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T H I R T E E N T H E D I T I O N
QUANTITATIVE ANALYSIS
for MANAGEMENT
BARRY RENDER • RALPH M. STAIR, JR. • MICHAEL E. HANNA • TREVOR S. HALE

CONTENTS vii
4.7 Multiple Regression Analysis 126

CHAPTER 3 Decision Analysis 63
Evaluating the Multiple Regression
3.1 The Six Steps in Decision Making 63 Model 127
3.2 Types of Decision-Making Jenny Wilson Realty Example 128
Environments 65
4.8 Binary or Dummy Variables 129
3.3 Decision Making Under Uncertainty 65
4.9 Model Building 130
Optimistic 66
Stepwise Regression 131
Pessimistic 66
Multicollinearity 131
Criterion of Realism (Hurwicz Criterion) 67
4.10 Nonlinear Regression 131
Equally Likely (Laplace) 67
4.11 Cautions and Pitfalls in Regression
Minimax Regret 67
Analysis 134
3.4 Decision Making Under Risk 69 Summary 135 Glossary 135 Key
Expected Monetary Value 69 Equations 136 Solved Problems 137
Expected Value of Perfect Information 70 Self-Test 139 Discussion Questions and
Expected Opportunity Loss 71 Problems 139 Case Study: North–South
Airline 144 Bibliography 145
Sensitivity Analysis 72
Appendix 4.1: Formulas for Regression Calculations 145
A Minimization Example 73
3.5 Using Software for Payoff Table
Problems 75 CHAPTER 5 Forecasting 147
QM for Windows 75 5.1 Types of Forecasting Models 147
Excel QM 75 Qualitative Models 147
3.6 Decision Trees 77 Causal Models 148
Efficiency of Sample Information 82 Time-Series Models 149
Sensitivity Analysis 82 5.2 Components of a Time-Series 149
3.7 How Probability Values Are Estimated by 5.3 Measures of Forecast Accuracy 151
Bayesian Analysis 83 5.4 Forecasting Models—Random Variations
Calculating Revised Probabilities 83 Only 154
Potential Problem in Using Survey Results 85 Moving Averages 154
3.8 Utility Theory 86 Weighted Moving Averages 154
Measuring Utility and Constructing a Utility Exponential Smoothing 156
Curve 86 Using Software for Forecasting Time
Utility as a Decision-Making Criterion 88 Series 158
Summary 91 Glossary 91 Key Equations 92 5.5 Forecasting Models—Trend and Random
Solved Problems 92 Self-Test 97 Discussion Variations 160
Questions and Problems 98 Case Study: Starting Exponential Smoothing with Trend 160
Right Corporation 107 Case Study: Toledo
Trend Projections 163
Leather Company 107 Case Study: Blake
Electronics 108 Bibliography 110 5.6 Adjusting for Seasonal Variations 164
Seasonal Indices 165
CHAPTER 4 Regression Models 111 Calculating Seasonal Indices with
4.1 Scatter Diagrams 112 No Trend 165
4.2 Simple Linear Regression 113 Calculating Seasonal Indices with
Trend 166
4.3 Measuring the Fit of the Regression
Model 114 5.7 Forecasting Models—Trend, Seasonal,
and Random Variations 167
Coefficient of Determination 116
The Decomposition Method 167
Correlation Coefficient 116
Software for Decomposition 170
4.4 Assumptions of the Regression Model 117
Using Regression with Trend and Seasonal
Estimating the Variance 119
Components 170
4.5 Testing the Model for Significance 119 5.8 Monitoring and Controlling
Triple A Construction Example 121 Forecasts 172
The Analysis of Variance (ANOVA) Table 122 Adaptive Smoothing 174
Triple A Construction ANOVA Example 122 Summary 174 Glossary 174 Key
4.6 Using Computer Software for Equations 175 Solved Problems 176
Regression 122 Self-Test 177 Discussion Questions
Excel 2016 122 and Problems 178 Case Study:
Forecasting Attendance at SWU Football
Excel QM 123 Games 182 Case Study: Forecasting Monthly
QM for Windows 125 Sales 183 Bibliography 184
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viii CONTENTS
7.2 Formulating LP Problems 239

CHAPTER 6 Inventory Control Models 185
Flair Furniture Company 240
6.1 Importance of Inventory Control 186
7.3 Graphical Solution to an LP
Decoupling Function 186
Problem 241
Storing Resources 187
Graphical Representation of Constraints 241
Irregular Supply and Demand 187
Isoprofit Line Solution Method 245
Quantity Discounts 187
Corner Point Solution Method 248
Avoiding Stockouts and Shortages 187
Slack and Surplus 250
6.2 Inventory Decisions 187 7.4 Solving Flair Furniture’s LP Problem
6.3 Economic Order Quantity: Determining Using QM for Windows, Excel 2016, and
How Much to Order 189 Excel QM 251
Inventory Costs in the EOQ Situation 189 Using QM for Windows 251
Finding the EOQ 191 Using Excel’s Solver Command to Solve LP
Sumco Pump Company Example 192 Problems 252
Purchase Cost of Inventory Items 193 Using Excel QM 255
Sensitivity Analysis with the EOQ Model 194 7.5 Solving Minimization Problems 257
6.4 Reorder Point: Determining When to Holiday Meal Turkey Ranch 257
Order 194 7.6 Four Special Cases in LP 261
6.5 EOQ Without the Instantaneous Receipt No Feasible Solution 261
Assumption 196 Unboundedness 261
Annual Carrying Cost for Production Run
Redundancy 262
Model 196
Alternate Optimal Solutions 263
Annual Setup Cost or Annual Ordering
Cost 197 7.7 Sensitivity Analysis 264
Determining the Optimal Production High Note Sound Company 265
Quantity 197 Changes in the Objective Function
Brown Manufacturing Example 198 Coefficient 266
6.6 Quantity Discount Models 200 QM for Windows and Changes in Objective
Function Coefficients 266
Brass Department Store Example 202
Excel Solver and Changes in Objective Function
6.7 Use of Safety Stock 203 Coefficients 267
6.8 Single-Period Inventory Models 209 Changes in the Technological Coefficients 268
Marginal Analysis with Discrete
Changes in the Resources or Right-Hand-Side
Distributions 210
Values 269
Café du Donut Example 210
QM for Windows and Changes in Right-Hand-
Marginal Analysis with the Normal Side Values 270
Distribution 212
Excel Solver and Changes in Right-Hand-Side
Newspaper Example 212 Values 270
6.9 ABC Analysis 214 Summary 272 Glossary 272 Solved
6.10 Dependent Demand: The Case for Problems 273 Self-Test 277 Discussion
Material Requirements Planning 214 Questions and Problems 278 Case Study:
Material Structure Tree 215 Mexicana Wire Winding, Inc. 286
Bibliography 288
Gross and Net Material Requirements Plans 216
Two or More End Products 218
6.11 Just-In-Time Inventory Control 219 CHAPTER 8 Linear Programming Applications 289
6.12 Enterprise Resource Planning 220 8.1 Marketing Applications 289
Summary 221 Glossary 221 Key Media Selection 289
Equations 222 Solved Problems 223 Marketing Research 291
Self-Test 225 Discussion Questions and
Problems 226 Case Study: Martin-Pullin 8.2 Manufacturing Applications 293
Bicycle Corporation 234 Bibliography 235 Production Mix 293
Appendix 6.1: Inventory Control with QM for Production Scheduling 295
Windows 235 8.3 Employee Scheduling Applications 299
Labor Planning 299
8.4 Financial Applications 300
CHAPTER 7 Linear Programming Models:
Graphical and Computer Methods 237 Portfolio Selection 300
7.1 Requirements of a Linear Programming Truck Loading Problem 303
Problem 238 8.5 Ingredient Blending Applications 305

CONTENTS ix
Diet Problems 305 Ranking Goals with Priority Levels 371

Ingredient Mix and Blending Problems 306 Goal Programming with Weighted Goals 371
8.6 Other Linear Programming 10.4 Nonlinear Programming 372
Applications 308 Nonlinear Objective Function and Linear
Summary 310 Self-Test 310 Constraints 373
Problems 311 Case Study: Cable & Both Nonlinear Objective Function and Nonlinear
Moore 318 Bibliography 318 Constraints 373
Linear Objective Function with Nonlinear
CHAPTER 9 Transportation, Assignment, Constraints 374
and Network Models 319 Summary 375 Glossary 375 Solved
9.1 The Transportation Problem 320 Problems 376 Self-Test 378 Discussion
Linear Program for the Transportation Questions and Problems 379 Case Study:
Example 320 Schank Marketing Research 384 Case Study:
Oakton River Bridge 385 Bibliography 385
Solving Transportation Problems Using
Computer Software 321
A General LP Model for Transportation CHAPTER 11 Project Management 387
Problems 322
11.1 PERT/CPM 389
Facility Location Analysis 323
General Foundry Example of PERT/CPM 389
9.2 The Assignment Problem 325 Drawing the PERT/CPM Network 390
Linear Program for Assignment Example 325
Activity Times 391
9.3 The Transshipment Problem 327 How to Find the Critical Path 392
Linear Program for Transshipment
Probability of Project Completion 395
Example 327
What PERT Was Able to Provide 398
9.4 Maximal-Flow Problem 330
Using Excel QM for the General Foundry
Example 330
Example 398
9.5 Shortest-Route Problem 332 Sensitivity Analysis and Project
9.6 Minimal-Spanning Tree Problem 334 Management 399
Summary 337 Glossary 338 Solved 11.2 PERT/Cost 400
Problems 338 Self-Test 340 Discussion
Planning and Scheduling Project Costs:
Questions and Problems 341 Case Study:
Budgeting Process 400
Andrew–Carter, Inc. 352 Case Study:
Northeastern Airlines 353 Case Study: Monitoring and Controlling Project
Southwestern University Traffic Problems 354 Costs 403
Bibliography 355 11.3 Project Crashing 405
Appendix 9.1: Using QM for Windows 355 General Foundry Example 406
Project Crashing with Linear Programming 407
CHAPTER 10 Integer Programming, Goal 11.4 Other Topics in Project Management 410
Programming, and Nonlinear Subprojects 410
Programming 357 Milestones 410
10.1 Integer Programming 358 Resource Leveling 410
Harrison Electric Company Example of Integer Software 410
Programming 358 Summary 410 Glossary 410 Key
Using Software to Solve the Harrison Integer Equations 411 Solved Problems 412
Programming Problem 360 Self-Test 414 Discussion Questions and
Mixed-Integer Programming Problem Problems 415 Case Study: Southwestern
Example 360 University Stadium Construction 422
Case Study: Family Planning Research Center of
10.2 Modeling with 0–1 (Binary) Variables 363 Nigeria 423 Bibliography 424
Capital Budgeting Example 364 Appendix 11.1: Project Management with QM for
Limiting the Number of Alternatives Windows 424
Selected 365
Dependent Selections 365
CHAPTER 12 Waiting Lines and Queuing Theory
Fixed-Charge Problem Example 366
Models 427
Financial Investment Example 367
12.1 Waiting Line Costs 428
10.3 Goal Programming 368
Three Rivers Shipping Company Example 428
Example of Goal Programming: Harrison Electric
Company Revisited 369 12.2 Characteristics of a Queuing System 429
Extension to Equally Important Multiple Arrival Characteristics 429
Goals 370 Waiting Line Characteristics 430

x CONTENTS
Service Facility Characteristics 430 Role of Computers in Simulation 485

