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UNIT 1: QUANTITATIVE DECISION MAKING


- AN OVERVIEW
Add-on for
MS-8: QUANTITATIVE ANALYSIS FOR MANAGERIAL APPLICATIONS

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Note: This unit is an add-on to the original course material for MS-8: Quantitative Analysis for
Managerial Applications. The unit has to be read in conjunction with the original course
material. We recommend that you first scan this material and note on the original text that you
need to study the relevant part of this supplement so that you will not forget to do so as you study.
Then, when you reach that section in your studies, refer back to this supplement.
Objective:
1. To orient and help the readers with more examples on each unit of MS-8 on Public
Systems Management.
2. To further clarify the fundamentals of quantitative techniques, supported by Public
systems examples, which have been discussed in MS-8.
3. To retain the section of this unit of MS-8 that has clear explanation of the Public Systems
Management.

SECTION 1.1 INTRODUCTION


The term statistics is widely used in practice. Often, it refers to a collection of facts, figures,
graphs, charts and tables like per capita income, national exports and imports, per capita power
consumption, mortality rate, divorce trend, crime rate and so on. Such statistics are commonly
found in newspapers and magazines, websites of government organizations and private
companies, presentations, television and classroom lectures. When thus used, statistics generally
refers to information about an activity or process that is expressed in numbers, listed in tables or
illustrated in figures.
In earlier times, decisions usually were taken based upon the past experiences and intuition only.
With the liberalization of the economy and increased complexity in overall systems, intuition
alone does not suffice in decision-making. It is imperative for the decision makers to consider
several constraints and objectives simultaneously. Thus, quantitative approaches help in solving
such complex problems. But the quantitative approach does not eliminate the qualitative or
judgmental dimensions of the decision makers. Unit 1.1 of MS-8 explains the extensive use of
quantitative techniques (both statistical techniques and operations research) in decision-making.
Examples of decisions aided by quantitative analysis follow:
1. Selecting locations for new stores, restaurants, warehouse, and fire stations.
2. Deciding whether to continue or cancel a new television series.
3. Forecasting whether an economic recession is imminent.
4. Determining what to charge (the premium) for fire, causality, life, health, and other forms
of insurance.
5. Determining what factors promote employee moral and motivation.
6. Deciding the quantity of goods to be carried in inventory, and when to reorder.

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SECTION 1.2 No supplementation is included. Refer to the corresponding section of MS-8
SECTION 1.3 STATISTICS AND OPERATIONS RESEARCH
Numerous quantitative techniques are available that can be broadly put under two categories: (a)
statistical techniques and (b) programming techniques (what is generally described as operations
research or simply O.R.). The following chart lists the names of the important quantitative
techniques.

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Quantitative techniques
Statistical techniques
Programming techniques
(Statistical methods and measures)
(O.R)
1. Linear programming
1. Methods of collecting data
2. Non-linear programming
2. Tabulation of collected data
3. Dynamic programming
3. Probability theory and sampling
4. Integer programming
analysis
5. Decision theory
4. Correlation and regression analysis
6. Theory of games
5. Index numbers
7. Simulation (Montecarlo techniques)
6. Time series analysis
8. Queuing theory
7. Interpolation and extrapolation
9. Inventory planning
8. Survey techniques and methodology
10. Network analysis / PERT
9. Ratio analysis
11. Integrated Production models
10. Statistical quality control
11. Analysis of variance
12. Statistical inferences and interpretation
13. Theory of attributes
Unit 1.3 of MS-8 deals with statistical methods in detail. Various activities related to statistical
methods such as collection, organisation, presentation, analysis and interpretation of data are
explained clearly. Further some characteristics of data are illustrated. Statistical data can broadly
be grouped into two categories: secondary data and primary data. While Unit 1.3 discusses
statistical data collection, the same holds good for the public systems management also. Some of
the public systems from which the secondary data can be collected are the Census commission,
Ministry of commerce, Food, Labour, Transport and Economic Affairs, Reserve Bank of India,
research organisations, municipal corporations, and NGOs. Other sources could be Business
Statistics, Economic Indicators, Handbook of Basic Economic Statistics, Monthly Labour
Review, Social Indicators, and Statistics of Income etc.
SECTIONS 1.4, 1.5 and 1.6 No supplementations are included. Refer to the corresponding
sections of MS-8

