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Topic 1: Introduc on to Management Science
What is Management Science?
Management science is an approach
to decision making based on the scien fic
method and makes extensive use of
quan ta ve analysis.
A variety of names exists for the
body of knowledge involving quan ta ve
approaches to decision making; in addi on
to management science, two other widely
known and accepted names are opera ons
research and decision science. Today, many
use the terms management science,
opera ons research, and decision science
interchangeably.
Management science is the
applica on of the scien fic method to
address problems and decisions that arise in
the business community and other
organiza ons.
The scien fic management
revolu on of the early 1900s, ini ated by
Frederick W. Taylor, provided the
founda on for the use of quan ta ve
methods in management. He is known as
the father of scien fic management. But
modern management science research is
generally considered to have originated
during the World War II period, when teams
were formed to deal with strategic and
tac cal problems faced by the military.
F. Taylor developed four
management principles: research,
standardiza on, monitoring, and co-
working. He is also the founder of the
ra onal goal model. According to (Lawle,
2016) "Ra onal goal model is all about
techniques pioneered by Frederick Taylor
whereby work is broken down into small
task which are then measured precisely and
designed to be performed in the most
efficient manner possible." Ra onal goal
model is about planning, se ng goals and
emphasize control opera ons in the internal
business organiza on.
1.1 Problem Solving and Decision
Making
Problem solving can be defined as
the process of iden fying a difference
between the actual and the desired state of
affairs and then taking ac on to resolve the
difference.
For problems important enough to
jus fy the me and effort of careful
analysis, the problem-solving process
involves the following seven steps:
1. Iden fy and define the problem.
2. Determine the set of alterna ve
solu ons.
3. Determine the criterion or criteria
that will be used to evaluate the
alterna ves.
4. Evaluate the alterna ves.
5. Choose an alterna ve.
6. Implement the selected alterna ve.
7. Evaluate the results to determine
whether a sa sfactory solu on has
been obtained.
Decision making is the term generally
associated with the first five steps of the
problem-solving process. Thus, the first step
of decision making is to iden fy and define
the problem. Decision making ends with the
choosing of an alterna ve, which is the act
of making the decision.

Let us consider the following example of
the decision-making process. For the
moment
assume that you are currently unemployed
and that you would like a posi on that will
lead to a sa sfying career. Suppose that
your job search has resulted in offers from
companies in Rochester, New York; Dallas,
Texas; Greensboro, North Carolina; and
Pi sburgh,
Pennsylvania. Thus, the alterna ves for your
decision problem can be stated as follows:
1. Accept the posi on in Rochester.
2. Accept the posi on in Dallas.
3. Accept the posi on in Greensboro.
4. Accept the posi on in Pi sburgh.
The next step of the problem-solving
process involves determining the criteria
that will be used to evaluate the four
alterna ves. Obviously, the star ng salary is
a factor of some importance. If salary were
the only criterion of importance to you, the
alterna ve selected as “best” would be the
one with the highest star ng salary.
Problems in which the objec ve is to find
the best solu on with respect to one
criterion are referred to as single-criterion
decision problems.
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Suppose that you also conclude that the
poten al for advancement and the loca on
of the job are two other criteria of major
importance. Thus, the three criteria in your
decision problem are star ng salary,
poten al for advancement, and loca on.
Problems that involve more than one
criterion are referred to as mul criteria
decision problems.
The next step of the decision-making
process is to evaluate each of the
alterna ves with respect to each criterion.
For example, evalua ng each alterna ve
rela ve to the star ng salary criterion is
done simply by recording the star ng salary
for each job alterna ve. Evalua ng each
alterna ve with respect to the poten al for
advancement and the loca on of the job is
more difficult to do, however, because
these evalua ons are based primarily on
subjec ve factors that are o en difficult to
quan fy. Suppose for now that you decide
to measure poten al for advancement and
job loca on by ra ng each of these criteria
as poor, fair, average, good, or excellent.
The data that you compile are shown in
Table 1.1.
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You are now ready to make a choice from the available alterna ves. What makes this choice
phase so difficult is that the criteria are probably not all equally important, and no one
alterna ve is “best” with regard to all criteria. Although we will present a method for dealing
with situa ons like this one later in the text, for now let us suppose that a er a careful
evalua on of the data in Table 1.1, you decide to select alterna ve 3; alterna ve 3 is thus
referred to as the decision.

