Lecture 1 Management Science Defined

Management Science

 Wikipedia

Management science (MS), is the broad interdisciplinary study of problem solving and decision making
in human organizations, with strong links to management, economics, business, engineering,
management consulting, and other sciences. It uses various scientific research-based principles,
strategies, and analytical methods including mathematical modeling, statistics and numerical
algorithms to improve an organization's ability to enact rational and accurate management decisions by
arriving at optimal or near optimal solutions to complex decision problems. Management sciences help
businesses to achieve goals using various scientific methods.

The field was initially an outgrowth of applied mathematics, where early challenges were problems
relating to the optimization of systems which could be modeled linearly, i.e., determining the optima
(maximum value of profit, assembly line performance, crop yield, bandwidth, etc. or minimum of loss,
risk, costs, etc.) of some objective function. Today, management science encompasses any
organizational activity for which the problem can be structured as a functional system so as to obtain a
solution set with identifiable characteristics.

• PCMag.com

The study of statistical methods, such as linear programming and simulation, in order to analyze and
solve organizational problems. Same as operations research

• Businessmanagementideas.com

A problem-solving process used by an interdisciplinary team to develop mathematical models that

represent simple-to-complex functional relationships and provide management with a basis for
decision-making and a means of uncovering new problems for quantitative analysis.

Management science encompasses, however, more than just the development of models for specific
problems. It makes a substantial contribution in a much broader area: the application of the output
from management science models for decision-making at the lower, middle, and top management
levels.

• Britannica.com

Management science, any application of science to the study of management. Originally a synonym for
operations research, the term management science (often used in the plural) now designates a distinct
field. Whereas operations research affords analytical data, statistics, and methods to increase the
efficiency of management systems, management science applies these tools in such fields as data
mining, engineering, economic forecasting, and logistics.

Management science initially included any application of science to management problems or to the
process of management itself; it thus encompassed operations research, systems analysis, and the
study of management-information systems.

Operations Research

• the application of scientific principles to business management, providing a quantitative basis

for complex decisions

• a discipline that deals with the application of advanced analytical methods to help make better
decisions
 • an analytical method of problem-solving and decision-making that is useful in the management
of organizations

• the application of mathematical (quantitative) techniques to decision making

Originally…

• Management Science

• Quantitative Techniques in Business

Frederick Winslow Taylor

• an American mechanical engineer who sought to improve industrial efficiency

• one of the first management consultants

• one of the intellectual leaders of the Efficiency Movement and his ideas, broadly conceived,
were highly influential in the Progressive Era (1890s-1920s)

• author of the book “The Principles of Scientific Management”

• Father of the Scientific Management & Efficiency Movement

• Father of Industrial Engineering

FW Taylor
Scientific Management Principles

1. Replace rule-of-thumb work methods with methods based on a scientific study of the tasks.

2. Scientifically select, train, and develop each employee rather than passively leaving them to
train themselves.

3. Provide "Detailed instruction and supervision of each worker in the performance of that
worker's discrete task" (Montgomery 1997: 250).

4. Divide work nearly equally between managers and workers, so that the managers apply
scientific management principles to planning the work and the workers actually perform the
tasks.

Rule of Thumb

• a broadly accurate guide or principle, based on experience or practice rather than theory

Art or Science

Qualitative or Quantitative?

• Qualitative

 Qualitative research is any which does not involve numbers or numerical data. It often
involves words or language, but may also use pictures or photographs and observations.

• Quantitative

 The data produced are always numerical, and they are analyzed using mathematical and
statistical methods. If there are no numbers involved, then it’s not quantitative
research.
Difference

Which will be taught?

Management Science

• Management science research can be done on three levels:

 The fundamental level lies in three mathematical disciplines: probability, optimization,

and dynamical systems theory.

 The modeling level is about building models, analyzing them mathematically, gathering
and analyzing data, implementing models on computers, solving them, experimenting
with them—all this is part of management science research on the modeling level. This
level is mainly instrumental, and driven mainly by statistics and econometrics.

 The application level, just as in any other engineering and economics disciplines, strives
to make a practical impact and be a driver for change in the real world.

• Management science is also concerned with so-called "soft-operational analysis", which

concerns methods for strategic planning, strategic decision support, and problem structuring
methods (PSM). At this level of abstraction, mathematical modeling and simulation will not
suffice. Therefore, during the past 30 years, a number of non-quantified modelling methods
have been developed. These include morphological analysis and various forms of influence
diagrams.

