Module 1

INTRODUCTION TO
MANAGEMENT SCIENCE
Module 1 : What will you learn…

Definition and characteristics of Management

Science
Brief History
Decision Making and the Systems Approach
Modeling Techniques
INTRODUCTION
TO
MANAGEMENT
SCIENCE

Mgmt114n-RJCC
Outline

• Introduction
• Definition of Mgt. Science
• Characteristics of Mgt. Science
• Brief history of Mgt. Science
• Typical Managerial problems that can be solved through
Mgt. Science Techniques/Tools
• Applications of Mgt. Science
 Learning Objectives

1. Understand what is management science (MS).

2. Comprehend the history of management science
3. Appreciate the importance of management science.
4. Describe the important applications of management science.
 INTRODUCTION

• Managers make decisions; the higher the manager is in the

organizational heirarchy, the more critical the decisions he/she
makes.
• Before the 20th century, businesses functioned in a less
complex environment. In modern times, decision making is
more complex, demanding and more important than ever.
• Need for innovative approaches for dealing with complex
problems.
INTRODUCTION
• In the 21st century, the country’s most successful
executives will be producing outstanding results by
optimizing the resources at hand and making decisions
with better outcomes.

HOW?
MANAGEMENT SCIENCE
Introduction

 Mathematical tools have been used for thousands of years.

 QA can be applied to a wide variety of problems.

 One must understand the specific applicability of the

technique, its limitations, and its assumptions.
 What is Management Science?

“Management” + “Science”

• a branch of knowledge or study

• a process used to achieve dealing with a body of facts or
certain goals through the truths systematically arranged and
utilization of resources showing the operation of general
laws.
What is Management Science?

• is an approach to decision-making that is based on

scientific methodology and utilizes the all-
encompassing use of quantitative analysis (QA).

• also known as Operations Research (OR)

What is Management Science?
 The scientific approach to solving management
problems (Taylor, 2013).
 It is an approach to decision making based on the
scientific method.
 The discipline of applying advanced analytical
methods to help managers make better decisions.
 Science of problem solving. It is devoted to solving
managerial-type problems using quantitative models.
 Problems

Successful use of Mgt. Science

techniques

Solutions that are timely, accurate, flexible,

economical, reliable, and easy to understand
Solutions
and use
Mgt. Science (Quantitative Analysis):
A scientific approach to managerial decision making whereby raw
data are processed and manipulated resulting in meaningful
information.

Quantitative
Analysis Meaningful
Raw Data
Information

.
Management Science

Similar Terms

The alternative name for quantitative approaches to decision

making is Operations Research (OR)
covers research on all aspects of management related to
strategy, entrepreneurship, innovation, information technology,
and organizations as well as all functional areas of business,
such as accounting, finance, marketing, and operations.
Other names for the same area: operational research,
operations analysis, quantitative analysis, quantitative
methods, decision analysis and decision science.
Characteristics of Management Science

1. A primary focus on managerial decision making.

2. The application of the scientific approach to the decision making
process
3. The examination of the decision situation from a broad
perspective; i.e. the application of system approach
4. The use of methods and knowledge from several disciplines
5. A reliance on formal mathematical models
6. The extensive use of computers
 A brief history of Mgt. Science
• MS has been in existence since the beg’ng. of recorded history.
Quantitative methods were applied to build structures like the
pyramids of Egypt.
• 1900s Frederick W. Taylor pioneered the principles of the
scientific approach to management
• WW II – many new scientific and quantitative techniques were
developed to assist the military and these were very successful.
• After World War II many companies started using similar
techniques in managerial decision making and planning. Today,
many organizations employ a staff of operations research or
management science personnel or consultants to apply the
principles of scientific management to problems and
opportunities
Brief History of MS

Quantitative Analysis, has been in

existence since the beginning of
recorded history, but it was Frederick
W. Taylor who in the early 1900s
pioneered the principles of the
scientific approach to management.
Brief History of Management Science

• The significant development of the Operations Research disciplines

and techniques started during World War II in form of military
applications (strategic and tactical tasks).
Brief History of Management Science
Brief History of Management Science
• After WW II MS/OR activities have grown rapidly in business, govt. units, and
private institutions. The scope of the problems addressed by MS/OR practitioners
have expanded.

Before the war After the war

Military operations Civilian Sector

2 other key factors affecting MS/QA growth

• Improvements in the techniques- scientists were motivated

to pursue research relevant to the field

• Computer revolution- development of electronic digital

computers, brought use of OR to large number of people
Typical Managerial Problems

• Inventory control
• Facility design
• Product-mix determination
• Portfolio analysis
• Scheduling and sequencing
• Merger-growth analysis
• Transportation planning
• Design of information systems
• Allocation of scarce resources
Typical Managerial Problems

• Investment decisions (new plants, etc.)

• Project management – planning and control
• New product decisions
• Sales force decisions
• Market research decisions
• Research and development decisions
• Oil and gas exploration decisions
• Pricing decisions
Management Science Techniques

For solving those and many other problems, the following techniques
can be used:

Linear Programming
- one of the best-known tools of management science.
- this approach mostly defines the problem as the
maximizing (minimizing) a linear function, respecting
the set of linear constraints.
Forecasting
- prediction of future aspects of business operations.
- statistics and econometrics offer many techniques based on time-
series and regression analysis.
Management Science Techniques
Project Management
- planning, scheduling and controlling projects that consists of many separate jobs
or tasks performed by variety of individuals or departments.
- Two basic methods: Critical Path Method (CPM) and Program Evaluation
Review Technique (PERT).
Inventory Models
- helps managers to determine when and how much to order.
- the main goal is usually to find a proper balance between the inventory
holding cost and the cost of executing an order.

