Management Science

Reporter : Prado, Jude G.

Quantitative approach to Management

The quantitative approach to management

involves the use of quantitative techniques, such
as statistics, information models, and computer
simulations, to improve decision making. 

During World War II, mathematicians,

physicists, and other scientists joined together to
solve military problems. The quantitative school
of management is a result of the research
conducted during World War II. 
 The key Managerial Responsibility
Managers make decisions. Some of these decisions are made
largely on the basis of “intuition or feeling”.
Example: Deciding to raise the price during negotiation with
a large customer.
Deciding which combination of machines, Jobs to be done,
and workable employee which can generate lowest total
manufacturing cost for a large plant is a decision which can
use “ Quantitative Technique”.
 Management Science or
Operations Research

Is a quantitative approach to management decision

making. It can help managers make better decisions.
If you were hired as an management science or
operational research specialist you should follow the
six steps in helping managers make better decisions.
 Characteristics of Management
Science / Operation Research
1. It has decision making approach – The main objectives of MS/OR
is to find optimal solution to to the problem under consideration.

2. It has Scientific approach- It uses various scientific methods,

models and tools to solve complex organization problems.

3. It has Interdisciplinary Team approach- An OR Team Consists of

expert from science, Mathematics, Engineering, And they are from
different discipline.
4. It is a continuing process- It cannot stop from the application to one
problem, because th application of a model may create new problems in
other sectors.
 When do managers used Quantitative
methods?
1. When the problem is complex.
2. When the problem involves many variables.
3. When there are data which describe the decision
environment.
4. When therecare data which describe the value or utility of
the different possible alternatives.
5. When the goals of the decision maker or organization can
describe in quantitative terms.
6. When workable models are available for these situations.
 Steps in Management Science or
Operations Research

1. Observe the Problem environment.

Activities : Site visits, Output : Sufficient information
conferences, observations and and support to proceed.
research.

2. Analyze and define the problem.

Activities : Define use, Output : Clear grasp of need for
define objectives and and nature of solution requested.
define limitations.
 3. Develop a model.

Activities : MS/OR tools, Output : Model that works

mathematical models and understated environmental
research. constrainst.

4. Select appropriate data input.

Activities : Internal- external data, Output : Sufficient inputs to

Facts, opinion and computer data operate and test model.
banks.
 5. Provide a solution and test its reasonableness.

Activities :Testing, Output : Solutions that support

Limitations and current organizational objectives.
verification.

6. Implement the solution.

Activities : Behavioral issues, Output : Ownership by

Selling the idea, Management management sufficient to
involvement and Explanations. support larger run operation of
model.
 Emergence of Management Science/
Operations Research
Amultdisciplinary Approach to complex problems
emerged as a separate field when:

• When Industrial Engineers became inter.ested in

the overall operations of the firm.
• Natural and social scientists became interested
in management problems.
 Development of scientific management
from industrial engineering to
management science/ operations research
Industrial Engineering was born when the scientific was applied to
management problems.
• Books of exodus, Jethro( Moses Father in Law) is credited with a
treative of organizational principles.
1832 – Charles Babbage wrote on the economy of machinery and
manufacturers showing industrial engineering insight.

19th Century – Frederick Taylor who is the father of scientific

management has his “shovel study” about the productivity of
men shovelling ORE.
 Productivity Ratio Model

The term “productivity” refers to the performance metric that

is usually used to measure the efficiency of the production
process of a company during a given period of time.

It can be used to measure the efficiency of human capital or

machine.
 The above formula is the underlying principle for various productivity
metrics, such as revenue per employee, revenue per hour, units produced per
hour, etc.

Let us take the example of a production manager who wants to assess the
productivity of all the employees in the company. According to the accounts
department, the company had produced 150,000 units last quarter, which
required 20 labors to work for 22 days a month and 8 hours per day. Calculate
the productivity of the employees in terms of units produced per hour.
 Calculation
of Input
Input = No. of Labors * No. of Months
* No. of Working Days per Month * No.
of Working Hours per Day
Input = 20 * 3 * 22 * 8 hours
Input = 10,560 hours
Calculation of
Productivity
Productivity = Output / Input
Productivity = 150,000 units / 10,560
hours
Productivity = 14.2 units/hour

Therefore, during the last quarter, the employees produced at a rate

of 14.2 units/hour.