Quantitative Techniques

• Quantitative techniques may be defined as those techniques which provide the decision makes
a systematic and powerful means of analysis, based on quantitative data.

• It is a scientific method employed for problem solving and decision making by the management.

• With the help of quantitative techniques, the decision maker is able to explore policies for
attaining the predetermined objectives.

• In short, quantitative techniques are inevitable in decision-making process.

Classification of QT

• Mathematical
 • Statistical

• Programming

Mathematical Quantitative Techniques

• A technique in which quantitative data are used along with the principles of mathematics is
known as mathematical quantitative techniques

• Permutations and Combinations • Differentiation

• Set Theory • Integration

• Matrix Algebra • Differential Equation

• Determinants

Statistical Quantitative Techniques

• Statistical techniques are those techniques which are used in conducting the statistical enquiry
concerning to certain Phenomenon. They include all the statistical methods beginning from the
collection of data till interpretation of those collected data

• Collection of Data • Interpolation and Extrapolation

• Measures of Central Tendency, • Statistical Quality Control

Dispersion, Skewness and Kurtosis
• Ratio Analysis
• Correlation and Regression Analysis
• Probability Theory
• Index Numbers
• Testing of Hypothesis
• Time Series Analysis
Programming Techniques

• Programming techniques are also called operations research techniques. Programming

techniques are model building techniques used by decision makers in modern times

• Linear Programming • Simulation

• Queuing Theory • Replacement Theory

• Game Theory • Non-Linear Programming

• Decision Theory • Sequencing

• Inventory Theory • Quadratic Programming

• Network Programming

• Branch and Bound Technique

Functions of QT

• To facilitate the decision-making process

• To provide tools for scientific research

• To help in choosing an optimal strategy

 • To enable in proper deployment of resources

• To help in minimizing costs

• To help in minimizing the total processing time required for performing a set of jobs

Uses of QT in Business

• Quantitative techniques of linear programming is used for optimal allocation of scarce resources
in the problem of determining product mix

• Inventory control techniques are useful in dividing when and how much items are to be
purchase so as to maintain a balance between the cost of holding and cost of ordering the
inventory

• Quantitative techniques of CPM, and PERT helps in determining the earliest and the latest times
for the events and activities of a project. This helps the management in proper deployment of
resources.

• Decision tree analysis and simulation technique help the management in taking the best
possible course of action under the conditions of risks and uncertainty.

• Queuing theory is used to minimize the cost of waiting and servicing of the customers in queues.

• Replacement theory helps the management in determining the most economic replacement
policy regarding replacement of an equipment.

Limitations of QT

• Quantitative techniques involves mathematical models, equations and other mathematical

expressions

• Quantitative techniques are based on number of assumptions. Therefore, due care must be
ensured while using quantitative techniques, otherwise it will lead to wrong conclusions.

• Quantitative techniques are very expensive.

• Quantitative techniques do not take into consideration intangible facts like skill, attitude etc.

Quantitative techniques are only tools for analysis and decision-making. They are not decisions itself

Problem Solving

• Can be defined as the process of identifying a difference between the actual and desired state
of affairs and then taking action to resolve the difference

7 Steps in Problem Solving

• Identify and define the problem.

• Determine the set of alternative solutions.

• Determine the criterion or criteria that will be used to evaluate the alternatives.

• Evaluate the alternatives.

• Choose an alternative.
 • Implement the selected alternative.

• Evaluate the results to determine whether a satisfactory solution has been obtained.

Decision Making

• the term generally associated with the first five steps of the problem-solving process.

• Thus, the first step of decision making is to identify and define the problem.

• Decision making ends with the choosing of an alternative, which is the act of making the
decision.
Statistical Approach

Advantages of
Mathematical Modelling

• Models exactly represent the real problem

situations.

• Models help managers to take decisions

faster and more accurately.

• Models save valuable resources like money

and time.

• Large and complex problems can be solved

with ease.

• Models act as communicators to others by

providing information and impact in changing
conditions.

Areas of Application

 Finance and Accounting

 Cash flow analysis, Capital budgeting, Dividend and Portfolio management, Financial
planning

 Marketing Management

 Selection of product mix, Sales resources allocation and Assignments

 Production Management

 Facilities planning, Manufacturing, Aggregate planning, Inventory control, Quality

control, Work scheduling, Job sequencing, Maintenance and Project planning and
scheduling

 Personnel Management

 Manpower planning, Resource allocation, Staffing, Scheduling of training programs

 General Management

 Decision Support System and Management of Information Systems, MIS, Organizational

design and control, Software Process Management and Knowledge Management