decision Making

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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Takeaways

 Optimization

 Why optimization

 Decision Making

 Why maths based decision making

 Quantitative Techniques

 Quantitative Techniques and Types

 Application in business and benefits

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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 Thank You !

*Maryam Mirzakhani 1977-2017.

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license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
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