Identifying Models Using Kendall Notation 431 Summary 486 Glossary 486 Solved
12.3 Single-Channel Queuing Model with Problems 487 Self-Test 489 Discussion
Poisson Arrivals and Exponential Service Questions and Problems 490 Case Study:
Times (M/M /1) 434 Alabama Airlines 496 Case Study: Statewide
Development Corporation 497 Case Study:
Assumptions of the Model 434 FB Badpoore Aerospace 498
Queuing Equations 434 Bibliography 500
Arnold’s Muffler Shop Case 435
Enhancing the Queuing Environment 438 CHAPTER 14 Markov Analysis 501
12.4 Multichannel Queuing Model with 14.1 States and State Probabilities 502
Poisson Arrivals and Exponential Service
Times (M/M/m) 439 The Vector of State Probabilities for Grocery
Store Example 503
Equations for the Multichannel Queuing
Model 439 14.2 Matrix of Transition Probabilities 504
Arnold’s Muffler Shop Revisited 440 Transition Probabilities for Grocery Store
Example 504
12.5 Constant Service Time Model
(M/D/1) 442 14.3 Predicting Future Market Shares 505
Equations for the Constant Service Time 14.4 Markov Analysis of Machine
Model 442 Operations 506
Garcia-Golding Recycling, Inc. 443 14.5 Equilibrium Conditions 507
12.6 Finite Population Model (M/M/1 with 14.6 Absorbing States and the Fundamental
Finite Source) 443 Matrix: Accounts Receivable
Application 510
Equations for the Finite Population
Model 444 Summary 514 Glossary 514 Key
Equations 514 Solved Problems 515
Department of Commerce Example 444 Self-Test 518 Discussion Questions and
12.7 Some General Operating Characteristic Problems 519 Case Study: Rentall Trucks 523
Relationships 445 Bibliography 525
12.8 More Complex Queuing Models and the Appendix 14.1: Markov Analysis with QM for
Use of Simulation 446 Windows 525
Summary 446 Glossary 447 Key Appendix 14.2: Markov Analysis with Excel 526
Equations 447 Solved Problems 449
Self-Test 451 Discussion Questions and
Problems 452 Case Study: New England
Foundry 457 Case Study: Winter Park
CHAPTER 15 Statistical Quality Control 529
Hotel 459 Bibliography 459 15.1 Defining Quality and TQM 529
Appendix 12.1: Using QM for Windows 460 15.2 Statistical Process Control 531
Variability in the Process 531
CHAPTER 13 Simulation Modeling 461 15.3 Control Charts for Variables 532
13.1 Advantages and Disadvantages of The Central Limit Theorem 533
Simulation 462 Setting x- -Chart Limits 534
13.2 Monte Carlo Simulation 463 Setting Range Chart Limits 536
Harry’s Auto Tire Example 464 15.4 Control Charts for Attributes 537
Using QM for Windows for Simulation 468 p-Charts 537
Simulation with Excel Spreadsheets 469 c-Charts 539
13.3 Simulation and Inventory Analysis 471 Summary 541 Glossary 541 Key
Simkin’s Hardware Store 472 Equations 541 Solved Problems 542
Analyzing Simkin’s Inventory Costs 475 Self-Test 543 Discussion Questions and
Problems 543 Bibliography 546
13.4 Simulation of a Queuing Problem 476
Appendix 15.1: Using QM for Windows for SPC 547
Port of New Orleans 476
Using Excel to Simulate the Port of New Orleans
Queuing Problem 478 APPENDICES 549
13.5 Simulation Model for a Maintenance APPENDIX A Areas Under the Standard Normal
Policy 479
Curve 550
Three Hills Power Company 479
Cost Analysis of the Simulation 481 APPENDIX B Binomial Probabilities 552
13.6 Other Simulation Issues 484
Two Other Types of Simulation Models 484 APPENDIX C Values of e − L for Use in the Poisson
Verification and Validation 485 Distribution 557

CONTENTS xi
APPENDIX D F Distribution Values 558 Using Expected Monetary Value to Make a

Decision M3-4
APPENDIX E Using POM-QM for Windows 560 M3.2 Expected Value of Perfect Information
and the Normal Distribution M3-5
APPENDIX F Using Excel QM and Excel Add-Ins 563 Opportunity Loss Function M3-5
Expected Opportunity Loss M3-5
APPENDIX G Solutions to Selected Problems 564 Summary M3-7 Glossary M3-7 Key
Equations M3-7 Solved Problems M3-7
APPENDIX H Solutions to Self-Tests 568 Self-Test M3-8 Discussion Questions and
Problems M3-9 Bibliography M3-10
INDEX 571 Appendix M3.1: Derivation of the Break-Even
Point M3-10
ONLINE MODULES Appendix M3.2: Unit Normal Loss Integral M3-11
MODULE 1 Analytic Hierarchy Process M1-1
M1.1 Multifactor Evaluation Process M1-2 MODULE 4 Game Theory M4-1
M1.2 Analytic Hierarchy Process M1-3 M4.1 Language of Games M4-2
Judy Grim’s Computer Decision M1-3 M4.2 The Minimax Criterion M4-2
Using Pairwise Comparisons M1-5 M4.3 Pure Strategy Games M4-3
Evaluations for Hardware M1-5 M4.4 Mixed Strategy Games M4-4
Determining the Consistency Ratio M1-6 M4.5 Dominance M4-6
Evaluations for the Other Factors M1-7 Summary M4-7 Glossary M4-7
Determining Factor Weights M1-8 Solved Problems M4-14 Self-Test M4-8
Discussion Questions and Problems M4-9
Overall Ranking M1-9 Bibliography M4-10
Using the Computer to Solve Analytic Hierarchy
Process Problems M1-9
MODULE 5 Mathematical Tools: Determinants
M1.3 Comparison of Multifactor Evaluation and Matrices M5-1
and Analytic Hierarchy Processes M1-9
M5.1 Matrices and Matrix Operations M5-1
Summary M1-10 Glossary M1-10
Key Equations M1-10 Solved Problems M1-11 Matrix Addition and Subtraction M5-2
Self-Test M1-12 Discussion Questions and Matrix Multiplication M5-2
Problems M1-12 Bibliography M1-14 Matrix Notation for Systems of Equations M5-5
Appendix M1.1: Using Excel for the Analytic Hierarchy Matrix Transpose M5-5
Process M1-14
M5.2 Determinants, Cofactors, and
Adjoints M5-5
Determinants M5-5
MODULE 2 Dynamic Programming M2-1
Matrix of Cofactors and Adjoint M5-7
M2.1 Shortest-Route Problem Solved Using
Dynamic Programming M2-2 M5.3 Finding the Inverse of a Matrix M5-9
M2.2 Dynamic Programming Summary M5-10 Glossary M5-10
Terminology M2-5 Key Equations M5-10 Self-Test M5-11
Discussion Questions and Problems M5-11
M2.3 Dynamic Programming Notation M2-7 Bibliography M5-12
M2.4 Knapsack Problem M2-8 Appendix M5.1: Using Excel for Matrix
Types of Knapsack Problems M2-8 Calculations M5-13
Roller’s Air Transport Service Problem M2-8
Summary M2-13 Glossary M2-14 MODULE 6 Calculus-Based Optimization M6-1
Key Equations M2-14 Solved Problem M2-14
M6.1 Slope of a Straight Line M6-1
Self-Test M2-16 Discussion Questions
and Problems M2-17 Case Study: United M6.2 Slope of a Nonlinear Function M6-2
Trucking M2-19 Bibliography M2-20 M6.3 Some Common Derivatives M6-5
Second Derivatives M6-6
M6.4 Maximum and Minimum M6-6
MODULE 3 Decision Theory and the Normal
M6.5 Applications M6-8
Distribution M3-1
Economic Order Quantity M6-8
M3.1 Break-Even Analysis and the Normal
Distribution M3-1 Total Revenue M6-8
Barclay Brothers Company’s New Product Key Equations M6-10 Solved Problems M6-10
Decision M3-1 Self-Test M6-11 Discussion Questions and
Probability Distribution of Demand M3-2 Problems M6-11 Bibliography M6-12

xii CONTENTS
Changes in the Objective Function

MODULE 7 Linear Programming: The Simplex Coefficients M7-28
Method M7-1 Changes in Resources or RHS Values M7-30
M7.1 How to Set Up the Initial Simplex
Solution M7-2 M7.7 The Dual M7-32
Converting the Constraints to Equations M7-2 Dual Formulation Procedures M7-33
Finding an Initial Solution Solving the Dual of the High Note Sound
Algebraically M7-3 Company Problem M7-33
The First Simplex Tableau M7-4 M7.8 Karmarkar’s Algorithm M7-34
M7.2 Simplex Solution Procedures M7-7 Summary M7-35 Glossary M7-35
Key Equations M7-36 Solved Problems M7-36
The Second Simplex Tableau M7-8 Self-Test M7-40 Discussion Questions and
Interpreting the Second Tableau M7-11 Problems M7-41 Bibliography M7-50
The Third Simplex Tableau M7-12
Review of Procedures for Solving LP
Maximization Problems M7-14 MODULE 8 Transportation, Assignment,
M7.3 Surplus and Artificial Variables M7-15 and Network Algorithms M8-1
Surplus Variables M7-15 M8.1 The Transportation Algorithm M8-1
Artificial Variables M7-15 Developing an Initial Solution: Northwest Corner
Surplus and Artificial Variables in the Objective Rule M8-2
Function M7-16 Stepping-Stone Method: Finding a Least-Cost
M7.4 Solving Minimization Problems M7-16 Solution M8-3
Special Situations with the Transportation
The Muddy River Chemical Corporation Algorithm M8-9
Example M7-16
Unbalanced Transportation Problems M8-9
Graphical Analysis M7-17
Degeneracy in Transportation Problems M8-10
Converting the Constraints and Objective
Function M7-18 More Than One Optimal Solution M8-12
Rules of the Simplex Method for Minimization Maximization Transportation Problems M8-13
Problems M7-18 Unacceptable or Prohibited Routes M8-13
First Simplex Tableau for the Muddy River Other Transportation Methods M8-13
Chemical Corporation Problem M7-19 M8.2 The Assignment Algorithm M8-13
Developing a Second Tableau M7-20 The Hungarian Method (Flood’s Technique) 14
Developing a Third Tableau M7-22 Making the Final Assignment M8-18
Fourth Tableau for the Muddy River Chemical Special Situations with the Assignment
Corporation Problem M7-23 Algorithm M8-18
Review of Procedures for Solving LP Unbalanced Assignment Problems M8-18
Minimization Problems M7-24
Maximization Assignment Problems M8-19
M7.5 Special Cases M7-25
M8.3 Maximal-Flow Problem M8-20
Infeasibility M7-25
Maximal-Flow Technique M8-20
Unbounded Solutions M7-25
M8.4 Shortest-Route Problem M8-24
Degeneracy M7-26
Shortest-Route Technique M8-24
More Than One Optimal Solution M7-27
M7.6 Sensitivity Analysis with the Simplex Solved Problems M8-26 Self-Test M8-33
Tableau M7-27 Discussion Questions and Problems M8-33
High Note Sound Company Revisited M7-27 Bibliography M8-43

