Management science

Course overview

Effective use of scarce organizational resources and quick response to opportunities are two main
ingredients for the success of all organizations, business or non business, small or large, local or
global. The increasing demand for competitiveness in an ever converging world makes the task
of managing business enterprises even more complex and demanding. In Ethiopia, there is an
increasing number of business enterprises engaged in various sectors in the economy. There is
some evidence that inefficient use of resources is a key factor that prevented the competitiveness
of many local enterprises, both in the local and international market. There is an increasing
demand for systematic approach to manage these enterprises to enhance their efficiency and
effectiveness. Increasing number and size of local enterprises also mean a greater need for more
effective ways of solving problems in these organizations. In light of this, the new generation of
management/business professionals in the country need to be better equipped with modeling
techniques that facilitate effective decision making in various areas of operation in these local
enterprises. Of course, the same can be said about non business institutions. Governmental and
nongovernmental institutions in the country will also benefit from managers who are conversant
with modeling techniques.

Management science provides today’s managers with state-of-art technology of modeling

techniques that have been tested and proved their importance in a variety of applications in
business and other management decision making environments. The course system (stream)
management science is designed to equip students in the various specializations of business
enrolled in undergraduate programs. The course is designed with the aim of equipping students
with the most widely used tools of management science. Students will engage in various
exercises including case studies, mini case research projects and discussions to develop their
understanding and mastery of the models and techniques of management science and learn their
applications to solve real business problems.

Course objectives

This course is designed to undergraduate students in management, marketing, accounting, and

supply chain and logistics management. When students graduate in these fields they are assumed
to be professional managers and accountants. To perform their decision making roles, these
students need to be conversant with various modeling techniques that are commonly used in
today’s business and management practice around the world. In light of these, the objectives of
the course are to

 Enable students use management science techniques to formulate mathematical models of

various business problems, use appropriate techniques and algorithms to solve models,
and draw appropriate conclusions from results and make recommendations on the basis
of their conclusions
 Enable students appreciate the importance of management science techniques in
supporting decision making in organizations.

Expected Outcomes

At the conclusion of the course, students will be able to

 Apply the management science modeling process to formulate and solve problems
 Differentiate the types of management science models that are commonly used in
management decision making
 Differentiate situations where to apply the different management science models
 Able to convert verbal descriptions of business problems into appropriate mathematical
forms
 Decide how to select sample from a population to gather data
 Identify the steps to obtain timely, accurate, and relevant data needed to make managerial
decisions
 Organize data using tabular and graphical representation
 Compute summary statistics for data
 Solve models using appropriate solution techniques and algorithms
 Develop estimates, and forecasts of events based on available data
 Use computer based templates and algorithms (e.g., Excel) to formulate and solve
mathematical models of business problems
 Identify the specific nature of problems, suggest appropriate mathematical models, and
determine solutions to problems
 Make recommendations and conclusions based on solutions obtained for problems

Instructional design

The instructional strategy that will be followed for this course involves extensive use of case
studies and exercises to facilitate learning by students.
 Instructional methodologies

The instruction methodologies explain how material will be presented, discussed, practiced
and/or applied. A variety of methodologies are used to create an optimum learning experience
and reinforce understanding and application.

Method Description
Group discussion An open exchange of ideas, perspectives or observations around a
particular subject or learning topic. Used to solicit input from learners
and to confirm their comprehension of the subject matter.
Individual exercise A preparation or learning activity that requires a learner to acquire new
knowledge through reading or a self-reflective observation. The exercise
is used to help learners acquire new information and gain a personal
perspective of a topic or issue.
Lecture A brief presentation of a subject or topic and/or a facilitator’s comments
on a particular issue. Used to introduce concepts, theories, models or
principles from which the learner applies new knowledge through
subsequent learning activities.
Quizzes A set of questions that reviews the learning material and confirms the
learners’ comprehension of the program material and leaning objectives.
Case studies
Case development
Using software to
solve models
 Delivery schedule