At this point in me, the decision-making process is complete. In summary, we see that this
process involves five steps:

1. Define the problem.

2. Iden fy the
alterna ves.
3. Determine the
criteria.
4. Evaluate the
alterna ves.
5. Choose an
alterna ve.

Note that missing from

this list are the last two
steps in the problem-solving
process: implemen ng the
selected alterna ve and
evalua ng the results to
determine whether a
sa sfactory solu on has
been obtained. This
omission is not meant to
diminish the importance of
each of these ac vi es, but
to emphasize the more
limited scope of the term
decision making as
compared to the term
problem solving. Figure 1.1
summarizes the rela onship between these two concepts.
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1.2 Quan ta ve Analysis and Decision Making

Consider the flowchart presented in Figure 1.2. Note that it combines the first three
steps of the decision-making process under the heading of “Structuring the Problem” and the
la er two steps under the heading “Analyzing the Problem.” Let us now consider in greater
detail how to carry out the set of ac vi es that make up the decision-making process.

Figure 1.3 shows that the analysis phase of the decision-making process may take two
basic forms: qualita ve and quan ta ve. Qualita ve analysis is based primarily on the
manager’s judgment and experience; it includes the manager’s intui ve “feel” for the problem
and is more an art than a science. If the manager has had experience with similar problems or if
the problem is rela vely simple, heavy emphasis may be placed upon a qualita ve analysis.
However, if the manager has had li le experience with similar problems, or if the problem is
sufficiently complex, then a quan ta ve analysis of the problem can be an especially important
considera on in the manager’s final decision.
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When using the quan ta ve approach, an analyst will concentrate on the quan ta ve
facts or data associated with the problem and develop mathema cal expressions that describe
the objec ves, constraints, and other rela onships that exist in the problem. Then, by using one
or more quan ta ve methods, the analyst will make a recommenda on based on the
quan ta ve aspects of the problem.

Although skills in the qualita ve approach are inherent in the manager and usually
increase with experience, the skills of the quan ta ve approach can be learned only by studying
the assump ons and methods of management science. A manager can increase decision-
making effec veness by learning more about quan ta ve methodology and by be er
understanding its contribu on to the decision-making process.

Reasons why a quan ta ve approach might be used in the decision-making process:

1. The problem is complex, and the manager cannot develop a good solu on without the
aid of quan ta ve analysis.
2. The problem is especially important (e.g., a great deal of money is involved), and the
manager desires a thorough analysis before a emp ng to make a decision.
3. The problem is new, and the manager has no previous experience from which to draw.
4. The problem is repe ve, and the manager saves me and effort by relying on
quan ta ve procedures to make rou ne decision recommenda ons.

To successfully apply quan ta ve analysis to decision making, the management scien st

must work closely with the manager or user of the results. When both the management
scien st and the manager agree that the problem has been adequately structured, work can
begin on developing a model to represent the problem mathema cally. Solu on procedures can
then be employed to find the best solu on for the model. This best solu on for the model then
becomes a recommenda on to the decision maker. The process of developing and solving
models is the essence of the quan ta ve analysis process.

Model Development

Models are representa ons of real objects or situa ons and can be presented in various
forms. For example, a scale model of an airplane is a representa on of a real airplane. Similarly,
a child’s toy truck is a model of a real truck. The model airplane and toy truck are examples of
models that are physical replicas of real objects. In modeling terminology, physical replicas are
referred to as iconic models.

