Operations Management, Management Science & Information Systems, RBS
Lecture 1
Romulo Ely
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Operations Management, Management Science & Information Systems, RBS
Principles of Management Science
Management Science ~ Operations Research ~
Quantitative Methods ~ Quantitative Analysis ~
Decision Sciences ~ Business Analytics
=
a scientific approach to solve management problems
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Operations Management, Management Science & Information Systems, RBS
operations.questions@gmail.com
Operations Management, Management Science & Information Systems, RBS
operations.questions@gmail.com
Operations Management, Management Science & Information Systems, RBS
v Observation: identification of a problem that exists
in the system or organization;
v Definition of the Problem: problem must be clearly
and consistently defined showing its boundaries and
interaction with the objectives of the organization;
v Model Construction: development of the functional
mathematical relationship that describes the
decision variables, objective function and
constraints of the problem;
v Model Solution: Models solved using Management
Sciences techniques;
v Model Implementation: Actual use of the model or
its solution;
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Operations Management, Management Science & Information Systems, RBS
Key elements of an operations system in
organizations
• Inputs are resources used in the process of
production.
• Transformation is the conversion of inputs
(resources) into outputs (goods or services)
• Outputs refer to the end result of an
organization's efforts — the service or product
that is delivered or provided to the consumer.
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Operations Management, Management Science & Information Systems, RBS
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Operations Management, Management Science & Information Systems, RBS
Operations, productivity and business
competitiveness
•
•
•
Productivity and competitiveness can be improved when operations
reduces costs, improves quality and delivers goods and services on time.
Productivity is a measure of efficiency— the amount of output produced
compared to the amount of input required in production.
Business competitiveness refers to the ability of an organization to sell
products in a market.
Operations Management, Management Science & Information Systems, RBS
Model Building: Break-Even Analysis
• Break-Even analysis ~ Profit Analysis = the aim is to
determine the number of units of a product (volume) to
sell or produce that will equate total revenue with total
cost – zero profit;
TOTAL REVENUE (TR) = TOTAL COST (TC)
• Break-Even Point à
Profit = TR – TC
TR = 𝑝×𝑣
TC = FC + 𝑣𝑐×𝑣
p = price
vc =variable cost
v = volume
PROFIT = zero
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Operations Management, Management Science & Information Systems, RBS
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Computing the Break-Even Point
Example: consider Western Clothing
Company, which produces denim jeans. The
company incurs the following monthly costs
to produce their products:
p = $ 23 per pair
FC = $ 10,000
vc = $ 8 per pair
v=?
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Operations Management, Management Science & Information Systems, RBS
Graphical Solution
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Operations Management, Management Science & Information Systems, RBS
Sensitivity Analysis: increase in price
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Operations Management, Management Science & Information Systems, RBS
Sensitivity Analysis: increase in VC
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Operations Management, Management Science & Information Systems, RBS
Sensitivity Analysis: increase in FC
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Operations Management, Management Science & Information Systems, RBS
Thank You!
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