Preliminaries

Weeks: First week of the course

Total hours: 3 hrs

Section one: Introduction to the course

Introduction of subject team

Overview of the course

Relation of the course with other subjects in

business/management

Course delivery schedule , Course requirements, tasks,

standards

Akd
Delivery sequence

Lecture Tutorial
Part One: Introduction Weeks Tasks
hrs hrs

Section one: Introduction to the course 0.5 2 hrs

Introduction of subject team

Overview of the course

Relation of the course with other subjects in

business/management

Course delivery schedule , Course requirements, tasks,

standards

Section two: Management Science

0.5 2 hrs
Introduction

Management science: Nature, scope, and relevance

Management science and Problem solving

Management science models

Case study on management modeling

Management science Modeling process
process to be assigned
Part Two: Mathematics for
1 4 hrs 4 hrs
managers/Business mathematics
section one: Linear algebra Case analysis 2

linear equations and functions

systems of linear equations

Solving systems of linear equations

linear inequalities Work sheet 1

Section two: Matrix algebra 1.5 6 hrs 4 hrs Case analysis 3
Types of matrices
Matrix operation Work sheet 2
Inverse matrix, and determinants
Matrix representation of systems of equations
Solving systems of linear equations using matrix operations Quiz 1
Computer based solutions
Section Three: Mathematics of Finance 1 4 hrs 4 hrs
Introduction to sequence and series
Simple and compound interest
Annuities
Present and future value Work sheet 4
Ordinary annuities Case analysis 4
Section Four: Calculus 1.5 6hrs 4 hrs Quiz 2
Limits
Derivatives and differentials
Unconstrained optimization
Constrained optimization (Lagrange Method)
Work shop 1 (2 hrs): Management science
Section Five: Introduction to linear Programming 1 4 hrs 4 hrs in the Banking industry (Guest lecture,
and discussion)
Linear programming: Model, nature Work sheet 5 , Case analysis 5

Solution techniques to LP Quiz 3

Computer based solutions

Conclusion Exam 1

Cumulative
Part Three: Statistics for
managers/Business statistics
Section one: statistical analysis introduction
Measurement and data
describing data
summarizing data
Probability theory and axioms
Probability rules
Probability distributions Work sheet 6
Types of distributions Case analysis 6
Using SPSS
Section three: Sampling and sampling
Quiz 4
distributions
Sampling theory
sampling distribution of the mean
sampling distribution of proportion Work sheet 7
sampling distribution of the difference between two means Case analysis 7
Section Four: Statistical estimation
Point estimates
Interval estimation
sample size determination
Section Five: Hypothesis Testing
Hypotheses: Formulation
Testing hypotheses for population mean Work sheet 8
Hypothesis testing for population proportion Case analysis 8
Hypothesis testing for differences between population
Quiz 5
means
Section Six: Chi square distributions and
ANOVA
Test for independence between two means
Test to equality of population proportions Work sheet 9
Goodness of fit tests (binomial, nominal, passion) Case analysis 9
Comparison, of the means of more than two populations. Workshop 2
Using SPSS

Conclusions Exam 2

Section seven: Business Forecasting:

Introduction

Simple estimation techniques: Weighted

estimation
Introduction to regression analysis

Simple linear regression Model

Assumptions
Regression coefficients
Inference and hypothesis testing in simple
linear regression
Multiple regression model
Hypothesis testing
Model assumptions and Model selection
SPSS Application
Section eight: statistical Quality control
Statistical quality control

Part Three: Operations Research

Section one: Linear Programming Model
Formulation
Model Formulation and Components

Model Properties

Graphical Method

Simplex Algorithm

Section Two: Simple Method: Theory

The matrix form of LP

The revised simplex method

The fundamental insight

Section three: Duality and Post optimality

analysis
Duality theory

Shadow prices

Sensitivity analysis

Parametric Programming

Section Four: Network Flow models

The Transportation problem

The assignment problem

The shortest path problem

The minimal spanning tree problem

The maximal flow problem

The minimum cost flow problem

Section Five: Project management

techniques
The nature of project management

Networks in project management

Critical path method and PERT

Deterministic model

Probabilistic model

Crashing and cost -time trade-off

MS Project software applications

Section Six: Games and Decision analysis

Game theory: Normal form

Equilibrium concepts in game theory

Game tree

Games of perfect information

Minimax

Maximin

Bayes Rule

Decision tree analysis

Section seven: Advanced Mathematical Modeling

Goal programming

Integer programming

Dynamic programming

Section Eight: Simulation, and Queuing

Simulation

Queuing models

Section Nine: Inventory Models

Section Ten: Quality Control

Course supplements
The following materials should be provided to facilitate learning and delivery of the course