Preface
Overview
Welcome to the thirteenth edition of Quantitative Analysis for Management. Our goal is to pro-
vide undergraduate and graduate students with a genuine foundation in business analytics, quan-
titative methods, and management science. In doing so, we owe thanks to the hundreds of users
and scores of reviewers who have provided invaluable counsel and pedagogical insight for more
than 30 years.
To help students connect how the techniques presented in this book apply in the real world,
computer-based applications and examples are a major focus of this edition. Mathematical
models, with all the necessary assumptions, are presented in a clear and “plain-English” manner.
The ensuing solution procedures are then applied to example problems alongside step-by-step
“how-to” instructions. We have found this method of presentation to be very effective, and stu-
dents are very appreciative of this approach. In places where the mathematical computations are
intricate, the details are presented in such a manner that the instructor can omit these sections
without interrupting the flow of material. The use of computer software enables the instructor to
focus on the managerial problem and spend less time on the details of the algorithms. Computer
output is provided for many examples throughout the book.
The only mathematical prerequisite for this textbook is algebra. One chapter on probability
and another on regression analysis provide introductory coverage on these topics. We employ
standard notation, terminology, and equations throughout the book. Careful explanation is pro-
vided for the mathematical notation and equations that are used.
Special Features
Many features have been popular in previous editions of this textbook, and they have been
updated and expanded in this edition. They include the following:
●● Modeling in the Real World boxes demonstrate the application of the quantitative analysis
approach to every technique discussed in the book. Three new ones have been added.
●● Procedure boxes summarize the more complex quantitative techniques, presenting them as a
series of easily understandable steps.
●● Margin notes highlight the important topics in the text.
●● History boxes provide interesting asides related to the development of techniques and the
people who originated them.
●● QA in Action boxes illustrate how real organizations have used quantitative analysis to solve
problems. Several new QA in Action boxes have been added.
●● Solved Problems, included at the end of each chapter, serve as models for students in solving
their own homework problems.
●● Discussion Questions are presented at the end of each chapter to test the student’s under-
standing of the concepts covered and definitions provided in the chapter.
xiii
A01_REND3161_13_AIE_FM.indd 13 28/10/16 10:13 AM

xiv PREFACE
●● Problems included in every chapter are applications-oriented and test the student’s ability
to solve exam-type problems. They are graded by level of difficulty: introductory (one
bullet), moderate (two bullets), and challenging (three bullets). Twenty-six new problems
have been added.
●● Internet Homework Problems provide additional problems for students to work. They are
available on the Companion Website.
●● Self-Tests allow students to test their knowledge of important terms and concepts in prepara-
tion for quizzes and examinations.
●● Case Studies, at the end of most chapters, provide additional challenging managerial
applications.
●● Glossaries, at the end of each chapter, define important terms.
●● Key Equations, provided at the end of each chapter, list the equations presented in that
chapter.
●● End-of-chapter bibliographies provide a current selection of more advanced books and
articles.
●● The software POM-QM for Windows uses the full capabilities of Windows to solve quantita-
tive analysis problems.
●● Excel QM and Excel 2016 are used to solve problems throughout the book.
●● Data files with Excel spreadsheets and POM-QM for Windows files containing all the
examples in the textbook are available for students to download from the Companion
Website. Instructors can download these plus additional files containing computer solutions
to the relevant end-of-chapter problems from the Instructor Resource Center Website.
●● Online modules provide additional coverage of topics in quantitative analysis.
●● The Companion Website, at www.pearsonhighered.com/render, provides the online modules,
additional problems, cases, and other material for every chapter.
Significant Changes to the Thirteenth Edition

In the thirteenth edition, we have introduced Excel 2016 in all of the chapters. Updated screen-
shots are i ntegrated in the appropriate sections so that students can easily learn how to use Excel
2016 for the calculations. The Excel QM add-in is used with Excel 2016, allowing students with
limited Excel experience to easily perform the necessary calculations. This also allows students
to improve their Excel skills as they see the formulas automatically written in Excel QM.
From the Companion Website, students can access files for all of the examples used in the
textbook in Excel 2016, QM for Windows, and Excel QM. Other files with all of the end-of-
chapter problems involving these software tools are available to the instructors.
Business analytics, one of the hottest topics in the business world, makes extensive use of
the models in this book. A discussion of the business analytics categories is provided, and the
relevant management science techniques are placed into the appropriate category.
Examples and problems have been updated, and many new ones have been added. New
screenshots are provided for almost all of the examples in the book. A brief summary of the
changes in each chapter of the thirteenth edition is presented here.
Chapter 1 Introduction to Quantitative Analysis. The section on business analytics has been
updated, and a new end-of-chapter problem has been added.
Chapter 2 Probability Concepts and Applications. The Modeling in the Real World box has been
updated. New screenshots of Excel 2016 have been added throughout.
Chapter 3 Decision Analysis. A new QA in Action box has been added. New screenshots of
Excel 2016 have been added throughout. A new case study has been added.
Chapter 4 Regression Models. New screenshots of Excel 2016 have been added throughout. A
new end-of-chapter problem has been added.

PREFACE xv
Chapter 5 Forecasting. A new QA in Action box has been added. New screenshots of Excel 2016
have been added throughout. Two new end-of-chapter problems have been added.
Chapter 6 Inventory Control Models. A new QA in Action box has been added. New screenshots
of Excel 2016 have been added throughout. Two new end-of-chapter problems have been added.
Chapter 7 Linear Programming Models: Graphical and Computer Methods. The Learning
Objectives have been modified slightly. Screenshots have been updated to Excel 2016.
Chapter 8 Linear Programming Applications. Two new problems have been added to the Internet
Homework Problems. Excel 2016 screenshots have been incorporated throughout.
Chapter 9 Transportation, Assignment, and Network Models. Two new problems have been
added to the Internet Homework Problems. Excel 2016 screenshots have been incorporated
throughout.
Chapter 10 Integer Programming, Goal Programming, and Nonlinear Programming. Two new
problems have been added to the Internet Homework Problems. Excel 2016 screenshots have
been incorporated throughout.
Chapter 11 Project Management. Four new end-of-chapter problems and a new Modeling in the
Real World box have been added.
Chapter 12 Waiting Lines and Queuing Theory Models. Four new end-of-chapter problems
have been added.
Chapter 13 Simulation Modeling. Two new end-of-chapter problems have been added.
Chapter 14 Markov Analysis. Two new end-of-chapter problems have been added.
Chapter 15 Statistical Quality Control. Two new end-of-chapter problems have been added.
Excel 2016 screenshots have been updated throughout.
Modules 1–8 The only significant change to the modules is the update to Excel 2016 throughout.
Online Modules
To streamline the book, eight topics are contained in modules available on the Companion
Website for the book.
1. Analytic Hierarchy Process
2. Dynamic Programming
3. Decision Theory and the Normal Distribution
4. Game Theory
5. Mathematical Tools: Determinants and Matrices
6. Calculus-Based Optimization
7. Linear Programming: The Simplex Method
8. Transportation, Assignment, and Network Algorithms
Software
Excel 2016 Excel 2016 instructions and screen captures are provided, throughout the book.
Instructions for activating the Solver and Analysis ToolPak add-ins in Excel 2016 are provided
in an appendix. The use of Excel is more prevalent in this edition of the book than in previous
editions.

xvi PREFACE
Excel QM Using the Excel QM add-in that is available on the Companion Website makes
the use of Excel even easier. Students with limited Excel experience can use this and learn
from the formulas that are automatically provided by Excel QM. This is used in many of the
chapters.
POM-QM for Windows This software, developed by Professor Howard Weiss, is available to
students at the Companion Website. This is very user-friendly and has proven to be a very
popular software tool for users of this textbook. Modules are available for every major prob-
lem type presented in the textbook. At press time, only version 4.0 of POM-QM for Windows
was available. Updates for version 5.0 will be released on the Companion Website as they
become available.
Companion Website
The Companion Website, located at www.pearsonhighered.com/render, contains a variety of
materials to help students master the material in this course. These include the following:
Modules There are eight modules containing additional material that the instructor may choose
to include in the course. Students can download these from the Companion Website.
Files for Examples in Excel, Excel QM, and POM-QM for Windows Students can download the
files that were used for examples throughout the book. This helps them become familiar with
the software, and it helps them understand the input and formulas necessary for working the
examples.
Internet Homework Problems In addition to the end-of-chapter problems in the textbook, there
are additional problems that instructors may assign. These are available for download at the
Companion Website.
Internet Case Studies Additional case studies are available for most chapters.
POM-QM for Windows Developed by Howard Weiss, this very user-friendly software can be
used to solve most of the homework problems in the text.
Excel QM This Excel add-in will automatically create worksheets for solving problems. This is
very helpful for instructors who choose to use Excel in their classes but who may have students
with limited Excel experience. Students can learn by examining the formulas that have been
created and by seeing the inputs that are automatically generated for using the Solver add-in for
linear programming.
Instructor Resources
●● Instructor Resource Center: The Instructor Resource Center contains the electronic files
for the test bank, PowerPoint slides, the Solutions Manual, and data files for both Excel and
POM-QM for Windows for all relevant examples and end-of-chapter problems (www
.pearsonhighered.com/render).
●● Register, Redeem, Login: At www.pearsonhighered.com/irc, instructors can access a variety
of print, media, and presentation resources that are available with this text in downloadable,
digital format. For most texts, resources are also available for course management platforms
such as Blackboard, WebCT, and Course Compass.
●● Need help? Our dedicated technical support team is ready to assist instructors with questions
about the media supplements that accompany this text. Visit support.pearson.com/getsupport
for answers to frequently asked questions and toll-free user support phone numbers. The
supplements are available to adopting instructors. Detailed descriptions are provided in the
Instructor Resource Center.

PREFACE xvii
Instructor’s Solutions Manual The Instructor’s Solutions Manual, updated by the authors, is
available for download from the Instructor Resource Center. Solutions to all Internet Homework
Problems and Internet Case Studies are also included in the manual.
PowerPoint Presentation An extensive set of PowerPoint slides is available for download from
the Instructor Resource Center.
Test Bank The updated test bank is available for download from the Instructor Resource Center.
TestGen The computerized TestGen package allows instructors to customize, save, and generate
classroom tests. The test program permits instructors to edit, add, or delete questions from the
test bank; edit existing graphics and create new graphics; analyze test results; and organize a
database of test and student results. This software allows instructors to benefit from the
extensive flexibility and ease of use. It provides many options for organizing and displaying
tests, along with search and sort features. The software and the test banks can be downloaded
from the Instructor Resource Center.
Acknowledgments
We gratefully thank the users of previous editions and the reviewers who provided valuable
suggestions and ideas for this edition. Your feedback is valuable in our efforts for continuous
improvement. The continued success of Quantitative Analysis for Management is a direct result
of instructor and student feedback, which is truly appreciated.
The authors are indebted to many people who have made important contributions to this
project. Special thanks go to Professors Faizul Huq, F. Bruce Simmons III, Khala Chand Seal,
Victor E. Sower, Michael Ballot, Curtis P. McLaughlin, and Zbigniew H. Przanyski for their
contributions to the excellent cases included in this edition.
We thank Howard Weiss for providing Excel QM and POM-QM for Windows, two of the
most outstanding packages in the field of quantitative methods. We would also like to thank the
reviewers who have helped to make this textbook the most widely used one in the field of quan-
titative analysis:
Stephen Achtenhagen, San Jose University Arun Khanal, Nobel College

