CH 1: INTRO TO MANAGEMENT Early Management Science

SCIENCE  Pre-world war II

Rodel C. Pomentil, MBA  Archimedes and the Siege of
MANAGEMENT SCIENCE Syracuse
 The systematic study of a problem  Archimedes
involving gathering data, building a employed to devise
mathematical model, experimenting means of breaking the
with the model, predicting future naval siege (military
operations, and getting the support of operation) of the city-
the management for the use of the under attack by
model Romans 212 BC
Successful managers use quantitative  Lanchester’s equation tested (1914-
approaches to decision making 15)
 The problem is complex  Edison’s statistics on submarine
 Problem involves many variable warfare
 There are data which describe the  Erlang’s early work in waiting time
decision environment (1917)
 There are data which describe the  Harris develops the first inventory
value or utility of the different model
possible alternatives  Shewhart applies statistical inference
 The goals of the decision maker or  Fisher and modern statistical
her organization can be described in methods
quantitative terms  Leontieff develops a linear
 Workable models are available for programming model
these situations 1.
England 1914-15, attempted to treat military ops
Steps in MS Process quantitatively, derived equations relating to
Observe the problem environment outcome of the battle to strength of combatants
Site visit, conference, observation, research-sufficient and their firepower
information to proceed 2. Analyzing maneuvers where surface ships could
evade and destroy submarines
Analyze and define the problem 3. Danish mathematician ( A.K. Erlang ) developes a
Define use, objectives, limitations-clear grasp of need for theory of Probabilities of Significance in
solution
AUtomatiC Telephone Exchanges (waiting time
formulas)
Develop a model
4. Ford W. Harris ( publish in1915)
MS tools, Interrelationships, Mathematical Models-
Models that work under stated environmental constraints 5. Introduce the theory of quality control charts
6. Ronald Fisher dealing with various modern
statistics
Select appropriate data input
7. Military and industrial applications of linear
Internal-external data, facts , opinions-sufficient inputs to  World War II
programming
operate and test model

