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01-Introductin Data Modeling

The document discusses data modeling and decision making. It introduces Dr. Amer Saeed and his background and research interests. It then discusses what management science is and how computers, statistics, and mathematics can be used to solve business problems. It provides examples of companies that have successfully used management science techniques like optimization to improve operations and save money. The document explains what computer models are and how spreadsheets can be used to build models. It discusses the benefits of modeling and provides a generic mathematical model example. Finally, it discusses the problem solving process and some psychological factors that can influence decision making.

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GOHAR GHAFFAR
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49 views23 pages

01-Introductin Data Modeling

The document discusses data modeling and decision making. It introduces Dr. Amer Saeed and his background and research interests. It then discusses what management science is and how computers, statistics, and mathematics can be used to solve business problems. It provides examples of companies that have successfully used management science techniques like optimization to improve operations and save money. The document explains what computer models are and how spreadsheets can be used to build models. It discusses the benefits of modeling and provides a generic mathematical model example. Finally, it discusses the problem solving process and some psychological factors that can influence decision making.

Uploaded by

GOHAR GHAFFAR
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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DATA MODELING &

DECISIONS
Dr. AMER SAEED
PhD Management Science & Engineering (Supply Chain Management)
Antecedents and Consequences of Sustainable Supply Chain Practices: An Empirical
Study of Manufacturing Sector of Pakistan
MS Supply Chain Management
Where should we focus? Quality Management Practices or ISO Certification- A Case
For Supply Chain Performance
MBA-Ex (Supply Chain Management)
RFID Technology Architecture and Applications For Supply Chain Management

BCS-Hons (Software Engineering)

Assistant Professor
Department of Operations and Supply Chain
School of Business and Economics
University of Management and Technology, Lahore
Introduction to Modeling
& Problem Solving

 We face numerous decisions in life & business.

 We can use computers to analyze the potential outcomes


of decision alternatives.

 Spreadsheets are the tool of choice for today’s managers.


What is Management Science?

 A field of study that uses computers, statistics,


and mathematics to solve business problems.

 Also known as:

 Operations research

 Decision science
Home Runs
in Management Science
 Motorola

 Procurement of goods and services account for 50% of its


costs

 Developed an Internet-based auction system for


negotiations with suppliers

 The system optimized multi-product, multi-vendor


contract awards

 Benefits:

$600 million in savings


Home Runs
in Management Science
 Waste Management

 Leading waste collection company in North America

 26,000 vehicles service 20 million residential & 2 million


commercial customers

 Developed vehicle routing optimization system

 Benefits:

Eliminated 1,000 routes

Annual savings of $44 million


Home Runs
in Management Science
 Hong Kong International Terminals
 Busiest container terminal in the world
 122 yard cranes serve 125 ships per week
 Thousands of trucks move containers in & out of storage yard
 Used DSS to optimize operational decisions involving trucks, cranes &
storage locations
 Benefits:
 35% reduction in container handling costs
 50% increase in throughput
 30% improvement in vessel turnaround time
Home Runs in
Management Science
 John Deere Company
 2500 dealers sell lawn equipment & tractors with
support of 5 warehouses
 Each dealer stocks 100 products, creating 250,000
product-stocking locations
 Demand is highly seasonal and erratic
 Developed inventory system to optimize stocking
levels over a 26-week horizon
 Benefits:
 $1 billion in reduced inventory
 Improved customer-service levels
What is a “Computer Model”?

 A set of mathematical relationships and logical


assumptions implemented in a computer as an
abstract representation of a real-world object of
phenomenon.

 Spreadsheets provide the most convenient way for


business people to build computer models.
The Modeling Approach
to Decision Making
 Everyone uses models to make decisions.

 Types of models:

– Mental (arranging furniture)

– Visual (blueprints, road maps)

– Physical/Scale (aerodynamics, buildings)

– Mathematical (what we’ll be studying)


Characteristics of Models

 Models are usually simplified versions of the things they

represent

 A valid model accurately represents the relevant

characteristics of the object or decision being studied


Benefits of Modeling

 Economy - It is often less costly to analyze decision


problems using models.

 Timeliness - Models often deliver needed information


more quickly than their real-world counterparts.

 Feasibility - Models can be used to do things that would


be impossible.

 Models give us insight & understanding that improves


decision making.
Example of a Mathematical Model

Profit = Revenue - Expenses

or

Profit = f(Revenue, Expenses)

or

Y= f(X1, X2)
A Generic Mathematical Model

Y = f (X1, X2, …, Xn)


Where:

Y = dependent variable
(aka bottom-line performance measure)

Xi = independent variables (inputs having an impact on Y)

f(.) = function defining the relationship between the Xi & Y


Mathematical Models & Spreadsheets

 Most spreadsheet models are very similar to our generic


mathematical model:

Y = f (X1, X2, …, Xn)

 Most spreadsheets have input cells


(representing Xi) to which mathematical
functions ( f (.)) are applied to compute a
bottom-line performance measure (or Y).
Categories of Mathematical Models

Model Independent OR/MS


Category Form of f(.) Variables Techniques

Prescriptive known, known or under LP, Networks, IP,


well-defined decision maker’s CPM, EOQ, NLP,
control GP

Predictive unknown, known or under Regression Analysis,


ill-defined decision maker’s Time Series Analysis,
control Discriminant Analysis

Descriptive known, unknown or Simulation, PERT,


well-defined uncertain Queueing,
Inventory Models
The Problem Solving Process

Identify Formulate &


Problem Implement Analyze Test Implement
Model Model Results Solution

unsatisfactory
results
The Psychology of Decision Making

 Models can be used for structurable aspects of decision


problems.

 Other aspects cannot be structured easily, requiring intuition


and judgment.

 Caution: Human judgment and intuition is not always


rational!
Anchoring Effects

 Arise when trivial factors influence initial thinking about a


problem.

 Decision-makers usually under-adjust from their initial


“anchor”.

 Example:

 What is 1x2x3x4x5x6x7x8 ?

 What is 8x7x6x5x4x3x2x1 ?
Framing Effects

 Refers to how decision-makers view a problem from a win-


loss perspective.

 The way a problem is framed often influences choices in


irrational ways…

 Suppose you’ve been given $1000 and must choose between:

– A. Receive $500 more immediately

– B. Flip a coin and receive $1000 more if heads occurs


or $0 more if tails occurs
Framing Effects (Example)

 Now suppose you’ve been given $2000 and must choose


between:

– A. Give back $500 immediately

– B. Flip a coin and give back $0 if heads occurs or


give back $1000 if tails occurs
A Decision Tree for Both Examples

Payoffs

Alternative A $1,500

Initial state
Heads (50%)
$2,000
Alternative B
(Flip coin) $1,000
Tails (50%)
Good Decisions vs. Good Outcomes

 Good decisions do not always lead to good outcomes...

 A structured, modeling approach to decision making


helps us make good decisions, but can’t guarantee
good outcomes.

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