REVIEWER IN CCMS
CHAPTER 1 INTRODUCTION
Introduction
 Management science is s tool used
by managers and administration in
the performance of their most vital
task; making crucial decisions.
 Common management decisions,
such as inventory management,
forecasting, project management,
and operational efficiency, require an
objective basis when choosing best
solutions.
MANAGEMENT SCIENCE
 Refers to the process of
administering and controlling the
affairs of the organization by
creating an environment that will
contribute to achieving the
business goals effectively and
efficiency.
Managers need successfully
execute the ff function:
1.
2.
3.
4.
Planning
Organizing
Leading
Controlling
The management science approach views
that precise decision are product of the ff:
1. Analysis of the circumstances that
can be measured
2. Verification of the quantifiable
relationship
3. Test to determine the presence of
cause and effect relationship among
factors or variables.
Definition of management science
1. Operation Research is defined as
the scientific process of
transforming data into insights to
make better decisions.
2. Quantitative analysis is the
process of collecting and
evaluating measurable and
verifiable data, such as revenues,
market shares, and wages to
understand the behavior and
performance of a business.
3. According to Lancaster
University, management science
can be defined as a concept
that is “concerned with
developing and applying models
and concepts that help to
illuminate issues and solve
managerial problems”. The
approach is essentially interested
in looking at an organization and
finding ways it can manage itself
better and improve its
productivity.
4. Management science, an
approach to decision-making
based on the scientific method,
makes extensive use of
quantitative analysis.
Special Characteristics of
Management Science
1. A primary focus on management
decision making
2. The application of the scientific
approach to decision making
3. The examination of the decision
situation from a broad perspective
4. The use of methods and knowledge
from several disciplines
5. A reliance on formal mathematical
models
6. The use of technology such as
computers, software or applications
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AREAS OF application
 Inventory Controlmeans managing your inventory
levels to ensure that you are keeping
the optimal amount of each product.
Proper inventory control can keep
track of your purchase orders and
keep a functional supply chain.
Systems can be put in place to help
with forecasting and allow you to set
reorder points, too.
 Facility Design-is the overall layout
of your facility -- including the
equipment, work stations, offices,
fixtures, machinery, and more.
 Product-mix determination-also
known as product assortment, refers
to the total number of product lines a
company offers to its customers. The
four dimensions to a company's
product mix include width, length,
depth and consistency.
 Portfolio analysis for securities The analysis of various tradable
financial instruments is called
security analysis. Security analysis
helps a financial expert or a security
analyst to determine the value of
assets in a portfolio.
 Scheduling and sequencing-is the
order of processing a set of tasks
over available resources. Scheduling
involves sequencing'' task of
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allocating as well as the
determination of process
commencement and completion
times i.e., time-tabling.
Transportation planning-is a
cooperative process designed to
foster involvement by all users of the
system, such as businesses,
community groups, environmental
organizations, the traveling public,
freight operators, and the general
public, through a proactive public
participation process.
Design of management
information systems-is a formal
method of making available
to management, the accurate and
timely information to facilitate the
decision-making process.
Allocation of scarce resourcesapportionment of productive assets
among different uses. Resource
allocation arises as an issue because
the resources of a society are in
limited supply, whereas human
wants are usually unlimited, and
because any given resource can have
many alternative uses.
Investment decisions or capital
budgeting- is the process by which
investors determine the value of a
potential investment project.
Project management-focuses on
planning and organizing a project
and its resources. This includes
identifying and managing the
lifecycle to be used, applying it to
the user-centered design process,
formulating the project team, and
efficiently guiding the team through
all phases until project completion.
New product decisions- are based
on how much the organisation has to
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adjust the product on the
standardisation - adaptation
continuum to differing market
conditions.
Manpower or sales force
management decisions- The main
objective of sales force management
is to optimise the performance of the
sales and marketing teams. We could
even say that sales force
management is a strategy to increase
business sales since it also relates to
performance and results.
Market research decisions-This
process provides a simple way to get
the information you need to address
any problem using the marketing
Research.
Research and development
decisions- includes activities that
companies undertake to innovate and
introduce new products and services.
It is often the first stage in the
development process. The goal is
typically to take new products and
services to market and add to the
company's bottom line.
Pricing decisions- is a process
whereby a business sets the price at
which it will sell its products and
services, and may be part of the
business marketing plan.