M. Jill Austin, Middle Tennessee State University Kenneth D. Lawrence, New Jersey Institute of Technology
Raju Balakrishnan, University of Michigan–Dearborn Jooh Lee, Rowan College
Hooshang Beheshti, Radford University Richard D. Legault, University of Massachusetts–Dartmouth
Jason Bergner, University of Nevada Douglas Lonnstrom, Siena College
Bruce K. Blaylock, Radford University Daniel McNamara, University of St. Thomas
Rodney L. Carlson, Tennessee Technological University Peter Miller, University of Windsor
Edward Chu, California State University, Dominguez Hills Ralph Miller, California State Polytechnic University
John Cozzolino, Pace University–Pleasantville Shahriar Mostashari, Campbell University
Ozgun C. Demirag, Penn State–Erie David Murphy, Boston College
Shad Dowlatshahi, University of Missouri–Kansas City Robert C. Myers, University of Louisville
Ike Ehie, Kansas State University Barin Nag, Towson State University
Richard Ehrhardt, University of North Carolina–Greensboro Nizam S. Najd, St. Gregory’s University
Sean Eom, Southeast Missouri State University Harvey Nye, Central State University
Ephrem Eyob, Virginia State University Alan D. Olinsky, Bryant College
Mira Ezvan, Lindenwood University Savas Ozatalay, Widener University
Wade Ferguson, Western Kentucky University Young Park, California University of Pennsylvania
Robert Fiore, Springfield College Yusheng Peng, Brooklyn College
Frank G. Forst, Loyola University of Chicago Dane K. Peterson, Missouri State University
Stephen H. Goodman, University of Central Florida Sanjeev Phukan, Bemidji State University
Irwin Greenberg, George Mason University Ranga Ramasesh, Texas Christian University
Nicholas G. Hall, Ohio State University Bonnie Robeson, Johns Hopkins University
Robert R. Hill, University of Houston–Clear Lake Grover Rodich, Portland State University
Bharat Jain, Towson University Vijay Shah, West Virginia University–Parkersburg
Vassilios Karavas, Nomura International L. Wayne Shell, Nicholls State University

xviii PREFACE
Thomas Sloan, University of Massachusetts–Lowell Chris Vertullo, Marist College

Richard Slovacek, North Central College James Vigen, California State University, Bakersfield
Alan D. Smith, Robert Morris University Larry Weinstein, Wright State University
John Swearingen, Bryant College Fred E. Williams, University of Michigan–Flint
Jack Taylor, Portland State University Mela Wyeth, Charleston Southern University
Andrew Tiger, Union University Oliver Yu, San Jose State University
We are very grateful to all the people at Pearson who worked so hard to make this book
a success. These include Donna Battista, Jeff Holcomb, Ashley Santora, Neeraj Bhalla,
Vamanan Namboodiri, and Dan Tylman. We are also grateful to Angela Urquhart and Andrea
Archer at Thistle Hill Publishing Services. Thank you all!
Barry Render
brender@rollins.edu
Ralph Stair
Michael Hanna
hanna@uhcl.edu
Trevor S. Hale
halet@uhd.edu

CHAPTER
1
Introduction to Quantitative Analysis
LEARNING OBJECTIVES
After completing this chapter, students will be able to:
1.1 Describe the quantitative analysis approach 1.4 Prepare a quantitative analysis model.
and understand how to apply it to a real 1.5 Use computers and spreadsheet models to
situation. perform quantitative analysis.
1.2 Describe the three categories of business 1.6 Recognize possible problems in using
analytics. quantitative analysis.
1.3 Describe the use of modeling in quantitative 1.7 Recognize implementation concerns of
analysis. quantitative analysis.
P
eople have been using mathematical tools to help solve problems for thousands of years;
however, the formal study and application of quantitative techniques to practical decision
making is largely a product of the twentieth century. The techniques we study in this book
have been applied successfully to an increasingly wide variety of complex problems in business,
government, health care, education, and many other areas. Many such successful uses are dis-
cussed throughout this book.
It isn’t enough, though, just to know the mathematics of how a particular quantitative tech-
nique works; you must also be familiar with the limitations, assumptions, and specific applica-
bility of the technique. The successful use of quantitative techniques usually results in a solution
that is timely, accurate, flexible, economical, reliable, and easy to understand and use.
In this and other chapters, there are QA (Quantitative Analysis) in Action boxes that provide
success stories on the applications of management science. They show how organizations have
used quantitative techniques to make better decisions, operate more efficiently, and generate
more profits. For example, Taco Bell has reported saving over $150 million with better fore-
casting of demand and better scheduling of employees. NBC television increased advertising
revenue by over $200 million by using a model to help develop sales plans for advertisers. Be-
fore it merged with United Airlines, Continental Airlines saved over $40 million a year by using
mathematical models to quickly recover from disruptions caused by weather delays and other
factors. These are but a few of the many companies discussed in QA in Action boxes throughout
this book.
M01_REND3161_13_AIE_C01.indd 1 27/10/16 3:20 PM

2 CHAPTER 1 • Introduction to Quantitative Analysis
To see other examples of how companies use quantitative analysis or operations research
methods to operate better and more efficiently, go to the website www.scienceofbetter.org. The
success stories presented there are categorized by industry, functional area, and benefit. These
success stories illustrate how operations research is truly the “science of better.”
1.1 What Is Quantitative Analysis?

Quantitative analysis uses a Quantitative analysis is the scientific approach to managerial decision making. This field of
scientific approach to decision study has several different names, including quantitative analysis, management science, and
making. operations research. These terms are used interchangeably in this book. Also, many of the quan-
titative analysis methods presented in this book are used extensively in business analytics.
Whim, emotions, and guesswork are not part of the quantitative analysis approach. The ap-
proach starts with data. Like raw material for a factory, these data are manipulated or processed
into information that is valuable to people making decisions. This processing and manipulating
of raw data into meaningful information is the heart of quantitative analysis. Computers have
been instrumental in the increasing use of quantitative analysis.
In solving a problem, managers must consider both qualitative and quantitative factors. For
example, we might consider several different investment alternatives, including certificates of
deposit at a bank, investments in the stock market, and an investment in real estate. We can use
quantitative analysis to determine how much our investment will be worth in the future when de-
posited at a bank at a given interest rate for a certain number of years. Quantitative analysis can
also be used in computing financial ratios from the balance sheets for several companies whose
stock we are considering. Some real estate companies have developed computer programs that
use quantitative analysis to analyze cash flows and rates of return for investment property.
Both qualitative and quantitative In addition to quantitative analysis, qualitative factors should be considered. The weather,
factors must be considered. state and federal legislation, new technological breakthroughs, the outcome of an election, and
so on may all be factors that are difficult to quantify.
Because of the importance of qualitative factors, the role of quantitative analysis in the deci-
sion-making process can vary. When there is a lack of qualitative factors and when the problem,
model, and input data remain the same, the results of quantitative analysis can automate the
decision-making process. For example, some companies use quantitative inventory models to
determine automatically when to order additional new materials. In most cases, however, quanti-
tative analysis will be an aid to the decision-making process. The results of quantitative analysis
will be combined with other (qualitative) information in making decisions.
Quantitative analysis has been particularly important in many areas of management. The
field of production management, which evolved into production/operations management (POM)
as society became more service oriented, uses quantitative analysis extensively. While POM
focuses on the internal operations of a company, the field of supply chain management takes a
more complete view of the business and considers the entire process of obtaining materials from
suppliers, using the materials to develop products, and distributing these products to the final
consumers. Supply chain management makes extensive use of many management science mod-
els. Another area of management that could not exist without the quantitative analysis methods
presented in this book, and perhaps the hottest discipline in business today, is business analytics.
1.2 Business Analytics

Business analytics is a data-driven approach to decision making that allows companies to make
better decisions. The study of business analytics involves the use of large amounts of data, which
means that information technology related to the management of the data is very important. Sta-
tistical and quantitative methods are used to analyze the data and provide useful information to
the decision maker.
Business analytics is often broken into three categories: descriptive, predictive, and prescrip-
tive. Descriptive analytics involves the study and consolidation of historical data for a business
and an industry. It helps a company measure how it has performed in the past and how it is per-
forming now. Predictive analytics is aimed at forecasting future outcomes based on patterns in
the past data. Statistical and mathematical models are used extensively for this purpose. Prescrip-
tive analytics involves the use of optimization methods to provide new and better ways to operate

1.3 The Quantitative Analysis Approach 3
TABLE 1.1
BUSINESS ANALYTICS
Business Analytics and CATEGORY QUANTITATIVE ANALYSIS TECHNIQUE
Quantitative Analysis
Models Descriptive analytics Statistical measures such as means and standard deviations (Chapter 2)
Statistical quality control (Chapter 15)
Predictive analytics Decision analysis and decision trees (Chapter 3)
Regression models (Chapter 4)
Forecasting (Chapter 5)
Project scheduling (Chapter 11)
Waiting line models (Chapter 12)
Simulation (Chapter 13)
Markov analysis (Chapter 14)
Prescriptive analytics Inventory models such as the economic order quantity (Chapter 6)
Linear programming (Chapters 7, 8)
Transportation and assignment models (Chapter 9)
Integer programming, goal programming, and nonlinear programming
(Chapter 10)
Network models (Chapter 9)
based on specific business objectives. The optimization models presented in this book are very
important to prescriptive analytics. While there are only three business analytics categories, many
business decisions are made based on information obtained from two or three of these categories.
Many of the quantitative analysis techniques presented in the chapters of this book are used
extensively in business analytics. Table 1.1 highlights the three categories of business analytics,
and it places many of the topics and chapters in this book in the most relevant category. Keep in
mind that some topics (and certainly some chapters with multiple concepts and models) could
The three categories of business possibly be placed in a different category. Some of the material in this book could overlap two or
analytics are descriptive, even three of these categories. Nevertheless, all of these quantitative analysis techniques are very
predictive, and prescriptive. important tools in business analytics.
1.3 The Quantitative Analysis Approach

Defining the problem can be the The quantitative analysis approach consists of defining a problem, developing a model, acquir-
most important step. ing input data, developing a solution, testing the solution, analyzing the results, and implement-
ing the results (see Figure 1.1). One step does not have to be finished completely before the
Concentrate on only a few next is started; in most cases, one or more of these steps will be modified to some extent before
problems. the final results are implemented. This would cause all of the subsequent steps to be changed.
In some cases, testing the solution might reveal that the model or the input data are not correct.
This would mean that all steps that follow defining the problem would need to be modified.
HISTORY The Origin of Quantitative Analysis
Q uantitative analysis has been in existence since the begin-

ning of recorded history, but it was Frederick Winslow Taylor
personnel or consultants to apply the principles of scien-
tific management to the challenges and opportunities of the
twenty-first century.
who in the late 1800s and early 1900s pioneered the appli- The origin of many of the techniques discussed in this book
cation of the principles of the scientific approach to manage- can be traced to individuals and organizations that have applied
ment. Dubbed the “Father of Industrial Engineering,” Taylor is the principles of scientific management first developed by Taylor;
credited with introducing many new scientific and quantitative they are discussed in History boxes throughout the book. Trivia:
techniques. These new developments were so successful that Taylor was also a world-class golfer and tennis player, finishing
many companies still use his techniques in managerial deci- just off the medal stand in golf at the 1900 Olympics and winning
sion making and planning today. Indeed, many organizations the inaugural men’s doubles title (with Clarence Clark) at the U.S.
employ a staff of operations research or management science Open Tennis Championships.

