1st Year – 1st Term of A.Y.

2021-2022 were established to apply these

MATHEMATICS IN THE MODERN WORLD techniques to industrial and business
problems.” (Bernard Taylor,
MODULE 1 Introduction to Management Science)
(INTRODUCTION TO MANAGEMENT SCIENCE) - Is flourishing in business and industry
due to:
o Numerous methodological
MANAGEMENT SCIENCE developments
e.g. simplex method for solving
- A body of knowledge that uses
linear programming problems
quantitative approaches to decision
- A virtual explosion in computing power
making (Anderson et.al, 2019).
- Is a discipline that attempts to aid
managerial decision-making by applying PROBLEM SOLVING
scientific approach to managerial
problems that involve quantitative 7 Steps of Problem Solving
factors (Hillier, 2008). (First 5 steps are the process of decision-
- The objective of Management Science is making)
to solve the decision-making problems 1. Define the problem.
both in public and private sectors by 2. Determine the set of alternative Structuring
developing mathematical models solutions. the Problem
(Taylor, 2016). 3. Determine the criteria for evaluating
- Also referred to as Operations Research, alternatives.
Decision Science, Quantitative Methods, 4. Evaluate the alternatives. Analyzing
Quantitative Analysis, and Business 5. Choose an alternative (make a decision) the Problem
Analytics.
---------------------------------------------------
- Frederick W. Taylor (1865-1915), 6. Implement the decision.
Founder of Management Science. 7. Evaluate the results.
The Principles of Scientific Management
(1911). Note:
- Problems in which the objective is to find
the best solution with respect to one
Evolution of Management Science criterion are referred to as single-criterion
decision problems.
- Started during World War II period. - Problems that involve more than one
- “As the war ended, and the criterion are referred to as multicriteria
mathematical models and techniques decision problems.
that were kept secret during the war
begun to be released. There was a
natural inclination at test their
applicability to business problems. At
the same time, various consulting firms
Analysis Phase of Decision Making Potential Reasons for a Quantitative Analysis
Approach to Decision-Making
- Qualitative Analysis
• Based largely on the manager’s - The problem is complex.
judgement and experience - The problem is important.
• Includes the manager’s intuitive - The problem is new.
“feel” for the problem - The problem is repetitive.
• Is more of an art than a science

- Quantitative Analysis
• Analyst will concentrate on the
quantitative facts or data
associated with the problem
• Analyst will develop
mathematical expressions that
describe the objectives,
constraints, and other
relationships that exist in the
problem
• Analyst will use one or more
quantitative methods to make a
recommendation
ANALYZING THE PROBLEM

Qualitative
STRUCTURING THE PROBLEM Analysis

Evaluate
Define the Identify the Determine Choose an
the
Problem Alternatives the Criteria Alternative
Alternatives

Quantitative
Analysis
QUANTITATIVE ANALYSIS PROCESS Note: Representation of a
problem using symbols and
- Procedures for finding the “best” or mathematical relationships or
optimal solution/s (Anderson et al., expressions.
2019).
4 Steps: i.e., sets quantitative analysis
o Model Development from other techniques
(Mathematical Representation)
o Data Preparation Add. The purpose or value of any model
o Model Solution is that it enables us to make inferences
o Report Generation (Managerial
about the real situation by studying and
Reports) analyzing the said model (Anderson et al.,
- The process of developing and solving 2019).
models is said to be the essence of
quantitative analysis problem (Anderson
et al., 2019).
Annotation of a linear trend line used in
forecasting:

1. Model Development

- Models are representations of real

objects or situations

Three forms of models are:

• Iconic models – physical replicas
(scalar representations) of real
objects
e.g. toy planes, toy cars
Linear programming model which aims to
• Analog models – physical in form, maximize profit
but do not physically resemble
the object being modeled
e.g. speedometer, thermometer

• Mathematical models –
represent real world problems
through a system of
mathematical formulas and
expressions based on key
assumptions, estimates, or
statistical analyses
 - Generally, experimenting with models There are environmental factors that can affect
(compared to experimenting with the both the objective function and the constraints.
real situation): These are said to be uncontrollable by managers.
• Requires less time
- Uncontrollable inputs – Environmental
• Is less expensive
factors that are not under the control of
• Involves less risk
the decision maker
- Decision variables – controllable inputs;
- Herbert A. Simon (Nobel prize winner in
decision alternatives specified by the
economics and expert in decision-
decision maker, such as the number of
making) said that, “A mathematical
units of a product to produce.
model doesn’t have to be exact. It just
has to be close enough to provide better A complete mathematical model for the simple
results than can be obtained by common production problems is:
sense.”
o The more closely the model Maximize 500x (objective function)
represents the real situation, subject to: 6x≥48 (constraint)
the accurate the conclusions x≥0 (constraint)
and predictions will be.
- Deterministic model – if all
uncontrollable inputs to the model are
known and cannot vary
MATHEMATICAL MODELS - Stochastic (or Probabilistic) model – if
any uncontrollable are uncertain and
- In a managerial problem, we usually find
subject to variation
problem-definition phase leads to a
e.g. demand for the product
specific objective of either (1)
maximizing the profit or (2) minimizing Note: A mathematical model with uncertainty
the cost. will be considered as a Stochastic model.
- Objective function – A mathematical
expression that describes the problem’s Add. The distinguishing feature of the Stochastic
objective, such as maximizing profit or model is that the value of the output cannot be
minimizing cost determined even if the value of the controllable
input is known, because the specific values of the
uncontrollable inputs are unknown.
The success of a mathematical model and
quantitative approach will depend heavily on e.g. if the number of hours of production
how accurately the objective and constraints can time per unit could vary from 3 to 6 hours
be expressed in terms of mathematical equations depending on the quality of the raw material, the
or relationships. model would be stochastic.