Early british operations
Provide a solution and test its reasonableness
research group
Testing, limitations, verification-solutions that support  Blakette’s circus
current organizational objectives  Early united states research
groups
Implement the solution  Post World War II
Selling the idea, management involvement-ownership by
management
 Army and navy postwar
operations research
 Dantzig develops the simplex
method
 World War 2
1. British Operational organization was
already in existence
2. Group of three physiologist, two
mathematical physicists, astro physicist,
army officer, surveyor, gen physicist and
two mathematicians
3. James Conant , Chairman of the National
Defense Committee ( instumental in
developing MS in US)
Post World War
1. Continuation of its valuable function
under Operation Research Office Agency
2. George Dantzig ,develop the simplex
method in linear programming
Applications of Management Science
 Accounting
 Forecasting cash flows
 Assigning audit teams
effectively
 Using sampling to improve
audit accuracy
 Management and accounts
receivable
 Deciding which customers to
give credit to and how much
 Improving the effectiveness
of cost accounting
 Resolving transfer pricing
problems
 Establishing costs for
byproducts
 Developing standard costs
 Finance
 Building cash management
models
 Allocating capital among
various alternatives
 Managing an investment
portfolio
 Forecasting long range
capital needs
 Building financial planning
models
 Determining optimal times to
replace equipment
 Deciding on the most
effective dividend policy
 Marketing
 Determining the best product
mix
 Effectively allocating
advertising among various
media
 Finding the best time to
introduce a new product
 Locating warehouse to
minimize distribution cost
 Planning salespersons travel
to minimize time and cost
 Assigning salespeople to
customers to maximize sales
effectiveness
 Deciding on the most
effective packaging
alternative
 Predicting the loyalty of
customers in future periods
 Determining the appropriate
number of accounts of a
salesperson
 Finding least-cost shipping
arrangements from plant to
customer
 Determining the best size for
a warehouse
 Production/Operations
 Balancing plant capacity with
market requirements
 Leveling a production
schedule to minimize hiring
and layoffs
 Mixing chemical ingredients
to achieve least cost
 Smoothing production
schedules when demand is
seasonal
 Minimizing in-process
inventory
 Moving products through the
manufacturing process in the
shortest time
 Scheduling street sweepers
and compactors for large
cities
 Scheduling household
garbage collection patterns
 Determining landing and
takeoff schedules for large
airports
  Scheduling school bus
pickups to minimize total
travel cost and time
 Deciding whether to
manufacture or purchase
components
 Balancing an assembly line
which has many different
operations
 Locating a new plant in the
most effective place
 Allocating R and D budgets
most effectively
 Choosing sites for oil and gas
exploration to reduce risk of
dry wells
 Choosing the best size for a
new plant or warehouse
 Scheduling crews for
package delivery airline
 Scheduling police beat
assignment in large cities
 Planning the long term
capacity of the company
 Scheduling railroad car
deliveries
 Making quality control more
effective
 Scheduling job shops to
improve capacity
 Organization Development/
Human Resource
 Minimizing the need for
temporary help through better
scheduling
 Staffing emergency rooms in
hospitals to provide the best
level of care
 Determining how to negotiate
in bargaining situation
 Coordinating manpower
needs for seasonal business
 Hiring new pilots at the right
time and at the right rate of
airlines
 Deploying a field sales force
optimally
 Assigning laboratory scientist
to project improve success
rates
 Scheduling training programs
to maximize skill
development and retention
 Designing organization
structures more effectively
 Choosing pension
alternatives to provide greater
benefits to employees
Opportunities
 Forces managers to be quite explicit
about their objectives, assumptions
and their way of seeing constraints
 Points out gaps in the data required
to support workable solutions to the
problems
 Permits us to examine a situation,
change the condition under which
decisions re being made, and
examine the effects of those changes
 Forces managers to be very precise
about how the variables in a problem
interact with one another
 Makes managers consider very
carefully just what variables
influence decisions
 Finds a solution to complex
problems much more quickly than if
we had to compute it by hand
 Let’s us model a problem and its
solution so that future solutions can
be done by computer
Shortcomings
 Often MS approaches have to
simplify the problem, thus produce
solutions with limitations
 For problems that a manager must
solve only one time , constructing a
complex MS is too expensive
 Sometime MS specialist become so
enamored with the model they have
build that they forget it doesn’t
represent the real world
 MS specialist forget to counsel
managers on the limitations of the
models they build
  Managers forget to include an DECISION SUPPORT SYSTEM
important constraint or assigned an  Any combination of MS and
incorrect value to a constraint computers which supports
 Many MS solutions are so complex management decision making
that they are difficult to explain  System that provide
 Many real world problems just don’t management quick access to
have an MS Solution info
Defining a good MS Solution  System which has flexible
 Technically appropriate database
 Reliable  Integrates MS model with
 Economically viable info processing software
 Behaviorally appropriate  System that deal with
unstructured problems
1. Should produce solutions which work  System which improves the
technically ( meet constraints and operates in
problem environment)
impact of management
2. Should work time after time under the decisions by extending the
condition for which it is designed capability of the managers
3. Should produce value for the organization in who make decisions
excess of what it costs to develop/seen as
Artificial Intelligence and Expert System
wise investment
4. Should have the support of the management/ 1. Artificial intelligence
must work well with the organization (long  Attempt to make machines
term basis) achieve thinking capacity
Quantitative Methods much like that of humans
 Probability concepts 2. Expert systems
 Forecasting  Subfield of AI which
 Decision theory concerns systems that
 Inventory models reproduce behavior of human
 Linear programming experts
 Heuristics
 Simulation
 Queuing theory
MS and the computer

Input Process Output

Classifying MIS in terms of how and

where the processing is done
 Batch processing
 Real-time processing
 Online processing
 Timesharing
 Distributed data processing