FIGURE 1.1 Defining the Problem

The Quantitative Analysis The first step in the quantitative approach is to develop a clear, concise statement of the prob-
Approach lem. This statement will give direction and meaning to the following steps.
In many cases, defining the problem is the most important and the most difficult step. It is
Defining
the Problem essential to go beyond the symptoms of the problem and identify the true causes. One problem
may be related to other problems; solving one problem without regard to other, related problems
can make the entire situation worse. Thus, it is important to analyze how the solution to one
Developing problem affects other problems or the situation in general.
a Model It is likely that an organization will have several problems. However, a quantitative analysis
group usually cannot deal with all of an organization’s problems at one time. Thus, it is usually
necessary to concentrate on only a few problems. For most companies, this means selecting
Acquiring
Input Data
those problems whose solutions will result in the greatest increase in profits or reduction in costs
for the company. The importance of selecting the right problems to solve cannot be overempha-
sized. Experience has shown that bad problem definition is a major reason for failure of manage-
Developing ment science or operations research groups to serve their organizations well.
a Solution When the problem is difficult to quantify, it may be necessary to develop specific, measur-
able objectives. A problem might be inadequate health care delivery in a hospital. The objectives
might be to increase the number of beds, reduce the average number of days a patient spends
Testing the
in the hospital, increase the physician-to-patient ratio, and so on. When objectives are used,
Solution
however, the real problem should be kept in mind. It is important to avoid setting specific and
measurable objectives that may not solve the real problem.
Analyzing
the Results Developing a Model
Once we select the problem to be analyzed, the next step is to develop a model. Simply stated, a
model is a representation (usually mathematical) of a situation.
Implementing
Even though you might not have been aware of it, you have been using models most of your
the Results
life. You may have developed models about people’s behavior. Your model might be that friend-
ship is based on reciprocity, an exchange of favors. If you need a favor such as a small loan, your
model would suggest that you ask a good friend.
Of course, there are many other types of models. Architects sometimes make a physical
model of a building that they will construct. Engineers develop scale models of chemical plants,
called pilot plants. A schematic model is a picture, drawing, or chart of reality. Automobiles,
lawn mowers, gears, fans, smartphones, and numerous other devices have schematic models
The types of models include
(drawings and pictures) that reveal how these devices work. What sets quantitative analysis apart
physical, scale, schematic, and
from other techniques is that the models that are used are mathematical. A mathematical model
mathematical models.
is a set of mathematical relationships. In most cases, these relationships are expressed in equa-
tions and inequalities, as they are in a spreadsheet model that computes sums, averages, or stan-
dard deviations.
Although there is considerable flexibility in the development of models, most of the models
presented in this book contain one or more variables and parameters. A variable, as the name
implies, is a measurable quantity that may vary or is subject to change. Variables can be control-
lable or uncontrollable. A controllable variable is also called a decision variable. An example
would be how many inventory items to order. A parameter is a measurable quantity that is in-
herent in the problem. The cost of placing an order for more inventory items is an example of a
parameter. In most cases, variables are unknown quantities, while parameters are known quanti-
ties. Hence, in our example, how much inventory to order is a variable that needs to be decided,
whereas how much it will cost to place the order is a parameter that is already known. All mod-
els should be developed carefully. They should be solvable, realistic, and easy to understand and
modify, and the required input data should be obtainable. The model developer has to be careful
to include the appropriate amount of detail to be solvable yet realistic.
Acquiring Input Data

Once we have developed a model, we must obtain the data that are used in the model (input
data). Obtaining accurate data for the model is essential; even if the model is a perfect represen-
Garbage in, garbage out means tation of reality, improper data will result in misleading results. This situation is called garbage
that improper data will result in in, garbage out. For a larger problem, collecting accurate data can be one of the most difficult
misleading results. steps in performing quantitative analysis.

1.3 The Quantitative Analysis Approach 5
IN ACTION Operations Research and Oil Spills
O perations researchers and decision scientists have been in-

vestigating oil spill response and alleviation strategies since long
to minimize the long-term impacts of a particular disaster after
the immediate situation has stabilized.
Many quantitative tools have helped in areas of risk analysis,
before the BP oil spill disaster of 2010 in the Gulf of Mexico. A insurance, logistical preparation and supply management, evacu-
four-phase classification system has emerged for disaster re- ation planning, and development of communication systems. Re-
sponse research: mitigation, preparedness, response, and recov- cent research has shown that while many strides and discoveries
ery. Mitigation means reducing the probability that a disaster will have been made, much research is still needed. Certainly each
occur and implementing robust, forward-thinking strategies to re- of the four disaster response areas could benefit from additional
duce the effects of a disaster that does occur. Preparedness is any research, but recovery seems to be of particular concern and per-
and all organization efforts that happen in advance of a disaster. haps the most promising for future research.
Response is the location, allocation, and overall coordination of Source: Based on N. Altay and W. Green, “OR/MS Research in Disaster Op-
resources and procedures during the disaster that are aimed at erations Management,” European Journal of Operational Research 175, 1
preserving life and property. Recovery is the set of actions taken (2006): 475–493, © Trevor S. Hale.
There are a number of sources that can be used in collecting data. In some cases, company
reports and documents can be used to obtain the necessary data. Another source is interviews
with employees or other persons related to the firm. These individuals can sometimes provide
excellent information, and their experience and judgment can be invaluable. A production super-
visor, for example, might be able to tell you with a great degree of accuracy the amount of time
it takes to produce a particular product. Sampling and direct measurement provide other sources
of data for the model. You may need to know how many pounds of raw material are used in
producing a new photochemical product. This information can be obtained by going to the plant
and actually measuring with scales the amount of raw material that is being used. In other cases,
statistical sampling procedures can be used to obtain data.
Developing a Solution
Developing a solution involves manipulating the model to arrive at the best (optimal) solution
to the problem. In some cases, this requires that an equation be solved for the best decision. In
other cases, you can use a trial-and-error method, trying various approaches and picking the
one that results in the best decision. For some problems, you may wish to try all possible values
for the variables in the model to arrive at the best decision. This is called complete enumera-
tion. This book also shows you how to solve very difficult and complex problems by repeat-
ing a few simple steps until you find the best solution. A series of steps or procedures that are
repeated is called an algorithm, named after Algorismus (derived from Muhammad ibn Musa
al-Khwarizmi), a Persian mathematician of the ninth century.
The input data and model The accuracy of a solution depends on the accuracy of the input data and the model. If the
determine the accuracy of the input data are accurate to only two significant digits, then the results can be accurate to only two
solution. significant digits. For example, the results of dividing 2.6 by 1.4 should be 1.9, not 1.857142857.
Testing the Solution

Testing the data and model Before a solution can be analyzed and implemented, it needs to be tested completely. Because
is done before the results are the solution depends on the input data and the model, both require testing.
analyzed. Testing the input data and the model includes determining the accuracy and completeness of
the data used by the model. Inaccurate data will lead to an inaccurate solution. There are several
ways to test input data. One method of testing the data is to collect additional data from a differ-
ent source. If the original data were collected using interviews, perhaps some additional data can
be collected by direct measurement or sampling. These additional data can then be compared
with the original data, and statistical tests can be employed to determine whether there are dif-
ferences between the original data and the additional data. If there are significant differences,
more effort is required to obtain accurate input data. If the data are accurate but the results are
inconsistent with the problem, the model may not be appropriate. The model can be checked to
make sure that it is logical and represents the real situation.

Although most of the quantitative techniques discussed in this book have been computer-
ized, you will probably be required to solve a number of problems by hand. To help detect both
logical and computational mistakes, you should check the results to make sure that they are con-
sistent with the structure of the problem. For example, (1.96)(301.7) is close to (2)(300), which
is equal to 600. If your computations are significantly different from 600, you know you have
made a mistake.
Analyzing the Results and Sensitivity Analysis

Analyzing the results starts with determining the implications of the solution. In most cases, a
solution to a problem will result in some kind of action or change in the way an organization is
operating. The implications of these actions or changes must be determined and analyzed before
the results are implemented.
Because a model is only an approximation of reality, the sensitivity of the solution to
Sensitivity analysis determines changes in the model and input data is a very important part of analyzing the results. This type
how the solution will change with of analysis is called sensitivity analysis or postoptimality analysis. It determines how much the
a different model or input data. solution will change if there are changes in the model or the input data. When the solution is
sensitive to changes in the input data and the model specification, additional testing should be
performed to make sure that the model and input data are accurate and valid. If the model or data
are wrong, the solution could be wrong, resulting in financial losses or reduced profits.
The importance of sensitivity analysis cannot be overemphasized. Because input data may
not always be accurate or model assumptions may not be completely appropriate, sensitivity
analysis can become an important part of the quantitative analysis approach. Most of the chap-
ters in this book cover the use of sensitivity analysis as part of the decision-making and problem-
solving process.
Implementing the Results

The final step is to implement the results. This is the process of incorporating the solution into
the company’s operations. This can be much more difficult than you would imagine. Even if the
solution is optimal and will result in millions of dollars in additional profits, if managers resist
the new solution, all of the efforts of the analysis are of no value. Experience has shown that a
large number of quantitative analysis teams have failed in their efforts because they have failed
to implement a good, workable solution properly.
After the solution has been implemented, it should be closely monitored. Over time, there
may be numerous changes that call for modifications of the original solution. A changing econ-
omy, fluctuating demand, and model enhancements requested by managers and decision makers
are only a few examples of changes that might require the analysis to be modified.
The Quantitative Analysis Approach and Modeling in the Real World

The quantitative analysis approach is used extensively in the real world. These steps, first seen in
Figure 1.1 and described in this section, are the building blocks of any successful use of quantita-
tive analysis. As seen in our first Modeling in the Real World box, the steps of the quantitative
analysis approach can be used to help a large company such as CSX plan for critical scheduling
needs now and for decades into the future. Throughout this book, you will see how the steps of
the quantitative analysis approach are used to help countries and companies of all sizes save mil-
lions of dollars, plan for the future, increase revenues, and provide higher-quality products and
services. The Modeling in the Real World boxes will demonstrate to you the power and impor-
tance of quantitative analysis in solving real problems for real organizations. Using the steps of
quantitative analysis, however, does not guarantee success. These steps must be applied carefully.
1.4 How to Develop a Quantitative Analysis Model

Developing a model is an important part of the quantitative analysis approach. Let’s see how we
can use the following mathematical model, which represents profit:
Profit = Revenue - Expenses
Expenses include fixed and In many cases, we can express revenue as the selling price per unit multiplied times the num-
variable costs. ber of units sold. Expenses can often be determined by summing fixed cost and variable cost.

