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    MODULE 1 Introduction

    Uploaded by

    Raven Cabrera

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    © All Rights Reserved
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    MODULE 1 Introduction

    Uploaded by

    Raven Cabrera
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    Download as docx, pdf, or txt
    3 views5 pages

    MODULE 1 Introduction

    Uploaded by

    Raven Cabrera

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 5

    MODULE 1

    MANAGEMENT SCIENCE

    SESSION TOPIC 1: Introduction of Management Science

    LEARNING OUTCOMES:
    The following specific learning objectives are expected to be realized at the end of the session:
    1. Explain what a Cash Flow Statement is
    2. Identify how the Cash Flow Statement is presented and reported
    3. Identify the components of a Cash Flow Statement

    KEY POINTS

    Management Science Quantitative Technique Decision-Making Model

    CORE CONTENT
    Introduction:
    This module covers the discussion of
    a. Importance and use of management science
    b. Enumerate the steps in applying the decision tools

    IN-TEXT ACTIVITY

    Management science is the adoption of IBM reported, in 2017, that 90% of the total data
    quantitative methods and analytics in decision- as of 2016 were created in the last two years,
    making process. referring to year 2015 and 2016.
    Management Science is also termed as Imagine that!
    quantitative techniques in decision making,
    decision analysis, and operational research. That was 2016, it is now 2020, can you imagine
    the volume of data and information we create
    10 Key Marketing Trends For 2017, an article during 2017 to 2020?
    published by IBM, state that the data were so
    tremendous that it now important to digest that
    information.

    We are not computers that can compute and use 2.5billion bytes of data a day. But making sense of the
    volume of data, may allow us better understand things – such as, but not limited to, customers’ needs,
    wants, and preferences.

    This fast and voluminous data creation and technological advancement leads to the Fourth Industrial
    Revolution – the fourth industrial revolution refer to large-scale automation of several industries from
    manufacturing, service providers and alike. To foster and continue this development, would require
    machine-to-machine communication, internet of things, artificial intelligence, and automation. Fourth
    industrial revolution needed and was induced primarily by data and information – by big data.

    Module 1: Management Science 1


    In a business set-up, decision makers should be well-versed in gathering, understanding, and utilizing big
    data. More data means more factors to consider making the decision process a more complex function.
    We aim that every decision should be logical and with the basis primarily to lessen the possibility of
    losses or regrets.

    In decision making we can classify data unto two

    Quantitative Factors Qualitative Factors


    Are data that can be accurately calculated like Are more difficult to quantify but affect the
    interest rates, inventory levels, labor cost, cost of decision process like weather, political will,
    electricity and demand technological advancement.

    Rationale in using quantitative techniques

     Variables associated with business decision


     The factors that are relevant to the problem they face
     The various alternative that are available to them
     The logical consequences of the possible alternatives
     The best alternative in terms of profits and realization of objectives

    In applying management science tools, a decision-maker commonly use the following steps:

    Step 1. Formulating and defining the problem, under this step a decision maker must state in a clear and
    concise manner the issues to be resolve.

    It is said to be the most difficult and important step because it gives direction to the decision-maker of the
    succeeding steps.

    The common difficulty of this step is the incapability of identifying the issues or that the decision maker
    does not know that there is a problem, unless until the symptoms revealed and is late to react.

    Module 1: Management Science 2


    Example:

    You have invested cash to establish a milk-tea store and


    probably your objective is to maximize your profit.

    Then the next steps of analysis will follow that objective

    Step 2. Defining the decision variables and constraint. Identifying


    these variables help the decision-maker to develop what tool or
    model is appropriate.

    Example: Continuing with your Milk-tea Store example, what


    products you will offer to maximize the profit?

    We identify:

    Key decision: How many units of X, Y, and Z are to be produced


    Variables: X is notation for a product, (e.g., taro milktea),
    Y is symbol use for another product (e.g., fruitea), and
    Z is symbol use for another product (e.g., coffee milktea)

    Constraint: Limited working hours

    Objective: Maximize profit

    Using the variables and constraint. The decision maker will have a better understanding and help in
    providing solution for the primary objective (problem).

    Step 3: Is the creation or developing a suitable model – a mathematical model or a mathematical


    representation of the problem. A mathematical model is the form of expression and equations that
    replicate the problem.

    Example (continuation of previous example) :

    Maximum Profit = 2X + 3Y + 4Z

    Assuming that each X have 2pesos contribution margin, 3pesos for each
    product Y, and 4 pesos in product Z.

    Subject to (The constraint)


    Working hours = 0.2X + 0.1Y and 0.3Z
    Working hours should not be more than 8 hours.

    Module 1: Management Science


    Assuming that it would require 0.20 hours to make product X, 0.1 hours to 3
    make product Y, and 0.3 hours to make the product Z.
    A mathematical model requires

     Specification of a complete list of variable factors that are relevant to the problem at hand
     Specific quantifiable relationships among variables

    Step 4: Acquiring the Input Data. The solution for the problem might be formulated and develop from the
    previous step, but it cannot provide the optimal or best solution in absence of accurate data. The decision
    maker must identify, select, and gather data that represent the variables properly. It is noteworthy, that
    misinformation and wrong data can lead to a bad decision.

    Step 5. Solving the Model. Is the checking the correctness of the equation used and of the model. The
    decision maker should take consideration that processes, or model is properly done.

    Step 6. Validating the Model refers to determining how good and realistic the solution is. While validating,
    the decision maker identifies the fitness of the model used, its inaccuracies and should take corrective
    actions to properly solve the issue.

    Step 7. Implementing the Results or the deployment of the solution. This is the actions and the decisions
    made by decision-maker.

    Advantages of Mathematical Modelling

    a. The approach is realistic


    b. Models can help the decision maker formulate and expound the problem
    c. Models can provide meaningful insights and information
    d. The method can save resources, time, money, effort and more.
    e. The model can communicate the problems and solutions to decision-makers and others.

    Possible Problems in the Quantitative Analysis Approach


    1. Defining the problem
    o Problems may not be easily identified.
    o There may be conflicting viewpoints
    o There may be an impact on other departments.
    o Beginning assumptions may lead to a particular conclusion.
    o The solution may be outdated.
    2. Developing a model
    o Manager’s perception may not fit a textbook model.
    o There is a trade-off between complexity and ease of understanding.
    3. Acquiring accurate input data
    o Accounting data may not be collected for quantitative problems.
    o The validity of the data may be suspect.
    4. Developing an appropriate solution
    o The mathematics may be hard to understand.
    o Having only one answer may be limiting.

    Module 1: Management Science 4


    5. Testing the solution for validity
    o Analyzing the results in terms of the whole organization There may be an institutional
    lack of commitment and resistance to change.
    o Management may fear the use of formal analysis processes will reduce their decision-
    making power.
    o Action-oriented managers may want “quick and dirty” techniques.
    6. Management support and user involvement are important.
    o There may be a lack of commitment by quantitative analysts.
    o Analysts should be involved with the problem and care about the solution.
    o Analysts should work with users and take their feelings into account.

    SESSION SUMMARY

    The increase in volume of data and the complexity of transaction, in business parlance, improved the
    position of the required usage of data available. In utilizing and understanding the data we can use the
    management science – a scientific and quantifiable- approach of solving realistic problem.

    The objective of the management science is to make available scientific basis to the decision maker in
    order to have a greater degree of control over the outcome of the decision. Several quantitative
    techniques are available and each of the technique will best fit to solve the problem or attain the
    objectives of the decision maker.

    Module 1: Management Science 5

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