- Constraints – A set of restrictions or

limitations, such as production
capacities
 TIPS IN SELECTING MATHEMATICAL MODELS solution for the problem.” (Anderson et
al., 2019)
- Cost/benefit considerations must be - Data preparation is not a trivial step (it is
made in selecting an appropriate a significant step), due to the time
mathematical model required and the possibility and the
- Frequently a less complicated (and possibility of data collection error.
perhaps less precise) model is more
appropriate than a more complex and
accurate one, due to cost and ease of
solution consideration. 3. Model Solution

- The analyst attempts to identify the

alternative (the set of decision variable
FLOWCHART OF THE PROCESS OF values) that provide the “best” output
TRANSFORMING MODEL INPUTS TO OUTPUT for the model
- The “best” output is the optimal solution.
- If the alternative does not satisfy one or
more of the model constraints, it is
CONTROLLABLE INPUTS
rejected as being infeasible, regardless
(DECISION VARIABLES)
of the objective function value
- If the alternative satisfies all of the
model constraints, it is feasible and a
candidate for the “best” solution

UNCONTROLLABLE INPUTS
Add. Trial-and-Error Solution is usually
MATHEMATICAL
(ENVIRONMENTAL FACTORS) used for problems.
MODEL

Microsoft Excel and Lingo is used for complex

mathematical models.

OUTPUT
(PROJECTED RESULTS)
Model Testing and Validation

- “Even though the analyst has

undoubtedly taken many precautions to
2. Data Preparation
develop a realistic model, (1) often the
goodness or accuracy of the model
- The data here refers to “the values of the
cannot be assessed until model solutions
uncontrollable inputs to the model and
are generated. (2) Model testing and
all the uncontrollable inputs or data
validation are frequently conducted with
must be specified before we can analyze
relatively small test problems that have
the model and recommend a decision or
 known or at least expected solutions. - Decision Analysis
(3) If the model generates the expected - Goal Programming
solutions and if other output information - Analytic Hierarchy Process
appears correct, the go ahead may be - Forecasting
given to use the model on the full-scale - Markov-Process Models
problem. However, (4) if the model test - Distribution/Network Models
and validation identify potential
problems or inaccuracies inherent in the
model, corrective action, such as model 1. Linear Programming
modification and/or collection of more- - Is a problem-solving approach
accurate input data may be taken. developed for situations involving
Whatever the corrective action, the maximizing a linear function subject to
model solution will not be used in linear constraints that limit the degree
practice until the model has satisfactory to which the objective can be pursued.
passed test validation.” (Anderson et al., e.g. maximizing profit/minimizing cost
2019)
2. Integer Linear Programming
- Is an approach used for problems that
4. Report Generation can be set up as linear programs with the
additional requirement that some or all
- A managerial report, based on the of the decision recommendations be
results of the model, should be prepared. integer values.
- The report should be easily understood
by the decision maker 3. Network Models
- The report should include: - Are specialized solution procedures for
(1) the recommended decision problems in transportation system
(2) other pertinent information about design, information system design,
the results (e.g., how sensitive the project scheduling, …
model solution is to the assumptions
and data used in the model) 4. Project Scheduling: PERT (Program
Evaluation and Review Technique) and CPM
(Critical Path Method)
MANAGEMENT SCIENCE TECHNIQUES - helps managers responsible for planning,
scheduling, and controlling projects that
- Linear Programming consist of numerous separate jobs or
- Integer Linear Programming tasks performed by a variety of
- Nonlinear Programming departments, individuals, and so forth.
- PERT/CPM
- Inventory Models 5. Inventory Models
- Waiting Lines - Are used by managers faced with dual
- Simulation problems of maintaining sufficient
 inventories to meet demands for goods 11. Analytic Hierarchy Process (AHP)
and, at the same time, incurring the - Is a multi-criteria decision-making
lowest possible inventory holding costs. technique that permits the inclusion of
subjective factors in arriving at a
Note: The demand is known with recommended decision.
certainty and is constant. - Designed for situations in which ideas,
feelings, and emotions affecting the
6. Waiting Line (or queuing) Models decision process are quantified to
- Help managers understand and make provide a numeric scale for prioritizing
better decisions concerning the the alternatives.
operation of systems involving waiting
lines. 12. Markov-Process Models
- Are used in studying the evolution of
Note: The average time it takes a person certain systems over repeated trials
waiting in line to be served. (such as describing the probability that a
machine, functioning in one period, will
7. Simulation function or break down in another
- Is a technique used to model the period)
operation of a system. This technique e.g., Analyzing Market Share, Predicting
employs a computer program to model the Market, Forecasting University
the operation and perform simulation Enrollment, and Determining whether
computations. Machine will break down in the future.
- Offers a means of analyzing very
complex systems that cannot be
analyzed by other management science MOST FREQUENTLY USED METHODS
techniques.
- Linear Programming
8. Decision Analysis - Integer Programming
- Can be used to determine optimal - Network Models (such as transportation
strategies in situations involving several and transshipment models)
decision alternatives and an uncertain - Simulation
pattern of future events.

9. Forecasting Methods
- Are techniques that can be used to
predict future aspects of a business
operation.

10. Goal Programming

- Is a technique for solving multi-criteria
decision problems, usually within the
framework of linear programming.