Management Science Reviewer, Study notes of Family and Consumer Science

Download Management Science Reviewer and more Study notes Family and Consumer Science in PDF only on Docsity! MANAGEMENT SCIENCE ADVANCE READING 1. Quantitative Techniques a. meaning Quantitative Technique is the scientific way to managerial decision- making, while emotion and guess work are not part of the scientific management approach. This approach starts with data. Like raw material for a factory, this data is manipulated or processed into information that is valuable to people making decision. Quantitative methods emphasize objective measurements and the statistical, mathematical, or numerical analysis of data collected through polls, questionnaires, and surveys, or by manipulating pre-existing statistical data using computational techniques. Quantitative analysis is a mathematical and statistical method of studying behavior and predicting outcomes that investors and management use in their decision-making process. Quantitative techniques help a manager improve the overall quality of decision making. These techniques are most commonly used in the rational/logical decision model, but they can apply in any of the other models as well. Among the most common techniques are decision trees, payback analysis, and simulations. b. classification c. functions d. uses Application of scientific management and Analysis is more appropriate when there is not much of variation in problems due to external factors, and where input values are steady. In such cases, a model can be developed to suit the problem which helps us to take decisions faster. e. limitations 2. Introduction to management science Management Science is a scientific approach to managerial decision making whereby raw data are processed and manipulated resulting in meaningful information RAW DATA - QUANTITATIVE ANALYSIS - MEANINGFUL INFORMATION Management science also referred to as operations research, quantitative methods and analysis, and decision sciences. Quantitative factors might be different investment alternatives, interest rates, inventory levels, demand, or labor cost. Qualitative factors such as the weather, state and federal legislation, and technology breakthroughs should also be considered - Information may be difficult to quantify but can affect the decision-making process. Management scientist is a person skilled in the application of management science techniques A model is an abstract mathematical representation of a problem situation. A variable is a symbol used to represent an item that can take on any value. a. problem solving and decision making Decision-Making- is the act of selecting a preferred course of action among alternatives. Decision theory -is an analytic and systematic approach to the study of decision making. The Six Steps in Decision Making 1. Clearly define the problem at hand 2. List the possible alternatives 3. Identify the possible outcomes or states of nature 4. List the payoff or profit of each combination of alternatives and outcomes 5. Select one of the mathematical decision theory models 6. Apply the model and make your decision plant Do nothing 0 0 0 3. Criterion of realism (Hurwicz) A weighted average compromise between optimistic and pessimistic m™ Select a coefficient of realism a =™ Coefficient is between O and 1 A value of 1 is 100% optimistic Compute the weighted averages for each alternative Select the alternative with the highest value Weighted average = o(maximum in row) + (1 - o)(minimum in row) m@ For the large plant alternative using a = 0.8 (0.8)(200,000) + (1 - 0.8)(-180,000) = 124,000 m For the small plant alternative using a = 0.8 (0.8)(100,000) + (1 - 0.8)(-20,000) = 76,000 STATE OF NATURE FAVORABLE UNFAVORABLE CRITERION OF ALTERNATIVE MARKET ($) MARKET (S$) REALISM (a= 0.8)$ Construct a a large plant 200,000 ~180,000 124,000-realism Construct a small plant 100,000 -20,000 76,000 Do nothing 0 0 0 4. Equally likely (Laplace) Considers all the payoffs for each alternative m Find the average payoff for each alternative m™ Select the alternative with the highest average STATE OF NATURE rE FAVORABLE UNFAVORABLE ROW AVERAGE i MARKET ($) MARKET ($) () Construct a large plant 200,000 —180,000 10,000 Construct a a small plant 100,000 -20,000 40,000-equally like Do nothing 0 0 0 5. Minimax regret Based on opportunity loss or regret, the difference between the optimal profit and actual payoff for a decision ™ Create an opportunity loss table by determining the opportunity loss for not choosing the best alternative ™ Opportunity loss is calculated by subtracting each payoff in the column from the best payoff in the column m Find the maximum opportunity loss for each alternative and pick the alternative with the minimum number Opportunity Loss Tables STATE OF NATURE FAVORABLE MARKET ($) UNFAVORABLE MARKET (8) 200,000 — 200,000 0 — (-180,000) 200,000 — 100,000 0 — (-20,000) 200,000 - 0 0-0 STATE OF NATURE ALTERNATI FAVORABLE UNFAVORABLE WE Wad) MARKET (S$) Construct a large plant 0 180,000 Construct a small plant 100,000 20,000 Do nothing 200,000 0 imax Regret STATE OF NATURE FAVORABLE UNFAVORABLE AW Ley MARKET ($) MARKET (S$) ROW (S) Construct a large plant 0 180,000 180,000 Construct a ini small plant 100,000 20,000 100,000-minimax Do nothing 200,000 0 200,000 b. quantitative analysis Quantitative analysis is a mathematical and statistical method of studying behavior and predicting outcomes that investors and management use in their decision-making process