Chapter I:

INTRODUCTION TO MANAGEMENT
SCIENCE
Introduction
Management science is applying a scientific approach to problem-solving management to help
managers make better choices. As suggested by this concept, management science includes a
variety of mathematically based strategies that have either been developed within the area of
management science or adopted from other disciplines such as mathematics, natural sciences,
statistics, and engineering. This module offers an introduction to the methods that make up the
philosophy of management and explains their contributions to crisis management.

Management science is a proven and recognized discipline in industry. Management science

techniques implementations are common, and they have also been credited with growing the
company firms' performance and profitability. Several suggest that they use management science
methods in different organization surveys, and the majority consider the findings to be quite good.
Management science (also referred to as operations research, systematic processes, predictive
study and decision-making sciences) is part of the core curriculum in most business programs.

Learning Objectives
After studying this module, you should be able to:
1. Define management science and describe its importance in business.
2. Explain the major characteristics of management science and how it is applied in problem
solving.
3. Explain the importance of models in decision making process.
4. Explain and identify the appropriate management science technique in managerial problems.

1.1 Definition and Characteristics of Management Science

Definition
Management science can be defined briefly as applying the scientific method to the analysis and
solution of problems with managerial decision. According to Turban and Meridith, management
science is applying analytical principles, procedures, and instruments to problems concerning
device processes in order to offer optimal answers to the problems for those in charge of the
processes.

Major Characteristics of Management Science

1. A main focus on decision making by the managers.
2. Usage of the analytical model to the decision-making phase.
3. Examining the condition of the judgment from a specific viewpoint
4. Using methods and expertise from multiple disciplines.
5. A dependency on the mathematical models of shape.
6. Computer widespread use.

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Decision-making is a method of deciding between two or more possible courses of action
necessary to accomplish a particular goal. Decision-making is a systematic process and can be
described simply by defining the problem, searching for alternative courses of action, evaluating
alternatives and choosing one alternative.

System configuration comprises of three associated components: inputs, procedures, and outputs.
The inputs (people, raw materials, money) enter the system. Processes transform inputs into
outputs (processes may use resources, operating procedures, workers, machines). Outputs exit the
machine (Products, Customers served). Systems approach involves finding and defining all the
elements mentioned and the real world relationships between them. This method is the
presumption required to use management science methods, since they allow the precise definition
of a problem. System approach allows mathematical formulation of the problem.

1.2 Models and Modeling

Model is a generalized reflection of the natural world, and only significant and appropriate objects
or properties can be included in the model, whereas modeling is the method of treating and
explaining real-life problems in mathematical terms.

Management science follows a rational, structured approach to problem solving that strongly
resembles what is known as the analytical process of problem-solving. This approach, as illustrated
in a generally recognized and ordered series of steps follows: (1) observation, (2) problem
definition, (3) model construction, (4) model solution, and (5) solution implementation.

Observation
The first phase in the cycle of handling management science process is to recognize a problem that
occurs within the organization. The system must be monitored continuously and closely so as to
identify problems as soon as they arise.

Definition of the Problem

When a problem has been established, the problem must be described explicitly and in a clear
manner. Defining a problem incorrectly can easily lead to either no solution or inappropriate
solution. Hence the limitations of the problem and the extent to which it pervades other units of
the organization should be included in the definition of the problem. It's evident that we need to
know the production process details and all the appropriate information.

Model Construction
A concept in management science is a theoretical representation of an actual issue scenario. It can
be in the form of a graph or diagram, but most commonly a model in management science consists
of a series of mathematical links. The numbers and symbols form these mathematical relationships.
Two types of models exist: determinist and probabilistic. All aspects are known with certainty in
deterministic models. There is no question that deterministic models are ideal, however they can
give a fairly decent estimation of truth. There is a particular degree of ambiguity in the probabilistic
models. This is tempting to neglect the small degree of ambiguity and to use deterministic models
instead of probabilistic models. In case of high uncertainty we should consider random variables
rather than constants.

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Model Solution
When models have been developed in management science, the
methods described in this text are used to solve them. A technique
for a management science solution usually applies to a particular type of model. Therefore, the
form of concept and the process of solution are also part of the scientific management research.
We also mean problem solution when we refer to model solution. The typical goal of the most
problems is to find an optimal solution, that is, the best of all feasible solutions (solutions that meet
all the constraints).

Implementation of Solution Result

Implementation is the actual use of the model once it has been developed or the solution to the
problem the model was developed to solve. This is actually the main goal of management and the
original purpose of the whole process - not the model itself, but adjustment of reality according to
the recommendations ensuing from the results of the modeling process. In case we do not use the
results in the real production process, all our effort was absolutely vain. On the contrary, if we
constructed the model in a wrong way and we did not validate it, the applied results could seriously
harm the real system. In order to achieve the best management results, each step must be carefully
considered and cannot be skipped.

1.3 Management Science Techniques

Linear Programming
This is one of management science's best-known tools. This strategy describes the problem as
maximizing a linear function (minimizing) with reference to the set of linear constraints.

Integer Linear Programming

Additional variable values criteria are applied to the initial linear process ( i.e., process of linear
function and linear constraints). All or any of the values must be an integer. The particular type of
these variables is the binary variable (0-1 variable) with a value of 0 or 1. We think about binary
integer linear programming in such a situation. When only those variables are described as integer
(binary) in the model, then we are thinking about mixed integer linear programming.