 Course guide book

 Course work book
 Reference books

Part one: Introduction

The first part of the course is intended to introduce students with the field of management
science and the course as it is delivered in this program. There are two sections in this part. In
section one, students will be introduced with the course team, who will introduce students with
the course, its requirements, delivery schedules and other aspects of the course.

Section one: Introduction to the course

Outcomes

At the end of section one, students will be able to

 Know the course team and the role of each team member
 Understand the nature, scope of the course
 Understand the relation of the course with other subjects in management/business
 Understand the requirements of the course
 Learn the materials to be used, the tasks they are required to carry out, the assessment and
grading standards, the sequence of delivery of course content

Content Description

1. Introduce students with course team

2. Overview of the course
3. Relation of the course with other subjects in business/management
4. Introduction of course delivery schedule, course requirements, tasks, standards
Section two: Management science modeling

Overview

Management science today plays a key role in support of management decision making in
business and non business organizations. The extent to which management science is playing this
role in organizations in Ethiopia is not clearly known but it can be concluded from anecdotal
evidences that management science models are little used in management decision making in the
country. To improve the situation demands the new generation of management professionals to
conversant with management science modeling. This course is intended to contribute to effort in
this direction. This first chapter in the course deals with basic concepts and terminologies in
management science/OR. Most importantly, the chapter presents the general management
science modeling process in relation with the problem solving process. Management science
modeling supports each stage of the management decision making/problem solving process:
problem formulation, identification and evaluation of alternatives, and selection of the best
alternative. The evolution of management science and its basic characteristics are also discussed
in this chapter.

Outcomes

At the end of this section, students will be able

 To develop an understanding of the problem solving process required when supporting

management decision-making
 To gain an understanding of the different elements involved in the problem solving
process
 To appreciate the role of modeling in supporting each element of the problem solving
process
 To develop an understanding of problem structuring methods
 To gain an appreciation of a variety of key modeling tools and techniques and how each
can support the management decision-making process
Content description

Management science: evolution, nature, and scope : Today’s management science state-of-the
art has its early developments rooted in early efforts associated with WWII, increasing size and
complexity of organizations and the need for systematic approach to coordinate effort in these
organizations , and advances in computing that made possible solve large problems.
Management science can be characterized as having Holistic in perspective, as search for
optimization, as team effort, as applicable in diverse areas, as using scientific method. These
issues will be thought in this sub section of this section.

The management science modeling framework: The management science modeling

framework consists of six major steps from problem definition, formulation of mathematical
model, finding solution to the model, validation of the model, preparation for implementation,
and implementation of the model. The major issues in each of these steps will be discussed.
Relationship between management science modeling and problem solving process will be
discussed. Various types of mathematical models commonly used in management science will
also be covered.

Management science (Scope of applications): Management science tools have been used in a
number of very diverse areas of business and other organizations. A sample of models as applied
in sample areas of applications will be presented in this sub section.

Part two: Deterministic Models I (Mathematics for management/Business Mathematics)

Outcomes

At the end of this part, students will be able to

 Differentiate linear equations and functions from non linear equations and functions

 Develop mathematical linear equations and functions from verbal descriptions of such
problems
 Solve models of simultaneous linear equations using substitution and elimination
methods

 Develop and solve simple linear equation models involving revenue, cost, and profit
functions

 Determine break even points from revenue, cost and profit functions

 Understand matrix representation of data

 Distinguish various types of matrices

 Convert systems of linear equations into matrix form

 Use matrix algebra to solve systems of linear equations

 Apply knowledge of linear algebra and matrix algebra to formulate and solve prototype
management problems (product mix, production, marketing, finance, etc)

 Use Excel solver to solve simultaneous linear equations involving management problems

 Use linear programming models to determine profit maximization or cost minimization

levels in combination of inputs utilization or output production.

