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MME3271 Lecture02 IntroductionToTheQuantitativeAnalysis
MME3271 Lecture02 IntroductionToTheQuantitativeAnalysis
International Islamic University Malaysia Problem Solving & Decision Making (1)
7 Steps of Problem Solving
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International Islamic University Malaysia Problem Solving & Decision Making (2)
Types of analysis for decision making
based largely on the managers judgment and experience includes the managers intuitive feel for the problem is more of an art than a science
Qualitative Analysis
Quantitative Analysis
analyst will concentrate on the quantitative facts or data associated with the problem analyst will develop mathematical expressions that describe the objectives, constraints, and other relationships that exist in the problem analyst will use one or more quantitative methods to make a recommendation
International Islamic University Malaysia Problem Solving & Decision Making (3)
Our focus in this course would be;
based largely on the managers judgment and experience includes the managers intuitive feel for the problem is more of an art than a science
Qualitative Analysis
Quantitative Analysis
analyst will concentrate on the quantitative facts or data associated with the problem analyst will develop mathematical expressions that describe the objectives, constraints, and other relationships that exist in the problem analyst will use one or more quantitative methods to make a recommendation
International Islamic University Malaysia Qualitative Analysis & Decision Making (1)
Potential reasons for a quantitative analysis approach to decision making Complex
Repetitive
Important
New
International Islamic University Malaysia Qualitative Analysis & Decision Making (2)
Quantitative Analysis Process
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Model Model Development Development Data Preparation Model Solution Report Generation
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Analog Model
physical in form, but do not physically resemble the object being modeled
represent real world problems through a system of mathematical formulas and expressions based on key assumptions, estimates, or statistical analyses
Mathematical Model
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Advantages
Less expensive Less risk
* The more closely the model represents the real situation, the accurate the conclusions and predictions will be.
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Iconic Model
Analog Model
physical in form, but do not physically resemble the object being modeled
represent real world problems through a system of mathematical formulas and expressions based on key assumptions, estimates, or statistical analyses
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Decision Variables
Deterministic Model
if all uncontrollable inputs to the model are known and cannot vary
Stochastic *
(or probabilistic)
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Frequently a less complicated (and perhaps less precise) model is more appropriate than a more complex and accurate one due to cost and ease of solution considerations
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Mathematical Model
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Question
Answer
Management science can provide a structured, quantitative approach for determining the minimum project completion time based on the activities' normal times and then based on the activities' expedited (reduced) times.
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Question
Answer
Normal and expedited activity completion times Activity expediting costs Funds available for expediting Precedence relationships of the activities
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Question
What would be the decision variables of the mathematical model? The objective function? The constraints?
Answer
Decision variables: which activities to expedite and by how much, and when to start each activity Objective function: minimize project completion time Constraints: do not violate any activity precedence relationships and do not expedite in excess of the funds available
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Question
Answer
Stochastic. Activity completion times, both normal and expedited, are uncertain and subject to variation. Activity expediting costs are uncertain. The number of activities and their precedence relationships might change before the project is completed due to a project design change
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Question
Answer
Make the model deterministic by assuming normal and expedited activity times are known with certainty and are constant. The same assumption might be made about the other stochastic, uncontrollable inputs
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Model Development
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Model Development Data Preparation Model Model Solution Solution Report Generation
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Some small models/problems can be solved by hand calculations Most practical applications require using a computer
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Microsoft Excel
LINGO
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Asses goodness/accuracy Generate Solution (Math. Model) (Test on part of the model which solution is known or expected )
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Easily understood Should includes Recommended decision Other pertinent information such as sensitivity of the assumption on the model
Successful implementation is critical Maximize user involvement in modeling process Continuous monitoring on model contribution Refine or expand the model if needed
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Also, it is assumed that age and mileage devalue a car in a linear manner and without limit. (Note, the starting bid for a very old car might be negative!)
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Let 1 and 2 denote this month's production level of product 1 and product 2, respectively. Denote by 1 and 2 the unit profits for products 1 and 2, respectively. Iron Works, Inc. has a contract calling for at least m units of product 1 this month. The firm's facilities are such that at most n units of product 2 may be produced monthly.
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Steel
Production
x1 > m
1
x2 < n
2 -
Unit Profit
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s.t.
1 1 + 2 2 b 1 m 2 n 2 0
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2000 60 720 0
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Answer:
One cannot produce and sell of an engine. Thus, the problem is further 3 restricted by the fact that both x1 and x2 must be integers. (They could remain fractions if it is assumed these fractions are work in progress to be completed the next month.)
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Mathematical Model
Max 100x1 + 200x2 60 units Prod. 1 s.t. 2x1 + 3x2 < 2000 x1 > 60 x2 < 720 Profit = $131,333.33 Steel Used = 2000)
x2 > 0
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Steel
Production
x1 > m
1
x2 < n
2 -
Unit Profit
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s.t.
1 1 + 2 2 b 1 m 2 n 2 0
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