A second classifica on includes models that are physical in form but do not have the
same physical appearance as the object being modeled. Such models are referred to as analog
models. The speedometer of an automobile is an analog model; the posi on of the needle on
the dial represents the speed of the automobile. A thermometer is another analog model
represen ng temperature.
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A third classifica on of models—the type we will primarily be studying—includes

representa ons of a problem by a system of symbols and mathema cal rela onships or
expressions. Such models are referred to as mathema cal models and are a cri cal part of any
quan ta ve approach to decision making. For example, the total profit from the sale of a
product can be determined by mul plying the profit per unit by the quan ty sold. If we let x
represent the number of units sold and P the total profit, then, with a profit of $10 per unit, the
following mathema cal model defines the total profit earned by selling x units:

P=10x

1.3 Management Science Techniques

Over the years, prac oners have found numerous applica ons for the following techniques:

1. Linear Programming
Linear programming is a problem-solving approach developed for situa ons involving
maximizing or minimizing a linear func on subject to linear constraints that limit the degree to
which the objec ve can be pursued.

2. Integer Linear Programming

Integer linear programming is an approach used for problems that can be set up as
linear programs, with the addi onal requirement that some or all of the decision variables be
integer values.

3. Distribu on and Network Models

A network is a graphical descrip on of a problem consis ng of circles called nodes that
are interconnected by lines called arcs. Specialized solu on procedures exist for these types of
problems, enabling us to quickly solve problems in such areas as supply chain design,
informa on system design, and project scheduling.

4. Nonlinear Programming
Many business processes behave in a nonlinear manner. For example, the price of a
bond is a nonlinear func on of interest rates; the quan ty demanded for a product is usually a
nonlinear func on of the price. Nonlinear programming is a technique that allows for
maximizing or minimizing a nonlinear func on subject to nonlinear constraints.
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5. Project Scheduling: PERT/CPM

In many situa ons, managers are responsible for planning, scheduling, and controlling
projects that consist of numerous separate jobs or tasks performed by a variety of departments,
individuals, and so forth. The PERT (Program Evalua on and Review Technique) and CPM
(Cri cal Path Method) techniques help managers carry out their project scheduling
responsibili es.

6. Inventory Models
Inventory models are used by managers faced with the dual problems of maintaining
sufficient inventories to meet demand for goods and, at the same me, incurring the lowest
possible inventory holding costs.

7. Wai ng-Line or Queueing Models

Wai ng-line or queueing models have been developed to help managers understand
and make be er decisions concerning the opera on of systems involving wai ng lines.

8. Simula on
Simula on is a technique used to model the opera on of a system. This technique
employs a computer program to model the opera on and perform simula on computa ons.

9. Decision Analysis
Decision analysis can be used to determine op mal strategies in situa ons involving
several decision alterna ves and an uncertain or risk-filled pa ern of events.

10. Goal Programming

Goal programming is a technique for solving mul criteria decision problems, usually
within the framework of linear programming.

11. Analy c Hierarchy Process

This mul criteria decision-making technique permits the inclusion of subjec ve factors
in arriving at a recommended decision.

12. Forecas ng
Forecas ng methods are techniques that can be used to predict future aspects of a
business opera on.
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13. Markov Process Models

Markov process models are useful in studying the evolu on of certain systems over
repeated trials. For example, Markov processes have been used to describe the probability that
a machine, func oning in one period, will func on or break down in another period.

1.4 Careers in Management Science events like death, accidents, and

With a degree in management
science, you can work in a variety of fields,
from marke ng and branding to finance,
human resources, and data science.
The most popular job tles include:
property damage.
d. Finance analyst: Assesses the
performance of stocks, bonds, and
investments to advise businesses
and individuals on their investment
decisions.

a. Business analyst: Studies the market, e. Programmer analyst: Tests, analyzes,

determines a business’s profitability, and maintains so ware applica ons
and iden fies solu ons to a to help businesses achieve their
business’s challenges. goals.

b. Data analyst: Gathers and interprets f. Risk analyst: Analyzes financial

data, highlights important trends,
and reports findings to an
organiza on’s management.
c. Actuarial analyst: Works in the
insurance industry and uses data
analysis and sta s cal modeling to
calculate the probability and risk of
documents and economic condi ons
to determine the risk involved in
business decisions and planned
ac vi es.
g. Research analyst: Collects data from
varied sources to help organiza ons
determine target markets and ideal
pricing for products and services.

Instructor: Dr. Warren B. Batac, MAE, LPT