 Compute present and future values of annuities and loan amortization.

 Operate on matrices and identify the different application of matrix: Gauss Jordan
methods of solving systems of linear equations and Markov Chain analysis for
managerial decision making

 Use concepts of derivative and differentials to find optimal solutions to unconstrained

optimization problems
  Evaluate the present value of stream of cash streams

 Find present and future value of stream of cash flows

 Understand the meaning of derivatives, differentials and integrals

 Determine derivatives of different functions

 Solve non constrained optimization problems involving derivatives

Section one: Linear algebra

Content description

Linear models dominate the field of management science application. Many phenomena can be
modeled by systems of linear equations and inequalities. The dearth of applications of linear
models in management science is also impressive. This section deals with fundamentals of linear
equations and functions. The main topics to be covered are the following.

Linear equations and functions: The structure of linear equations and functions, and their
difference from non linear functions and equations will be discussed. The determination of the
slope of linear functions will also be discussed. The meaning of the slope in the context of
functions describing relationships between such variables as output, revenue, profit, and cost will
also be discussed.

Systems of linear equations: Many business problems require decisions to be made on several
variables that are related in many different ways to certain constraints that must be exactly
satisfied. These constraints and the relation of the decision variables with these constraints can be
modeled as systems of linear equations. Formulation of such systems of equations is crucial
before the search for solutions is started. In this sub section, sample problems will be presented
and the process of formulating systems of linear equations will be illustrated.

Solving Systems of linear equations: Once systems of relationships between decision variables
and constraints are identified, the next step is to determine the set of values of the decision
variables that will satisfy the system. In principle, one can solve such models using substitution
and elimination methods. These techniques will be illustrated in the context of various sample
business problems involving a system of simultaneous equations. Also, different systems of
linear equations may have different types of solutions- unique, infinite, and infeasible-which will
also be discussed in this sub section.

Linear inequalities: Many business problems involve restrictions or constraints that impose
some upper or lower bound on values of individual variables or linear combinations of these
variables. Such situations can be mathematically described by linear inequalities. If a problem
involves more than one linear inequality, the problem consists of a system of linear inequalities.
Such problems may not have unique solution values as in the case of simultaneous linear
equations. This sub section will introduce students with all these themes. The formulation and
solution of linear inequalities and systems of linear inequalities will be illustrated with examples.

Matrix algebra: Matrix algebra is simply an integral part of many mathematical models in
management science. Matrix algebra also provides a more systematic approach to solve systems
of linear equations. This sub section presents opportunity to learn the basic topics in matrix
algebra. It will present a definition of matrix, the different types of matrices, representation of
data into matrix form, and matrix operation and rules. These lessons will then be used to build an
approach to solve systems of linear equations using matrix operations. The various applications
in business illustrated in the previous section (systems of linear equations) will be used to
illustrate the application of matrix operations to solve systems of linear equations.

Section two: Mathematics of finance and calculus

Overview

Section one deals only with linear functions and equations. Many business problems also require
models in which relationships can be non linear. More, there are many areas where mathematics
of sequence and series, the concepts of limits, and derivatives are applied in business. This
section presents basic concepts of sequences and series, and illustrates one large area of
application of these concepts in business: the mathematics of finance. Mathematics of finance
has wide application in valuation of securities, investments and other areas where streams of
flows are involved. The concepts of limits are cornerstone in this discussion. Finally, basic
concepts of calculus such as derivatives and differentials and integrals are very important in
many areas of applications. Classical optimization models build on these concepts. This section
therefore deals with basic material in these topics and provides some example areas of
applications in business.
Content description

Linear and non linear functions, Sequences and series, limits, mathematics of finance,
derivatives, differentials, unconstrained optimization

Section three: Introduction to Linear programming

Overview

Linear programming is one of success stories in applied mathematics in general and management
science specifically during the 21st century. The model has been applied in an impressive
diversity of areas of business. The model seeks to determine the optimal combination of level of
activities given certain constraints. This section provides a brief introduction to the subject of LP.
Linear programming is treated at length in part three of this course.