Waiting Line Models (Queuing System/ Queuing Models)

- deals with the situations where units (e.g. customers) need to be served
by a number of channels (e.g. vendors). Main goal is finding a proper
balance between size of the queue and the total service cost.
Management Science Techniques
Forecasting
- prediction of future aspects of business operations.
- statistics and econometrics offer many techniques based on time-series and
regression analysis.

Multi-criteria Decision Making (MCDM)

- in many managerial problems the decision maker needs to consider multiple
criteria.
- in this case the solution is provided by multi-objective programming techniques.

Markov Analysis
- This technique can be used to describe the behavior of a system in a dynamic
situation (evolution of the system throughout the time).
- If - at a given time point - the system is in one of possible states, at following time
point the system can remain in current state or can move into any other state.
 Application of Management Science: Quantitative Analysis
(QA) Approach
Fig 1.1
Define
the problem

Develop
a model

Acquire
input data

Develop
a solution

Test
the solution

Analyze
the results

Implement
the results
4/13/2023 33
Application of Management Science: Quantitative Analysis
(QA) Approach
An Example: The CSX Transportation, Inc.,

• CSX is a leading supplier of rail-

based freight transportation in North
America.
Application of Management Science: Quantitative Analysis (QA) Approach
Defining the Problem
• CSX Transportation, Inc., has 35,000 employees and annual revenue of $11 billion. It
provides rail freight services to 23 states east of the Mississippi River, as well as parts of
Canada. CSX receives orders for rail delivery service and must send empty railcars to
customer locations. Moving these empty railcars results in hundreds of thousands of
empty-car miles every day. If allocations of railcars to customers is not done properly,
problems arise from excess costs, wear and tear on the system, and congestion on the
tracks and at rail yards.
Developing a Model
• In order to provide a more efficient scheduling system, CSX spent 2 years and $5 million
developing its Dynamic Car-Planning (DCP) system. This model will minimize costs,
including car travel distance, car handling costs at the rail yards, car travel time, and costs
for being early or late. It does this while at the same time filling all orders, making sure
the right type of car is assigned to the job, and getting the car to the destination in the
allowable time.
Acquiring Input Data
• In developing the model, the company used historical data for testing. In running the
model, the DCP uses three external sources to obtain information on the customer car
orders, the available cars of the type needed, and the transit-time standards. In addition to
these, two internal input sources provide information on customer priorities and
preferences and on cost parameters.
Application of Management Science: Quantitative Analysis (QA) Approach

Developing a Solution
This model takes about 1 minute to load but only 10 seconds to solve. Because
supply and demand are constantly changing, the model is run about every 15
minutes. This allows final decisions to be delayed until absolutely necessary.
Testing the Solution
The model was validated and verified using existing data. The solutions found using
the DCP were found to be very good compared to assignments made without DCP.
Analyzing the Results
Since the implementation of DCP in 1997, more than $51 million has been saved
annually. Due to the improved efficiency, it is estimated that CSX avoided spending
another $1.4 billion to purchase an additional 18,000 railcars that would have been
needed without DCP. Other benefits include reduced congestion in the rail yards and
reduced congestion on the tracks, which are major concerns. This greater efficiency
means that more freight can ship by rail rather than by truck, resulting in significant
public benefits. These benefits include reduced pollution and greenhouse gases,
improved highway safety, and reduced road maintenance costs.
Application of Management Science: Quantitative Analysis (QA) Approach

Implementing the Results

• Both senior-level management who championed DCP as well as key car-
distribution experts who supported the new approach were instrumental in
gaining acceptance of the new system and overcoming problems during the
implementation. The job description of the car distributors was changed
from car allocators to cost technicians. They are responsible for seeing that
accurate cost information is entered into DCP, and they also manage any
exceptions that must be made. They were given extensive training on how
DCP works so they could understand and better accept the new system. Due
to the success of DCP, other railroads have implemented similar systems
and achieved similar benefits. CSX continues to enhance DCP to make DCP
even more customer friendly and to improve car-order forecasts

Source: Based on M. F. Gorman, et al. “CSX Railway Uses OR to Cash in on Optimized

Equipment Distribution,” Interfaces 40, 1 (January–February 2010): 5–16.
 Other Examples of the application Management Science:

In the mid 1990s, Taco

Bell saved over $150
million using
forecasting and
scheduling quantitative
analysis models.
Other Examples of the application Management Science:

NBC television
increased revenues
by over $200 million
between 1996 and
2000 by using
quantitative analysis
to develop better
sales plan.
Example: Mgt science techniques paved the way for the
implementation of the Needle Exchange Program in the U.S

Needle exchange
program (NEP), Contents of a needle-exchange kit

• is a social service that allows

injecting drug users (IDUs) to
obtain clean and unused
hypodermic needles and
associated paraphernalia at
little or no cost. It is based on
the philosophy of
harm reduction that attempts
to reduce the risk factors for
blood-borne diseases such as
HIV/AIDS and hepatitis.