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SECTION 1.7 ADVANTAGES OF QUANTITATIVE APPROACHES TO PUBLIC
SYSTEMS MANAGEMENT
Some of the important advantages of statistics are:
1. Represent facts in a definite form
2. Condense masses of figures
3. Help in formulating and testing hypotheses
4. Assist in prediction
5. Assist in comparison
6. Help in the formulation of suitable policies

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The explanation to each of these advantages is dealt with in Unit 1.7 of MS-8. The use of
statistics has permeated almost every facet of our lives. There is hardly any field, whether it be
trade, industry, commerce, economics, biology, botany, astronomy, physics, chemistry,
education, medicine, management, sociology, psychology or meteorology, where statistical tools
are not applicable.
SECTION 1.8 QUANTITATIVE TECHNIQUES IN PUBLIC SYSTEMS MANAGEMENT
The applications of statistics are so numerous that it is often remarked Statistics is what
statisticians do. Governments, businessmen, and individuals collect statistical data required to
carry out their activities efficiently and effectively. Examples of ways in which statistics can be
applied in various public systems are listed below:
(1) Banking

Effect of computerization on productivity


Customer satisfaction in a computerised bank
Effect of technology on productivity
Employee satisfaction in a computerised bank

(2) Health care

Study of various diseases with changes in weather


Quality control of pathological tests
Medicine inventory control in a hospital
Maintenance of hospital sanitation and patients satisfaction
Satisfaction level of employees after computerisation of hospital operations
Efficacy of a particular drug for curing a certain disease
Diagnosing the disease based on data like temperature, food, water, etc.

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(3) Transport services

Customer satisfaction with airline services


Disaster management and railway security
Past and future trends in road accidents
Management of traffic density in a road network

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(4) Entertainment sector

Popularity measure of a movie star

Comparative study of Bollywood and Hollywood film industries


Viewership of a popular TV serial
Decision on whether to continue or cancel a TV serial

(5) Public distribution systems

Management of the gap between the supply and demand of food grain consumption
Maximization of the yield of agricultural produce
Yield forecasts for wheat/sugar/rice for the nation
Agricultural productivity: Irrigated vs. non-irrigated land

(6) Public utility services

Estimate of drinking water requirement in a metropolitan area


Management of groundwater depletion and consumption of water in an industrial setup
Forecast of the housing requirements in a city
Power consumption estimates in metropolitan areas
Energy audits

SECTION 1.9 USE OF COMPUTERS


Statistics is a form of data processing, a way of converting data into information that is useful for
decision-making. Processing raw data requires the application of statistical tools and techniques.
In many instances, the volume of raw data is so large that manual calculations are near
impossible. The employment of statistical techniques demands calculations of such complexity
that, when combined with the sheer volume of raw data, only the computer can produce results in
a timely and usable fashion. This is a great benefit to public systems management as well as
business management. In payroll calculations, airline reservations, bank computerization to store
volumes of data, the computer has become essential. The advancement of the microprocessor and
its capability of high-speed computation has really made the computer an inseparable part of
analysis and decision-making.

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For this reason, most of the real-world statistical analysis is done on computers. Using many
widely used software packages. SPSS (statistical package for social science), SAS (Statistical
Analysis Software), Minitab, SYSTAT etc. are some key software packages used for statistical
analysis. It is not our intention to teach you the details of how to use any of these to do your


analysis, but you should be aware that there are such software packages available for rigorous
data analysis.
SECTIONS 1.10 AND 1.11 No supplementations re included. Refer to the corresponding
sections of MS-8
SECTION 1.12 SELF-ASSESSMENT EXERCISES

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1. Describe, in brief, some of the important quantitative techniques used in public systems
management.
2. Discuss the extent to which statistics can be applied to decision-making, noting limitations, if
any.
3. Statistics is a body of methods for making wise decisions in the face of uncertainty.
Comment on the statement bringing out clearly how statistics helps in decision-making.
4. Do you think the day will come when all decisions are made with the assistance of
quantitative methods? Give appropriate reasons for your answer.
5. Describe main areas of public systems where statistics can be used.
6. Distinguish between statistics plural and statistics singular.
7.

With what type of decision is statistical decision analysis concerned?

8. What are the limitations of statistics?


SECTION 1.13 FURTHER READINGS
Gupta, S.P., and M.P.Gupta, 1989. Business Statistics, Sultan Chand & Sons, New Delhi
Kothari, C.R., 2000. Quantitative Techniques, Vikas Publishing House Pvt. Ltd. New Delhi
Bowen, E.K., and Starr, M.K., 1985. Basic Statistics for Business and Economics, McGraw-Hill.

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