Description

Linear programming model: the linear programming model will be described and its nature,
assumptions, and areas of applications in business and non business areas will be discussed.

Linear programming model formulation: student will also be exposed to illustrations and
cases consisting of verbal description of problems to be converted to mathematical linear
programming models. LP model formulation involves definition of decision variables,
specification of an objective function and model constraints.

Solution technique for LP: students will be introduced to solution techniques for LP models.
The graphical technique of solving simple two variable models will be introduced first and a
brief discussion on the simplex algorithm will also be made.

Part three: Statistical Analysis in business/Management

(Statistics for management I/business statistics)

Overview
The analysis of data and development of empirical models plays a vital role in business analysis
and operational research. This part of the course will provide a basis for students to learn a range
of widely used methods ranging from effective presentation of data to development of
sophisticated statistical models.

Description
Statistical analysis in business is covered in two parts. The first part (here) provides an
introduction to the basic theory and application of statistical modelling. Topics covered included
data analysis, probability theory, distributions and moments, estimation and hypothesis testing.
The second part focuses mainly on two areas - regression modelling and multivariate analysis.
Throughout, there is an emphasis on the use of statistical analysis to help support decision-
making and the management of business and industrial problems. Cases are used to illustrate
topical issues.

Managers are required to make appropriate decisions at the right time with least cost and with
full information. The accuracy of decision depends on the effectiveness of collection, preparation
and analysis of data. Statistics is a vital tool for the aforementioned activities to be done
adequately. Therefore, the objective of the course is to familiarize students with the statistical
techniques that are helpful in managerial and administrative decision making to solve different
managerial problems.

Outcomes
At completion of this part, student will be able to

 To display and interpret data using appropriate visual displays.

 Select, construct and interpret summary statistics.
 Understand probabilistic reasoning and compute probabilities for simple problems.
 Use graphical methods to identify appropriate models and estimate parameters.
 Apply and interpret formal statistical estimation procedures and goodness-of-fit tests.

Section one: Descriptive statistical analysis

Management science is naturally data intensive. Systematic collection, organization and

summary of data are critical for effective model development and evaluation. There are various
ways to effectively organize large data set using graphical displays, and summary statistical
measures. This section deals with these basic statistical analysis topics.
Data collection, data organization, summary statistics

Section two: Probability theory

Many business problems involve more or less amount of uncertainty such that decision has to be
made without complete information regarding model parameters and outcomes of decisions.
Decision making under these circumstances can be improved with good application of
probability concepts and techniques. A number of probabilistic models also require knowledge of
probability theory. This section covers important topics in probability theory.

Section three: Estimation and hypotheses testing

Overview

Many business phenomena call for making some estimation on events and outcomes. A scientific
approach to making such estimations enhances the quality of estimations made based on
available data and sample taken from the population.

Description

The materials covered in this section include sampling techniques, sampling distributions,
Estimation and hypotheses testing

Part four: Advanced statistical analysis

Outcomes

At the end of this part students will be able to

 Develop regression model for given data, and test hypotheses about parameters using
data
 To develop and validate appropriate simple and multiple linear regression models
 Understand the basic principles of classification methods
 Understand the basic principles of Analysis of variance (ANOVA).
 Use different forecasting techniques in relation with making managerial decisions
Part five: Advanced topics in Management science (OR)

Outcomes

At the end of this part, students will be able to

 Formulate and solve linear programming models using the simplex algorithm

 Formulate and solve transportation problems

 Formulate and solve assignment models

 Construct networks

 Formulate and solve network models

 Identify the main elements of project management

 Identify the main techniques of project planning

 Develop networks for projects

 Determine critical paths for projects

 Evaluate the costs and benefits of crashing project activities

 Use different criteria to evaluate alternatives under uncertainty

  Identify organizational problems and develop representative mathematical model to the
problem

 Develop templates for solving the sample models they develop

Section one: Linear programming II

Section two: Project management techniques

Section three: Decision and game theory

Section four: Advanced mathematical programming (Integer programming, goal programming,

dynamic programming)

Section seven: Simulation and Queuing

Section eight: Inventory models