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on it to enable him to select the “best” one. This can be comparedto non-destructive testing in case of manufacturing organisations.
Presentation of Models
There are different forms through which Models can be presented.They are as follows:1. Verbal or prose models.2. Graphical/ conceptual models.3. Mathematical models.4. Logical flow models.We let us discuss each model one by one -
The verbal models use everyday English as the language of representation. An example of such model from the area of materials management would be as follows:“The price of materials is related to the quantum of purchases formany items. As the quantum, of purchases increases, the unitprocurement price exhibits a decrease in a step-wise fashion.However, beyond a particular price level no further discounts areavailable.”
I think you can easily understand graphical model. The graphicalmodels are more specific than verbal models. They depict theinterrelationships between the different variables or parts of themodel in diagrammatic or picture form. They improve exposition,facilitate discussions and guide analysis. The development of mathematical models usually follows “graphical models.
The mathematical models describe the relationships between thevariables in terms of mathematical equations or inequalities. Mostof these include clearly the objectives, the uncertainties and thevariables. These models have the following advantages:1.They can be used for a wide variety of analysis.2.They can be translated into Computer Programs.The example of a mathematical model that is very often used bymaterials managers is the
Economic Order Quantity (EOQ)
. Itgives the optimal order quantity (Q) for a product in terms of itsannual demand (A), the ordering cost per order (Co), the inventorycarrying cost per unit (Ci) and the purchase cost per unit (Cp). Themodel equation is as follows:
C C C AQ
Logical Flow Models
The logical flow models are a special class of diagrammatic models.Here, the model is expressed in form of symbols, which are usuallyused in computer programming and software development. Thesemodels are very useful for situations, which require multipledecision points and alternative paths. These models, once one isfamiliar with the symbols used, are fairly easy to follow. An exampleof such a model for a materials procurement situation withquantity discounts allowed, is as given in Figure 2.
A logical flow model material procurement decisions withquantitative discounts allowed.
Mention below a mathematical model, which has been used forsales forecasting by your organization, or any organization youknow of.________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Think of a production decision situation and present itdiagrammatically using logical flow model.________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Role of Modelling in Research inManagerial Decision-Making
In the previous sections of this lesson, we have tried to explorethe topics of model building and decision-making. However, weconfined ourselves to bits and pieces of each concept and theirillustration in a comprehensive decision-making situation has notbeen attempted. In this section we will look at a managerialdecision-making situation in totality and try to understand thetype of modelling which may prove of use to the decision maker.The example we will consider here is the case of co-operative statelevel milk and milk products marketing federation. The federationhas a number of district level dairies affiliated to it, each havingcapacity to process raw milk and convert it into a number of milk products like cheese, butter, milk powders, ghee, shrikhand, etc.The diagrammatic model of the processes in this set up is depicted.The type of decisions which have to be made in such a set up canbe viewed as a combination of short/intermediate term and long-term ones.The short-term decisions are typically product-mix decisions likedeciding:1.Where to produce which product and2.When to produce it.