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# 09/03/2014

Learning Objectives

Chapter 1

## After completing this chapter, students will be able to:

Introduction to
Quantitative Analysis
Q
y

## 1. list down several fields where quantitative

techniques can be used
2. explain
p
the term q
quantitative analysis
y
3. Understand steps involved in applying
decision analysis
4. Give some simple examples where
quantitative analysis is applied

To accompany
Quantitative Analysis for Management, Eleventh Edition, Global Edition
by Render, Stair, and Hanna
Power Point slides created by Brian Peterson

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## managerial decision making in which raw data are

processed and manipulated to produce meaningful
information.

Developing a Model

Acquiring
q
g Input
p Data

## mathematical method to develop a model and then to

develop a solution.

Developing a Solution

## research, quantitative method, management science

and decision science.

Raw Data

Quantitative
Analysis

Meaningful
Information

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Figure 1.1

## Defining the Problem

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Developing a Model

or mathematical.

true causes.

parameters

important

variables.

developed.

## understand and easy to modify.

A QA model is an abstract representation of an

## existing problem in the form of graph or chart but

most frequently in mathematical relationships.

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09/03/2014

## Acquiring Input Data

Developing a Solution
Manipulating the model to arrive at the best

## (optimal) solution to the problem. In some

cases, this requires that a mathematical
equation be solved for the best decision. In
other cases
cases, you can use a trial and error
method (simulation), trying various
approaches and picking the one that results
in the best decision.

(input data).
Obtaining accurate data for the model is

p
essential;; even if the model is a perfect
representation of reality, improper data will
Data may come from: company reports,

## company documents, interviews, on-site

direct measurement, and statistical sampling.

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## implemented, it needs to be tested completely.

Because the solution depends on the input data
and the model, both require testing.

Determine
D t
i accuracy and
d completeness
l t
off iinputt

compare.

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Methods

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Explanation

Decision
Analysis

## There are 3 decision environments:

(1) Decision making under certainty
(2) Decision making under uncertainty
(3) Decision making under risk
Appropriate model needs to be chosen depending on
the data available

Linear
Programmming
Model

## To maximize profit under the various resource

constraints
To minimize cost under various requirements of the
situations

Transportation

## Deals with the problem of distributing goods from

various supply sources to a number of demand
destinations.
To minimize total transportation cost

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09/03/2014

Methods
Assignment
Model

Inventory
Control Model
Project
Management
Model

## Common Quantitative Models

Explanation
Useful when one is required to assign some jobs to
some individuals.
The model enables one to assign the jobs to the
individuals in such a way that the total cost is the
minimum for the various jobs to be completed
completed.
Consist of economic order quantity model (EOQ),
quantity discount model, and production run model.
Depending on the situations, an appropriate inventory
model can be usedto minimize total inventory cost.

Explanation

Simulation
Modelling

## Widely used by companies.

It simulates the features, appearance, and
characteristic of a real situation using computer
software
ft
and
d creates
t various
i
possible
ibl solutions
l ti
tto
the problem.
The best decision can be chosen from the results
simulated.

## Two common QA techniques used for project

management are PERT and CPM:
The techniques help managers to plan, schedule,
monitor, and control projects. Corrective actions can
betaken to improve profitability of the company.

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solution.

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## Problem is solved using scientific method,

there is a logical and systematic approach
to solving problem.

## Possible Problems in the

Quantitative Analysis Approach

Solving

Methods

## Problems may not be easily identified.

There may be conflicting viewpoints
There may be an impact on other departments.
Beginning assumptions may lead to a particular

conclusion.
The solution may be outdated.

Developing a model
Managers perception may not fit a textbook

model.
There is a trade-off between complexity and ease

of understanding.

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## Possible Problems in the

Quantitative Analysis Approach
Acquiring accurate input data
Accounting data may not be collected for quantitative

problems.
The validity
y of the data mayy be suspect.
p

## Developing an appropriate solution

The mathematics may be hard to understand.
Having only one answer may be limiting.

## Testing the solution for validity

Analyzing the results in terms of the whole
organization