Distribution decisions-refer to all
decisions that ensure the efficient
delivery of goods and services to the
end user.
Credit policy analysis-evaluates the
riskiness of debt instruments issued
by companies or entities to measure
the entity's ability to meet its
obligations
Machine setup problems in
productions-During the
manufacturing process, there are
many production issues that can
occur: poor quality, long lead times,
high on-hand inventory, supply chain
interruptions, etc. These things all
affect the product you’re putting out
there, which in turn affects the
public’s perception of your brand.
 Research and development
effectiveness -measured according to
your company's strategy and project
constraints.
FEATURES OF
MANAGEMENT SCIENCE
Management science is
characterized as a managerial
decision-making's focal point
because of the following:
1. the implementation of the
scientific approach
2. the use of a systematic
process to solve problems
3. the use of an interdisciplinary
approach
4. the utilization of
mathematical tools
5. the use of some software
application
As a crucial management responsibility,
decision-making includes the following
steps:
Step 1. Defining a problem Step 2.
Collecting information
Step 3. Identifying alternatives
Step 4. Weighing the alternatives
Step 5. Selecting the best possible option
Step 6. Planning and implementing
Step 7. Reviewing and evaluating the
outcome
It consists of systematic observation,
measurement, experiment, and the
formulation of questions or hypotheses
The steps in a scientific method consist of
the following:
Step 1. Formulate the question or
hypothesis.
Step 2. Collect data.
Step 3. Test hypothesis.
Step 4. Draw a conclusion.
Systems are divided into three welldefined parts:
Inputs
Competitive Models. Competitive models
(or game theory) present an analytical
framework on the behavior of competing
players in the achievement of their
conflicting goals.
Network Models. Network models are
employed for proper management of
interrelated activities or "networks," such as
large construction projects. These models
apply techniques that will improve the
coordination of subtasks while providing
ways to use resources efficiently.
Dynamic Programming Models. Dynamic
programming models deal with the
optimization of multistage decision
situations. These models solve the original
problem by subdividing it into sub-problems
that will be worked out sequentially.
Processes
Outputs
Outside the system exist elements in the
environment:
social, political, legal, physical, economic,
and technological.
TOOLS OF MANAGEMENT
SCIENCE
Allocation Models. Allocation models are
used for problems involving the allocation
of resources to obtain optimal effectiveness.
Inventory Models. Inventory models
determine the best inventory model and the
best time to place an order.
Queuing Models. Queuing models or
waiting lines demonstrate how to achieve an
ideal balance between providing an
appropriate level of service and the waiting
time of a customer in a queuing system.
Markov Analysis. Markov analysis
describes and forecasts the possible outcome
of a system that undergoes transition over
time.
Decision Analysis Models. Decision
analysis models are employed for
managerial situations involving the selection
of an optimal course of action given
potential return and the corresponding
probabilities of the states of nature.
Forecasting. Forecasting involves the
prediction of the future under various
scenarios.
LESSON 2.3
Feasible and Infeasible Solutions. A
feasible solution requires that all conditions
and constraints given on the problem are
satisfied Defiance of said constraints would
cause the unacceptability of the solution.
Thus, the said solution is considered
infeasible.
Optimal and Non-Optimal Solutions. The
best among all feasible solutions is called an
optimal solution. All possible feasible
solutions have to be examined before an
optimal solution will be chosen. A nonoptimal solution is a feasible solution that is
not considered optimal.
Unique and Multiple Solutions. If there
will be a single optimal solution, it will be
classified as a unique solution. On the other
hand, if there will be more optimal
solutions, then there are "multiple
solutions." Greater flexibility is presented by
the latter case, which is considered more
favorable by management.
SOLUTION TO SITUATION UNDER
UNCERTAINTY
THE CRITERION OF EQUAL
PROBABILITY (LAPLACE)
CHAPTER 3 DECISION
THEORY
DECISION THEORY deals with methods
in determining the optimal course of action
when a number of alternatives are available
and their consequences cannot be forecast
with certainty.
Solution to Decision under Risk
CRITERION OF PESSIMISM
(MAXIMUM AND MINIMUM)
CRITERION OF OPTIMISM
(MAXIMUM AND MINIMUM)
COEFICIENT OF OPTIMISM
(HURWICZ CRITERION)
CRITERION OF REGRET (SAVAGE’S
CRITERION)