Another random document with
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for the purpose of guarantying the neutrality of the Isthmus canal or
determining the conditions of its use.
CHILI AND PERU.
The entire question is complicated by the war between Chili and

Peru, the latter owning immense guano deposits in which American
citizens have become financially interested. These sought the friendly
intervention of our government to prevent Chili, the conquering
Republic, from appropriating these deposits as part of her war
indemnity. The Landreau, an original French claim, is said to
represent $125,000,000, and the holders were prior to and during
the war pressing it upon Calderon, the Peruvian President, for
settlement; the Cochet claim, another of the same class, represented
$1,000,000,000. Doubtless these claims are speculative and largely
fraudulent, and shrewd agents are interested in their collection and
preservation. A still more preposterous and speculative movement
was fathered by one Shipherd, who opened a correspondence with
Minister Hurlburt, and with other parties for the establishment of
the Credit Industriel, which was to pay the $20,000,000 money
indemnity demanded of Peru by Chili, and to be reimbursed by the
Peruvian nitrates and guano deposits.
THE SCANDAL.
All of these things surround the question with scandals which

probably fail to truthfully reach any prominent officer of our
government, but which have nevertheless attracted the attention of
Congress to such an extent that the following action has been already
taken:
On February 24th Mr. Bayard offered in the Senate a resolution
reciting that whereas publication has been widely made by the public
press of certain alleged public commercial contracts between certain
companies and copartnerships of individuals relative to the exports
of guano and nitrates from Peru, in which the mediation by the
Government of the United States between the Governments of Peru,
Bolivia and Chili is declared to be a condition for the effectuation and
continuance of the said contracts; therefore be it resolved, that the
Committee on Foreign Relations be instructed to inquire whether
any promise or stipulation by which the intervention by the United
States in the controversies existing between Chili and Peru or Chili
and Bolivia has been expressly or impliedly given by any person or
persons officially connected with the Government of the United
States, or whether the influence of the Government of the United
States has been in any way exerted, promised or intimated in
connection with, or in relation to the said contracts by any one
officially connected with the Government of the United States, and
whether any one officially connected with the Government of the
United States is interested, directly or indirectly, with any such
alleged contracts in which the mediation as aforesaid of the United
States is recited to be a condition, and that the said committee have
power to send for persons and paper and make report of their
proceedings in the premises to the Senate at the earliest possible day.
Mr. Edmunds said he had drafted a resolution covering all the
branches of “that most unfortunate affair” to which reference was
now made, and in view of the ill policy of any action which would
commit the Senate to inquiries about declaring foreign matters in
advance of a careful investigation by a committee, he now made the
suggestion that he would have made as to his own resolution, if he
had offered it, namely, that the subject be referred to the Committee
on Foreign Relations. He intimated that the proposition prepared by
himself would be considered by the committee as a suggestion
bearing upon the pending resolution.
Mr. Bayard acquiesced in the reference with the remark that
anything that tended to bring the matter more fully before the
country was satisfactory to him.
The resolution accordingly went to the Committee on Foreign
Relations.
In the House Mr. Kasson, of Iowa, offered a resolution reciting
that whereas, it is alleged, in connection with the Chili Peruvian
correspondence recently and officially published on the call of the
two Houses of Congress, that one or more Ministers Plenipotentiary
of the United States were either personally interested or improperly
connected with a business transaction in which the intervention of
this Government was requested or expected and whereas, it is
alleged that certain papers in relation to the same subject have been
improperly lost or removed from the files of the State Department,
that therefore the Committee on Foreign Affairs be instructed to
inquire into said allegations and ascertain the facts relating thereto,
and report the same with such recommendations as they may deem
proper, and they shall have power to send for persons and papers.
The resolution was adopted.
THE CLAIMS.
The inner history of what is known as the Peruvian Company reads

more like a tale from the Arabian Nights than a plain statement of
facts. The following is gleaned from the prospectus of the company,
of which only a limited number of copies was printed. According to a
note on the cover of these “they are for the strictly private use of the
gentlemen into whose hands they are immediately placed.”
The prospects of the corporation are based entirely upon the
claims of Cochet and Landreau, two French chemists, residents of
Peru. In the year 1833, the Peruvian government, by published
decree, promised to every discoverer of valuable deposits upon the
public domain a premium of one-third of the discovery as an
incentive to the development of great natural resources vaguely
known to exist. In the beginning of 1830, Alexandre Cochet, who was
a man of superior information, occupied himself in the laborious
work of manufacturing nitrate of soda in a small oficina in Peru, and
being possessed with quick intelligence and a careful observer he
soon came to understand that the valuable properties contained in
the guano—an article only known to native cultivators of the soil—
would be eminently useful as a restorative to the exhausted lands of
the old continent. With this idea he made himself completely master
of the mode of application adopted by the Indians and small farmers
in the province where he resided, and after a careful investigation of
the chemical effects produced on the land by the proper application
of the regenerating agent, he proceeded in the year 1840 to the
capital (Lima) in order to interest some of his friends in this new
enterprise. Not without great persuasion and much hesitation, he
induced his countryman, Mr. Achilles Allier, to take up the
hazardous speculation and join with him in his discovery. He
succeeded, however, and toward the end of the same year the firm of
Quiroz & Allier obtained a concession for six years from the
government of Peru for the exportation of all the guano existing in
the afterwards famous islands of Chinchi for the sum of sixty
thousand dollars. In consequence of the refusal of that firm to admit
Cochet, the discoverer, to a participation in the profits growing out of
this contract a series of lawsuits resulted and a paper war ensued in
which Cochet was baffled. In vain he called the attention of the
government to the nature and value of this discovery; he was told
that he was a “visionary.” In vain he demonstrated that the nation
possessed hundreds of millions of dollars in the grand deposits: this
only confirmed the opinion of the Council of State that he was a
madman. In vain he attempted to prove that one cargo of guano was
equal to fourteen cargoes of grain; the Council of State coolly told
him that guano was an article known to the Spaniards, and of no
value: that Commissioner Humbolt had referred to it, and that they
could not accept his theory respecting its superior properties, its
value and its probable use in foreign agriculture at a period when no
new discovery could be made relative to an article so long and of so
evident small value.
At length a new light began to dawn on the lethargic
understanding of the officials in power, and as rumors continued to
arrive from Europe confirming the asseverations of Cochet, and
announcing the sale of guano at from $90 to $120 per ton, a degree
of haste was suddenly evinced to secure once more to the public
treasury this new and unexpected source of wealth; and at one blow
the contract with Quiroz & Allier, which had previously been
extended, was reduced to one year. Their claims were cancelled by
the payment of ten thousand tons of guano which Congress decreed
them. There still remained to be settled the just and acknowledged
indebtedness for benefits conferred on the country by Cochet,
benefits which could not be denied as wealth and prosperity rolled in
on the government and on the people. But few, if any, troubled
themselves about the question to whom they were indebted for so
much good fortune, nor had time to pay particular attention to
Cochet’s claims. Finally, however, Congress was led to declare Cochet
the true discoverer of the value, uses and application of guano for
European agriculture, and a grant of 5,000 tons was made in his
favor September 30th, 1849, but was never paid him. After passing a
period of years in hopeless expectancy—from 1840 to 1851—his
impoverished circumstances made it necessary for him to endeavor
to procure, through the influence of his own government, that
measure of support in favor of his claims which would insure him a
competency in his old age.
He resolved upon returning to France, after having spent the best
part of his life in the service of a country whose cities had risen from
desolation to splendor under the sole magic of his touch—a touch
that had in it for Peru all the fabled power of the long-sought
“philosopher’s stone.” In 1853 Cochet returned to France, but he was
then already exhausted by enthusiastic explorations in a deadly
climate and never rallied. He lingered in poverty for eleven painful
years and died in Paris in an almshouse in 1864, entitled to an estate
worth $500,000,000—the richest man in the history of the world—
and was buried by the city in the Potters’ Field; his wonderful history
well illustrating that truth is stranger than fiction.
THE LANDREAU CLAIM.
About the year 1844 Jean Theophile Landreau, also a French

citizen, in partnership with his brother, John C. Landreau, a
naturalized American citizen, upon the faith of the promised
premium of 33⅓ per cent. entered upon a series of extended
systematic and scientific explorations with a view to ascertaining
whether the deposits of guano particularly pointed out by Cochet
constituted the entire guano deposit of Peru, and with money
furnished by his partner, John, Theophile prosecuted his searches
with remarkable energy and with great success for twelve years,
identifying beds not before known to the value of not less than
$400,000,000. Well aware, however, of the manner in which his
fellow-countryman had been neglected by an unprincipled people, he
had the discretion to keep his own counsel and to extort from the
Peruvian authorities an absolute agreement in advance before he
revealed his treasure. This agreement was, indeed, for a royalty of
less than one sixth the amount promised, but the most solemn
assurances were given that the lessened amount would be promptly
and cheerfully paid, its total would give the brothers each a large
fortune, and payments were to begin at once. The solemn agreement
having been concluded and duly certified, the precious deposits
having been pointed out and taken possession of by the profligate
government, the brothers were at first put off with plausible pretexts
of delay, and when these grew monotonous the government calmly
issued a decree recognizing the discoveries, accepting the treasure,
and annulling the contract, with a suggestion that a more suitable
agreement might be arranged in the future.
It will be seen that these two men, Cochet and Landreau, have
been acknowledged by the Peruvian government as claimants. No
attempt has ever been made to deny the indebtedness. The very
decree of repudiation reaffirmed the obligation, and all the courts
refused to pronounce against the plaintiffs. Both of these claims
came into the possession of Mr. Peter W. Hevenor, of Philadelphia.
Cochet left one son whom Mr. Hevenor found in poverty in Lima and
advanced money to push his father’s claim of $500,000,000 against
the government. After $50,000 were spent young Cochet’s backer
was surprised to learn of the Laudreaus and their claim. Not wishing
to antagonize them, he advanced them money, and in a short time
owned nearly all the fifteen interests in the Landreau claim of
$125,000,000.
To the Peruvian Company Mr. Hevenor has transferred his titles,
and on the basis of these that corporation maintains that eventually
it will realize not less than $1,200,000,000, computed as follows:
The amount of guano already taken out of the Cochet Islands—
including the Chinchas—will be shown by the Peruvian Custom
House records, and will aggregate, it is said, not far from
$1,200,000,000 worth. The discoverer’s one-third of this would be
$400,000,000, and interest upon this amount at six per cent. say for
an equalized average of twenty years—would be $480,000,000
more. The amount remaining in these islands is not positively
known, and is probably not more than $200,000,000 worth; and in
the Landreau deposits say $300,000,000 more. The Chilean
plenipotentiary recently announced that his government are about
opening very rich deposits on the Lobos Islands—which are included
in this group. It is probably within safe limits, says the Peruvian
Company’s prospectus, to say that, including interest to accrue
before the claim can be fully liquidated, its owners will realize no less
than $1,200,000,000.
THE COUNTRIES INVOLVED.
In South America there are ten independent governments; and the

