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Module 1 - Introduction To Decision and Models

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Rameir Angelo Catamora
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11 views

Module 1 - Introduction To Decision and Models

Uploaded by

Rameir Angelo Catamora
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Introduction

CHAPTER 1
Overview
Management science
◦ Is an approach to decision making based on the scientific method
◦ Makes extensive use of quantitative analysis
The body of knowledge involving quantitative approaches to decision making is
also referred to as
◦ Operations research
◦ Decision science
◦ Business Analytics
Problem Solving and Decision Making
7 Steps of Problem Solving
(First 5 steps are the process of decision making)
◦ Define the problem.
◦ Identify the set of alternative solutions.
◦ Determine the criteria for evaluating alternatives.
◦ Evaluate the alternatives.
◦ Choose an alternative (make a decision).
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◦ Implement the chosen alternative.
◦ Evaluate the results.
Step 1: Identifying the problem
Identifying the “correct” problem.
Step 2: Collect and summarize data
◦ Dataset/file format
◦ Data collation
◦ Data transformation (example: VLOOKUP)
◦ Type of Data
◦ Nominal, Ordinal, Interval, Ratio (NOIR)
◦ Uncontrollable vs. Decision Inputs
◦ Independent vs. Dependent Variables
◦ Observed variables vs. Latent Variables
◦ Binning/discretizing variables (numerical to categorical).
◦ Cross-sectional vs. Time series
Step 2: Collect and summarize data
CATEGORICAL

Nominal

• Numbers do not have a meaning (gender, civil status)

Ordinal

• Numbers have meaningful order (ranking)

CONTINUOUS

Interval

• Numbers have order and equal intervals, no absolute zero (temperature, rating scale)

Ratio

• Numbers are meaningful but there is absolute zero (weight, length)


Importance of Management Science
1. Objective Decision-Making
1. Reduce the influence of subjective bias.

2. Precision and Accuracy


1. Statistical and Mathematical Models

3. Data-Driven Insights
1. Meaningful insights from the data

4. Resource Optimization
1. Allocation of resources towards achieving organizational goals in a cost-effective manner.

5. Competitive Advantage
1. Adapt and respond to market changes faster.

6. Forecasting
1. Predicting future trends and demands under changing market conditions.
Management Science in Action
- Improving productivity and collaboration at Microsoft.
- hypothesized that moving the 1,200-person group from
five buildings to four could improve collaboration by
increasing the number of employees per building and
reducing the distance that staff needed to travel for
meetings.
- Resulted in a 46% decrease in meeting travel time; 100
hours saved/week; $520,000 (Php 30 Million)/year of
employee time.
- Declined in duration of meeting, increased frequency.
Management Science in Action
- PepsiCo uses big data and predictive
analytics to ensure the right quantities and
types of products are available to consumers
in certain locations.
- Datasets used to identify specific retailers
for a specific product that targeted
households might shop. (24 million
households out of 100 million households =
Quaker Overnight Oats.
Think of a recent decision you made, a problem you solved, an opportunity you try to exploit
and assess your decision-making process in terms of:
◦ Defining the problem.
◦ Identifying the set of alternative solutions.
◦ Determine the criteria for evaluating alternatives.
◦ Evaluate the alternatives.
◦ Choose an alternative (make a decision).
◦ Implementing the chosen alternative.
◦ Evaluating the results.
Analyzing the Problem: Quantitative
Analysis and Qualitative Analysis
Cite an example of the importance of qualitative analysis in business and
research?
Step 1: Identifying the problem
Identifying the “correct” problem.
Step 2: Collect and summarize data
◦ Dataset/file format
◦ Data collation
◦ Data transformation (example: VLOOKUP)
◦ Type of Data
◦ Nominal, Ordinal, Interval, Ratio (NOIR)
◦ Controllable vs. Decision Variables
◦ Independent vs. Dependent Variables
◦ Observed variables vs. Latent Variables
◦ Binning/discretizing variables (numerical to categorical).
◦ Cross-sectional vs. Time series
Step 2: Collect and summarize data
CATEGORICAL

Nominal

• Numbers do not have a meaning (gender, civil status)

Ordinal

• Numbers have meaningful order (ranking)

CONTINUOUS

Interval

• Numbers have order and equal intervals, no absolute zero (temperature, rating scale)

Ratio

• Numbers are meaningful but there is absolute zero (weight, length)


Categorical vs. Continuous Variable
Pop Quiz
Identify the type of variable based on the measurement scale
Building a model
Step 3: Developing a model
Models
◦ are representations of real objects or situations
◦ Abstractions of a real problem.
◦ Capturing the essence and key features of the problem.
◦ Enables us to make inferences about the real situation by studying and analyzing the model.
Types of Models
◦ Graphical Models – intuitive and least quantitative type of a model, different elements of a problem are related
(what affects what).
◦ Algebraic Models – specify a set of relationships in a very precise way with algebraic equations.
◦ Spreadsheet Models – simulation of real-world scenarios through cells and formulas.
◦ Descriptive Model -simply describes a situation
◦ Optimization Model – suggests a desirable course of action.
Advantages of Models
Generally, experimenting with models (compared to
experimenting with the real situation):
◦requires less time
◦is less expensive
◦involves less risk
Step 4: Verify the model
Quantitative and Qualitative Analysis
Step 5: Select one or more suitable decision/s
The analyst attempts to identify the alternative (the set of
decision variable values) that provides the “best” output for the
model.
The “best” output is the optimal solution.
If the alternative does not satisfy all of the model constraints, it is
rejected as being infeasible, regardless of the objective function
value.
If the alternative satisfies all of the model constraints, it is
feasible and a candidate for the “best” solution.
Step 6-7: Presentation of results and
implementation
- Who shall receive what?
- How should the “what” be presented to whom?
- The use of charts, graphs, and other visualizations to present the results.
◦ The use of histogram and box plots, time series, etc.

- The report should be easily understood by the decision maker.


- Allocation of the resources.
Step 6-7: Presentation of results and
implementation

NUMBER RANGES CATEGORIES


Hands-on exercise
Data Cleaning / wrangling
Missing values, outliers, duplicates
Data format
Asking the right questions.
Types of data
Data transformation (summarization, sorting, filtering)
Data visualization
Data importation to Power BI
Data analysis
Validation of results
Managerial Implications
Module 1 Assignments
Conceptual Questions (50 points)
Performance Tasks (50 points)
** Prepare to share outputs to the class next meeting

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