Goal Programming
When several conflicting priorities need to be addressed concurrently, it needs more effective
resource. Goal programming is a specific methodology for coping with such situations, usually in
linear programming.

Distribution Models
A distribution problem is a specific category of problem in linear programming. There are two
major categories of distribution problems: the problem of transportation, and the problem of
assignment. The problem of transportation deals with shipping from a variety of suppliers to a
number of destinations while the problem of assignment deals with determining the right one-to-
one option for any of a number of prospective "candidates" to a number of possible "positions."

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Nonlinear Programming
Models used in this field of management science are close to linear
programming models; but there is a major distinction between them: nonlinear models include
nonlinear objective function and/or other nonlinear constraints. Techniques employed in this field
of management science to solve problems are somewhat distinct from linear programming
approaches.

Network Models
Many problems can be defined as a network (the collection of nodes and arcs) in graphic terms.
Typical circumstance is a network of transports: cities (nodes) are linked by roads (arcs) to each
other. When we evaluate the network (in this case we are involved, for example, in distances
among all the cities), the goal is always to locate the shortest distance from one city to all other
cities. Some forms of networks, instead of lengths, can be measured by capacities and then the
dilemma of maximal flow can be resolved. The most critical factor of several problems, addressed
by the help of network models, is unit cost and the aim is to find the lowest overall cost.

Project Management
Managers are responsible for organizing, managing and overseeing projects in certain cases that
consist of several different jobs or activities undertaken by a number of teams or persons. It needs
different time for a work to be completed. These problems are overcome by two simple methods:
CPM (Critical Path Method) and PERT (Program Analysis Review Technique). All approaches
allow the issue to be expressed on a network.

Inventory Models
Inventory control is one of the most common strategies, helping managers decide what to buy and
how much to buy. The primary purpose is generally to strike an accurate balance between the
expense of keeping inventory and the cost of implementing an order. Owing to the very various
actual distribution structures, there are several specific inventory models. We are considering two
distinct groups of models: deterministic and probabilistic. The demand rate in deterministic models
is constant over time, while the demand fluctuates over time in probabilistic inventory models and
can only be represented in probabilistic terms.

Waiting Line Models

This field of management science approaches deals with the circumstances in which a variety of
networks (e.g. vendors) ought to represent units ( e.g. customers). Since the number of vendors is
constrained, some units must wait in queue for the service. Thus the alternative name for the
models of the waiting line: Queuing Models. In actual life, the process of arrival of units as well
as the service times are irregular and the probabilistic approach is essential. Simple models of
waiting line can be obtained analytically (exact solution using derivative formulas), while the
simulation technique is needed for complex queuing systems.

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Simulation
As management challenges are more complicated, it is always
difficult to address them using traditional methods (or not successful because of the time and
expense spent). Simulation solution is useful for this reason and is in many situations the best way
to handle the issue. Simulation is a programming experience with a simulation model intended to
explain and measure the actions of the real system-the machine software simulates the actual
system. Complex waiting-line models and inventory models are common conditions for effective
simulation use.

Decision Analysis
Such methods may be used to choose appropriate approaches from a variety of alternatives to
decisions. According to the knowledge received by the manager, management challenges and
relevant methods are classified into three types: decisions under certainty (deterministic), decisions
under risk (probabilistic) and decisions under uncertainty. Of this function, we find unique
instruments: decision tables and trees.

Theory of Games
This field is an expansion of the decision making of two or more decision-makers to the
circumstances. All managers take simultaneous decisions (selected strategies) to execute an acts
that influences all decision-makers (players), i.e. their profits, costs etc. For certain disputes, two
or three decision-makers will collaborate, while battling with the others. We will consider a
standard case of a strategic game in economic theory-the oligopoly model.

Forecasting
Methods of forecasting support the manager predicting future elements of the business operation.
Statistics and econometrics deliver several time series and regression analysis methods based. The
key management task is to predict potential developments relative to the system's previous
behaviour. The well-known are the Moving Averages, Least Squares, Exponential Smoothing
processes, etc. Because the statistical significance for such models is very significant, the
manager's familiarity with validity hypotheses and statistical testing is relevant.

Multicriteria Decision Making

The decision maker needs to consider multiple criteria for many managerial problems. If we find
a solution which improves one criterion, it mostly aggravates some other criteria. It's practically
difficult to modify all the criteria at the same time. The Management's fair incentive is to consider
an acceptable solution. If the list of alternatives is small, we use alternative assessment approaches.
Few problems with set of constraints and set of objective functions are defined. In this scenario
multi-objective programming approaches have the remedy. Goal programming is the unique type
of this methodology in management science.

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Markov Analysis
This approach can be used for explaining a system 's actions in
a complex scenario (system progression over time). If-at a given time point-the device is in one of
the potential states, the device may remain in the current state or switch into some other state at
the following time point. The transition probabilities are set for staying in the current state or
moving to another state. The manager will be confident in the possibility of the system being in
the correct state at the present time.

Markov Analysis is a really strong management science method with a number of practical
applications.

Dynamic Programming
Management also needs to recognize a series of decisions where each judgment impacts potential
decisions in a major way. Dynamic programming lets administrators overcome certain forms of
challenges with these complex decision making. There is no common paradigm to solve dynamic
programming problems and, thus, the problems are divided into several classes. One probable
classification takes the deterministic and probabilistic models into consideration. Models also use
the sequential problems to describe the network. The Markov analysis may be viewed as a complex
programming probabilistic process.