three Guianas which are dependencies on European powers. Of the
independent governments Brazil is an empire, having an area of
3,609,160 square miles and 11,058,000 inhabitants. The other nine
are republics. In giving area and population we use the most
complete statistics at our command, but they are not strictly reliable,
nor as late as we could have wished. The area and the population of
the republics are: Venezuela, 426,712 square miles and 2,200,000
inhabitants; United States of Colombia, 475,000 square miles and
2,900,000 inhabitants; Peru, 580,000 square miles and 2,500,000
inhabitants; Ecuador, 208,000 square miles and 1,300,000
inhabitants; Bolivia, 842,730 square miles and 1,987,352
inhabitants; Chili, 200,000 square miles and 2,084,960 inhabitants;
Argentine Republic, 1,323,560 square miles and 1,887,000
inhabitants; Paraguay, 73,000 square miles and 1,337,439
inhabitants; Uruguay, 66,716 square miles and 240,000 inhabitants,
or a total in the nine republics of 3,789,220 square miles and
16,436,751 inhabitants. The aggregate area of the nine republics
exceeds that of Brazil 180,060 square miles, and the total population
exceeds that of Brazil 5,069,552. Brazil, being an empire, is not
comprehended in the Blaine proposal—she rather stands as a strong
barrier against it. Mexico and Guatemala are included, but are on
this continent, and their character and resources better understood
by our people. In the South American countries generally the
Spanish language is spoken. The educated classes are of nearly pure
Spanish extraction. The laboring classes are of mixed Spanish and
aboriginal blood, or of pure aboriginal ancestry. The characteristics
of the Continent are emphatically Spanish. The area and population
we have already given. The territory is nearly equally divided
between the republics and the empire, the former having a greater
area of only 180,060 square miles; but the nine republics have an
aggregate population of 5,059,522 more than Brazil. The United
States has an area of 3,634,797 square miles, including Alaska; but
excluding Alaska, it has 3,056,797 square miles. The area of Brazil is
greater than that of the United States, excluding Alaska, by 552,363
square miles, and the aggregate area of the nine republics is greater
by 732,423 square miles. This comparison of the area of the nine
republics and of Brazil with that of this nation gives a definite idea of
their magnitude. Geographically, these republics occupy the
northern, western and southern portions of South America, and are
contiguous. The aggregate exports and imports of South America,
according to the last available data, were $529,300,000; those of
Brazil, $168,930,000; of the nine republics, $360,360,000.
These resolutions will bring out voluminous correspondence, but
we have given the reader sufficient to reach a fair understanding of
the subject. Whatever of scandal may be connected with it, like the
Star Route cases, it should await official investigation and
condemnation. Last of all should history condemn any one in
advance of official inquiry. None of the governments invited to the
Congress had accepted formally, and in view of obstacles thrown in
the way by the present administration, it is not probable they will.
Accepting the proposition of Mr. Blaine as stated in his letter to
President Arthur, as conveying his true desire and meaning, it is due
to the truth to say that it comprehends more than the Monroe
doctrine, the text of which is given in President Monroe’s own words
in this volume. While he contended against foreign intervention with
the Republics on this Hemisphere, he never asserted the right of our
government to participate in or seek the control either of the
internal, commercial or foreign policy of any of the Republics of
America, by arbitration or otherwise. So that Mr. Blaine is the author
of an advance upon the Monroe doctrine, and what seems at this
time a radical advance. What it may be when the United States seeks
to “spread itself” by an aggressive foreign policy, and by
aggrandizement of new avenues of trade, possibly new acquisitions
of territory, is another question. It is a policy brilliant beyond any
examples in our history, and a new departure from the teachings of
Washington, who advised absolute non-intervention in foreign
affairs. The new doctrine might thrive and acquire great popularity
under an administration friendly to it; but President Arthur has
already intimated his hostility, and it is now beyond enforcement
during his administration. The views of Congress also seem to be
adverse as far as the debates have gone into the question, though it
has some warm friends who may revive it under more favorable
auspices.
The Star Route Scandal.
Directly after Mr. James assumed the position of Postmaster-

General in the Cabinet of President Garfield, he discovered a great
amount of extravagance and probably fraud in the conduct of the
mail service known as the Star Routes, authorized by act of Congress
to further extend the mail facilities and promote the more rapid
carriage of the mails. These routes proved to be very popular in the
West and Southwest, and the growing demand for mail facilities in
these sections would even in a legitimate way, if not closely watched,
lead to unusual cost and extravagance; but it is alleged that a ring
was formed headed by General Brady, one of the Assistant
Postmaster-Generals under General Key, by which routes were
established with the sole view of defrauding the Government—that
false bonds were given and enormous and fraudulent sums paid for
little or no service. This scandal was at its height at the time of the
assassination of President Garfield, at which time Postmaster-
General James, Attorney-General MacVeagh and other officials were
rapidly preparing for the prosecution of all charged with the fraud.
Upon the succession of President Arthur he openly insisted upon the
fullest prosecution, and declined to receive the resignation of Mr.
MacVeagh from the Cabinet because of a stated fear that the
prosecution would suffer by his withdrawal. Mr. MacVeagh, however,
withdrew from the Cabinet, believing that the new President should
not by any circumstance be prevented from the official association of
friends of his own selection; and at this writing Attorney-General
Brewster is pushing the prosecutions.
On the 24th of March, 1882, the Grand Jury sitting at Washington
presented indictments for conspiracy in connection with the Star
Route mail service against the following named persons: Thomas J.
Brady, J. W. Dorsey, Henry M. Vail, John W. Dorsey, John R. Miner,
John M. Peck, M. C. Rerdell, J. L. Sanderson, Wm. H. Turner. Also
against Alvin O. Buck, Wm. S. Barringer and Albert E. Boone, and
against Kate M. Armstrong for perjury. The indictment against
Brady, Dorsey and others, which is very voluminous, recites the
existence, on March 10, 1879, of the Post Office Department,
Postmaster-General and three assistants, and a Sixth Auditor’s office
and Contract office and division.
“To the latter was subject,” the indictment continues, “the
arrangement of the mail service of the United States and the letting
out of the same on contract.” It then describes the duties of the
inspecting division. On March 10, 1879, the grand jurors represent,
Thomas J. Brady was the lawful Second Assistant Postmaster-
General engaged in the performance of the duties of that office.
William H. Turner was a clerk in the Second Assistant Postmaster-
General’s office, and attended to the business of the contract division
relating to the mail service over several post routes in California,
Colorado, Oregon, Nebraska, and the Territories. On the 16th of
March, 1879, the indictment represents Thomas J. Brady as having
made eight contracts with John W. Dorsey to carry the mails from
July 1, 1878, to June 30, 1882, from Vermillion, in Dakota Territory,
to Sioux Falls and back, on a fourteen hour time schedule, for $398
each year; on route from White River to Rawlins, Colorado, once a
week of 108 hours’ time, for $1,700 a year; on route from Garland,
Colorado, to Parrott City, once a week, on a schedule of 168 hours’
time, for $2,745; on route from Ouray, Colorado, to Los Pinos, once a
week, in 12 hours’ time, for $348; on route from Silverton, Colorado,
to Parrott City, twice a week, on 36 hours’ time, for $1,488; on route
from Mineral Park, in Arizona Territory, to Pioche and back, once a
week, in 84 hours’ time, $2,982; on route from Tres Almos to Clifton
and back, once a week, of 84 hours’ time, for $1,568.
It further sets forth that the Second Assistant Postmaster-General
entered into five contracts with John R. Miner on June 13, 1878, on
routes in Dakota Territory and Colorado, and on March 15, 1879,
with John M. Peck, over eight post routes. In the space of sixty days
after the making of these contracts they were in full force. On March
10, 1879, John W. Dorsey, John R. Miner, and John M. Peck, with
Stephen W. Dorsey and Henry M. Vaile, M. C. Rerdell and J. L.
Sanderson, mutually interested in these contracts and money, to be
paid by the United States to the three parties above named, did
unlawfully and maliciously combine and conspire to fraudulently
write, sign, and cause to be written and signed, a large number of
fraudulent letters and communications and false and fraudulent
petitions and applications to the Postmaster-General for additional
service and increase of expenditure on the routes, which were
purported to be signed by the people and inhabitants in the
neighborhood of the routes, which were filed with the papers in the
office of the Second Assistant Postmaster-General. Further that these
parties swore falsely in describing the number of men and animals
required to perform the mail service over the routes and States as
greater than was necessary.
These false oaths were placed on file in the Second Assistant
Postmaster-General’s office; and by means of Wm. H. Turner falsely
making and writing and endorsing these papers, with brief and
untrue statements as to their contents, and by Turner preparing
fraudulent written orders for allowances to be made to these
contractors and signed by Thomas J. Brady fraudulently, and for the
benefit and gain of all the parties named in this bill, the service was
increased over these routes; and that Brady knew it was not lawfully
needed and required. That he caused the order for increasing to be
certified to and filed in the Sixth Auditor’s office for fraudulent
additional compensation. That Mr. Brady gave orders to extend the
service so as to include other and different stations than those
mentioned in the contract, that he and others might have the
benefits and profits of it: that he refused to impose fines on these
contracts for failures and delinquencies, but allowed them additional
pay for the service over these routes. During the continuance of these
contracts the parties acquired unto themselves several large and
excessive sums of money, the property of the United States,
fraudulently and unlawfully ordered to be paid them by Mr. Brady.
These are certainly formidable indictments. Others are pending
against persons in Philadelphia and other cities, who are charged
with complicity in these Star Route frauds, in giving straw bonds, &c.
The Star Route service still continues, the Post Office Department
under the law having sent out several thousand notifications this
year to contractors, informing them of the official acceptance of their
proposals, and some of these contractors are the same named above
as under indictment. This well exemplifies the maxim of the law
relative to innocence until guilt be shown.
The Coming States.
Bills are pending before Congress for the admission of Dakota,

Wyoming, New Mexico and Washington Territories. The Bill for the
admission of Dakota divides the old Territory, and provides that the
new State shall consist of the territory included within the following
boundaries: Commencing at a point on the west line of the State of
Minnesota where the forty-sixth degree of north latitude intersects
the same; thence south along the west boundary lines of the States of
Minnesota and Iowa to the point of intersection with the northern
boundary line of the State of Nebraska; thence westwardly along the
northern boundary line of the State of Nebraska to the twenty-
seventh meridian of longitude west from Washington; thence north
along the said twenty-seventh degree of longitude to the forty-sixth
degree of north latitude; to the place of beginning. The bill provides
for a convention of one hundred and twenty delegates, to be chosen
by the legal voters, who shall adopt the United States Constitution
and then proceed to form a State Constitution and government. Until
the next census the State shall be entitled to one representative, who,
with the Governor and other officials, shall be elected upon a day
named by the Constitutional Convention. The report sets apart lands
for school purposes, and gives the State five per centum of the
proceeds of all sales of public lands within its limits subsequent to its
admission as a State, excluding all mineral lands from being thus set
apart for school purposes. It provides that portion of the Territory
not included in the proposed new State shall continue as a Territory
under the name of the Territory of North Dakota.
The proposition to divide comes from Senator McMillan, and if
Congress sustains the division, the portion admitted would contain
100,000 inhabitants, the entire estimated population being 175,000
—a number in excess of twenty of the present States when admitted,
exclusive of the original thirteen; while the division, which shows
100,000 inhabitants, is still in excess of sixteen States when
admitted.
Nevada, with less than 65,000 population, was admitted before
the close Presidential election of 1876, and it may be said that her
majority of 1,075, in a total poll of 19,691 votes, decided the
Presidential result in favor of Hayes, and these votes counteracted
the plurality of nearly 300,000 received by Mr. Tilden elsewhere.
This fact well illustrates the power of States, as States, and however
small, in controlling the affairs of the country. It also accounts for the
jealousy with which closely balanced political parties watch the
incoming States.
Population is but one of the considerations entering into the
question of admitting territories, State sovereignty does not rest
upon population, as in the make up of the U. S. Senate neither
population, size, nor resources are taken into account. Rhode Island,
the smallest of all the States, and New York, the great Empire State,
with over 5,000,000 of inhabitants, stand upon an equality in the
conservative branch of the Government. It is in the House of
Representatives that the population is considered. Such is the
jealousy of the larger States of their representation in the U. S.
Senate, that few new ones would be admitted without long and
continuous knocking if it were not for partisan interests, and yet
where a fair number of people demand State Government there is no
just cause for denial. Yet all questions of population, natural division,
area and resources should be given their proper weight.
The area of the combined territories—Utah, Washington, New
Mexico, Dakota, Arizona, Montana, Idaho, Wyoming and Indian is
about 900,000 square miles. We exclude Alaska, which has not been
surveyed.
Indian Territory and Utah are for some years to come excluded
from admission—the one being reserved to the occupancy of the
Indians, while the other is by her peculiar institution of polygamy,
generally thrown out of all calculation. And yet it may be found that
polygamy can best be made amenable to the laws by the compulsory
admission of Utah as a State—an idea entertained by not a few who
have given consideration to the question. Alaska may also be counted
out for many years to come. There are but 30,000 inhabitants, few of
these permanent, and Congress is now considering a petition for the
establishment of a territorial government there.
Next to Dakota, New Mexico justly claims admission. The lands
comprised within its original area were acquired from Mexico, at the
conclusion of the war with that country, by the treaty of Guadalupe
Hidalgo in 1848, and by act of September 9, 1850, a Territorial
government was organized. By treaty of December 30, 1853, the
region south of the Gila river—the Gadsden purchase, so called—was
ceded by Mexico, and by act of August 4, 1854, added to the
Territory, which at that time included within its limits the present
Territory of Arizona. Its prayer for admission was brought to the
serious attention of Congress in 1874. The bill was presented in an
able speech by Mr. Elkins, then delegate from the Territory, and had
the warm support of many members. A bill to admit was also
introduced in the Senate, and passed that body February 25, 1875, by
a vote of thirty-two to eleven, two of the present members of that
body, Messrs. Ingalls and Windom, being among its supporters. The
matter of admission came up for final action in the House at the
same session, just prior to adjournment, and a motion to suspend
the rules, in order to put it upon its final passage, was lost by a vote
of one hundred and fifty-four to eighty-seven, and the earnest efforts
to secure the admission of New Mexico were thus defeated. A bill for
its admission is now again before Congress, and it is a matter of
interest to note the representations as to the condition of the
Territory then made, and the facts as they now exist. It has,
according to the census of 1880, a population of 119,565. It had in
1870 a population of 91,874. It was claimed by the more moderate
advocates of the bill that its population then numbered 135,000
(15,435 more than at present), while others placed it as high as
145,000. Of this population, 45,000 were said to be of American and
European descent. It was stated by Senator Hoar, one of the
opponents of the bill, that, out of an illiterate population of 52,220,
by far the larger part were native inhabitants of Mexican or Spanish
origin, who could not speak the English language. This statement
seems to be in large degree confirmed by the census of 1880, which
shows a total native white population of 108,721, of whom, as nearly
as can be ascertained, upward of 80 per cent. are not only illiterates
of Mexican and Spanish extraction, but as in 1870, speaking a foreign
language. The vote for Mr. Elkins, Territorial Delegate in 1875, was
reported as being about 17,000. The total vote in 1878 was 18,806,
and in 1880, 20,397, showing a comparatively insignificant increase
from 1875 to 1880.
The Territory of Washington was constituted out of Oregon, and
organized as a Territory by act of March 2, 1853. Its population by
the census of 1880 was 75,116, an increase from 23,955 in 1870. Of
this total, 59,313 are of native and 15,803 of foreign nativity. Its total
white population in the census year was 67,119; Chinese, 3,186;
Indian, 4,105; colored, 326, and its total present population is
probably not far from 95,000. Its yield of precious metals in 1880,
and for the entire period since its development, while showing
resources full of promise, has been much less than that of any other
of the organized Territories. Its total vote for Territorial Delegate in
1880, while exceeding that of the Territories of Arizona, Idaho, and
Wyoming, was but 15,823.
The Territory of Arizona, organized out of a portion of New
Mexico, and provided with a territorial government in 1863, contains
about 5,000,000 acres less than the Territory of New Mexico, or an
acreage exceeded by that of only five States and Territories. Its total
population in 1870 was 9,658, and in 1880, 40,440, 35,160 of whom
were whites. Of its total population in the census year, 24,391 were of
native and 16,049 of foreign birth, the number of Indians, Chinese,
and colored being 5,000.
Idaho was originally a part of Oregon, from which it was separated
and provided with a territorial government by the act of March 3,
1863. It embraces in its area a little more than 55,000,000 acres, and
had in 1880 a total population of 32,610, being an increase from
14,999 in 1870. Of this population, 22,636 are of native and 9,974 of
foreign birth; 29,013 of the total inhabitants are white, 3,379 Chinese
and 218 Indians and colored.
The Territory of Montana, organized by act of May 26, 1864,
contains an acreage larger than that of any other Territory save
Dakota. While it seems to be inferior in cereal producing capacity, in
its area of valuable grazing lands it equals, if it does not excel, Idaho.
The chief prosperity of the Territory, and that which promises for it a
future of growing importance, lies in its extraordinary mineral
wealth, the productions of its mines in the year 1880 having been
nearly twice that of any other Territory, with a corresponding excess
in its total production, which had reached, on June 30, 1880, the
enormous total of over $53,000,000. Its mining industries represent
in the aggregate very large invested capital, and the increasing
products, with the development of new mines, are attracting
constant additions to its population, which in 1880 showed an
increase, as compared with 1870, of over 90 per cent. For particulars
see census tables in tabulated history.
Wyoming was constituted out of the Territory of Dakota, and
provided with territorial government July 25, 1868. Lying between
Colorado and Montana, and adjoining Dakota and Nebraska on the
east, it partakes of the natural characteristics of these States and
Territories, having a fair portion of land suitable for cultivation, a
large area suitable for grazing purposes, and a wealth in mineral
resources whose development, although of recent beginning, has
already resulted in an encouraging yield in precious metals. It is the
fifth in area.
Henry Randall Waite, in an able article in the March number of
the International Review (1882,) closes with these interesting
paragraphs:
“It will be thus seen that eleven States organized from Territories,
when authorized to form State governments, and the same number
when admitted to the Union, had free populations of less than
60,000, and that of the slave States included in this number, seven
in all, not one had the required number of free inhabitants, either
when authorized to take the first steps toward admission or when
finally admitted; and that both of these steps were taken by two of
the latter States with a total population, free and slave, below the
required number. Why so many States have been authorized to form
State governments, and have been subsequently admitted to the
Union with populations so far below the requirements of the
ordinance of 1787, and the accepted rules for subsequent action may
be briefly explained as follows: 1st, by the ground for the use of a
wide discretion afforded in the provisions of the ordinance of 1787,
for the admission of States, when deemed expedient, before their
population should equal the required number; and 2d. by the equally
wide discretion given by the Constitution in the words, ‘New States
may be admitted by Congress into this Union,’ the only provision of
the Constitution bearing specifically upon this subject. Efforts have
been made at various times to secure the strict enforcement of the
original rules, with the modification resulting from the increase in
the population of the Union, which provided that the number of free
inhabitants in a Territory seeking admission should equal the
number established as the basis of representation in the
apportionment of Representatives in Congress, as determined by the
preceding census. How little success the efforts made in this
direction have met, may be seen by a comparison of the number of
inhabitants forming the basis of representation, as established by the
different censuses, and the free population of the Territories
admitted at corresponding periods.
“At this late date, it is hardly to be expected that rules so long
disregarded will be made applicable to the admission of the States to
be organized from the existing Territories. There is, nevertheless, a
growing disposition on the part of Congress to look with disfavor
upon the formation of States whose population, and the development
of whose resources, render the expediency of their admission
questionable; and an increasing doubt as to the propriety of so
dividing the existing Territories as to multiply to an unnecessary
extent the number of States, with the attendant increase in the
number of Representatives in the National Legislature.
“To recapitulate the facts as to the present condition of the
Territories with reference to their admission as States, it may be said
that only Dakota, Utah, New Mexico and Washington are in
possession of the necessary population according to the rule
requiring 60,000; that only the three first named conform to the rule
demanding a population equal to the present basis of representation;
that only Dakota, Utah and Washington give evidence of that
intelligence on the part of their inhabitants which is essential to the
proper exercise, under favorable conditions, of the extended rights of
citizenship, and of that progress in the development of their
resources which makes self-government essential, safe, or in any way
desirable; and that only Dakota can be said, unquestionably, to
possess all of the requirements which, by the dictates of a sound
policy, should be demanded of a Territory at this time seeking
admission to the Union.
“Whatever the response to the Territorial messengers now waiting
at the doors of Congress, a few years, at most, will bring an answer to
their prayers. The stars of a dozen proud and prosperous States will
soon be added to those already blazoned upon the blue field of the
Union, and the term Territory, save as applied to the frozen regions
of Alaska, will disappear from the map of the United States.”
The Chinese Question.
Since 1877 the agitation of the prohibition of Chinese immigration

in California and other States and Territories on the Pacific slope has
been very great. This led to many scenes of violence and in some
instances bloodshed, when one Dennis Kearney led the
Workingmen’s party in San Francisco. On this issue an agitator and
preacher named Kalloch was elected Mayor. The issue was carried to
the Legislature, and in the vote on a constitutional amendment it was
found that not only the labor but nearly all classes in California were
opposed to the Chinese. The constitutional amendment did not meet
the sanction of the higher courts. A bill was introduced into Congress
restricting Chinese immigrants to fifteen on each vessel. This passed
both branches, but was vetoed by President Hayes on the ground
that it was in violation of the spirit of treaty stipulations. At the
sessions of 1881–82 a new and more radical measure was
introduced. This prohibits immigration to Chinese or Coolie laborers
for twenty years. The discussion in the U. S. Senate began on the
28th of February, 1882, in a speech of unusual strength by Senator
John F. Miller, the author of the Bill. From this we freely quote, not
alone to show the later views entertained by the people of the Pacific
slope, but to give from the lips of one who knows the leading facts in
the history of the agitation.

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(Original PDF) Quantitative Analysis for

Management 13th Edition by Barry

BARRY RENDER • RALPH M. STAIR, JR. • MICHAEL E. HANNA • TREVOR S. HALE

4.7 Multiple Regression Analysis 126

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7.2 Formulating LP Problems 239

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Diet Problems 305 Ranking Goals with Priority Levels 371

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Service Facility Characteristics 430 Role of Computers in Simulation 485

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APPENDIX D F Distribution Values 558 Using Expected Monetary Value to Make a

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Changes in the Objective Function

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Significant Changes to the Thirteenth Edition

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Stephen Achtenhagen, San Jose University Arun Khanal, Nobel College

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Thomas Sloan, University of Massachusetts–Lowell Chris Vertullo, Marist College

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1.1 What Is Quantitative Analysis?

1.2 Business Analytics

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1.3 The Quantitative Analysis Approach

HISTORY The Origin of Quantitative Analysis

Q uantitative analysis has been in existence since the begin-

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FIGURE 1.1 Defining the Problem

Acquiring Input Data

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IN ACTION Operations Research and Oil Spills

O perations researchers and decision scientists have been in-

Testing the Solution

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Analyzing the Results and Sensitivity Analysis

Implementing the Results

The Quantitative Analysis Approach and Modeling in the Real World

1.4 How to Develop a Quantitative Analysis Model

Profit = Revenue - Expenses

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CHILI AND PERU.

The entire question is complicated by the war between Chili and

All of these things surround the question with scandals which

The inner history of what is known as the Peruvian Company reads

THE LANDREAU CLAIM.

About the year 1844 Jean Theophile Landreau, also a French

THE COUNTRIES INVOLVED.

In South America there are ten independent governments; and the

Directly after Mr. James assumed the position of Postmaster-

Bills are pending before Congress for the admission of Dakota,

Since 1877 the agitation of the prohibition of Chinese immigration

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