Introduction to Management Science

Bol Partner

Introduction Learning objectives After completing this chapter, you should be able to 1. Define the term management science, 2. Describe the nature of management science. 3. Explain what a mathematical model is, 4. Use a mathematical model to perform break-even analysis. 5, Use a spreadsheet model to perform break-even analysis. 6. Identify the levels of annual savings that management science sometimes can provide to organizations. 7. Identify some special features of this book. Welcome to the field of management science! We think that it is a particularly exciting and interesting field. Exciting because management science is having a dramatic impact on the profitability of numerous business firms around the world. Interesting because the methods used to do this are so ingenious. We are looking forward to giving you a guided tour to introduce you to the special features of the field. Some students approach a course (and textbook) about management science with a certain amount of anxiety and skepticism. The main source of the anxiety is the reputation of the field as being highly mathematical. This reputation then generates skepticism that such a theoretical approach can have much relevance for dealing with practical managerial problems. Most traditional courses (and textbooks) about management science have only reinforced these perceptions by emphasizing the mathematics of the field rather than its practical application. Rest easy. This is not a traditional management science textbook. We realize that most readers of this book are aspiring to become managers, not mathematicians. Therefore, the emphasis throughout is on conveying what a future manager needs to know about management science. Yes, this means including a little mathematics here and there, because it is a major language of the field. The mathematics you do see will be at the level of high school algebra plus (in the later chapters) basic concepts of elementary probability theory. We think you will be pleasantly surprised by the new appreciation you gain for how useful and intuitive mathematics at this level can be. However, managers do not need to know any of the heavy mathernatical theory that underlies the various techniques of management science. Therefore, the use of mathematies plays only a strictly secondary role in the book. One reason we can deemphasize mathematics is that powerful spreadsheet software now is avartlable for applying management science. Spreadsheets provide a comfortable and familiar environment for formulating and analyzing managerial problems. The spreadsheet takes care of applying the necessary mathematics automatically in the background with only a minimum of guidance by the user. This has begun to revolutionize the use of management science. In the past, technically trained management scientists were needed to carry out significant management science studies for management. Now spreadsheets are bringing many of the tools and concepts of management science within the reach of managers for conductìng their own analyses. Although busy managers will continue to call upon management science teams to conduct major studies for them, they are increasingly becoming direct users themselves through the medrum of spreadsheet software. Therefore, since this baok 1e aumed at fi re Managers (and management consultants), we wall emphasize the use of spreadsheets for applying management sctence, What does an enhghtened future manager need to learn from a management science coure) Lì. Gam an appreciation for the relevance and power of management sctence. (Therefore, we welude many applieatron vignettes throughout the book that give examples of actual appl: canons of management setence and the spact they had on the organizations mvolved } 2. Learn to recognize when management sctence can (and cannot} be frustfully applied (Therefore, we will emphasize the Aezds of problems to which the varrous management «1. ence techniques can be applied.) 3. Learn how to apply the major techniques of management science to analyze a variety of man. agenal problems. (Therefore, we will focus largely on how spreadsheets enable many such apphcations with no more background m management science than provided by this book ) 4. Develop an understanding of how to interpret the results of a management science study (Therefore, we will present many case studies that illustrate management scence studies and how their results depend on the assumptions and data that were used } The objectives just desenbed are the key teaching goals of this book. We begin this process mm the next two sections by mtroducing the nature of management science and the impact that it 1s having on many orgamzations. (These themes will continue throughout the remaming chapters as well.) Sectron 1.4 then points out some of the special features of thus book that you can look forward to seeing in the subsequent chapters. What is the name management science (sometimes abbreviated MS) supposed to convey? Ít does involve management and sctence or, more precisely, the science of management, but this stlì ts too vague. Here 1s a more suggestive definition. Management science 1s a discipline that attempts to ard managerial dectston matang by applying a scientific approach to managertal problerns that involve guantttattve factors. Now let us see how elaborating upon each of the italicized terms in this definitton conveys much more about the nature of management sctence. Management Science Is a Discipline As a discipline, management science 1s a whole body of knowledge and techniques that are based on a sctenufic foundation. For example, it is analogous in some ways to the medical field. A medical doctor has been trained in a whole body of knowledge and techniques that are based on the scientific foundations of the medical field. After receiving this training and entering practice, the doctor must diagnose a patient’s iliness and then choose the appropnate medical procedures to apply to the illness. The patient then makes the final deciston on which medical procedures to accept. For less senous cases, the patient may choose not to consult a doctor and instead use his own basic knowledge of medical principles to treat humself. Similarly, & management scientist must recetve substantial tramng (albert considerably less than for a medscal doctor). This training also 1s in a whole body of knowledge and techniques that are based on the screntafie foundations of the discipline. After entering practice, the management scientist must diagnose a managenal problem and then choose the appropmate management science techniques to apply in analyzing the problem. The cognizant manager then makes the final dectsion as to which conclusions from this analysts to accept. For less extensive managenal problems where management science can be helpful, the manager may choose not to consult a management scientst and instead use his or her own basie knowledge of management science principles to analyze the problem. Although st has considerably longer roots, the ropid development of the disciple began KLAN the 1940» and 1950» The in1ttal impetus cume early in World War LL, when large numbers af scientie were called upon to apply a scientific approach to the management of the war effort 14 OT Nore fM fi 3 tor the alles Anather landmark event was the discovery in 1947 by George Dantzig of the vmple method tor solving linear progtamnung problems (Limear programming ts the subject of several carlo chapters } Another factor that gave great mpetus to the growth of the disaphme was the onslaught of the computer revolution The traditronal name given to the discpline (and the one that stll ie widely used today outade of busmess schools} rs operations research. This name was applied because the teams of scientists m World War II were doung research on how to manage mihtary operations The abbrev ration OR also 1e widely used This abbreviation often rs combined with the one for management science (MS), thereby referring to the discipline as OR MS In 2006, the US Department of Labor estimated that there were about 58,000 mdividuals working as operatons research analy sts mn the Umted States One maor mternatronal protesstonal society for the discipltne 1s the Ansttute for Operatons Research and the Management Sctences (INFORMS). Headguartered m the United States. wath over 10.000 members, tus society holds major conferences in the Umted States each vear plus occastonal conterences elsewhere H also publishes several prominent journals, neludmg Management Scrence, Opvrattons Research, and Interfaces (Articles descnbing actual applicattons of management science are featured mn /nterfaces, so you will see many references to this journal throughout the book.) In addition, a few dozen countries around the world have their own nattonal operatrons research socteties (More about this mm Section 1.3.) Thus. operations research/management science (OR/MS) 1s a truly internatronal discipline. (We hereafter will just use the name management science or the abbrevrtation MS.) Management Science Aids Managerial Decision Making The key word here is that management science aids managerial decision making. Management scientists don't make managerial decisions. Managers do. A management science study only provides an analysis and recommendations, based on the quantitative factors involved in the problem, as input to the cognizant managers. Managers must also take into account vartous intangibte considerations that are outside the realm of management science and then use their best judgment to make the decision. Sometimes managers find that quahtative factors are as important as quantitative factors in making a decision. A small informal management science study might be conducted by just a single individual. who may be the cognizant manager.

Bol

This volume provides an applications-oriented introduction to the role of management science in decision-making. The text blends problem formulation, managerial interpretation, and math techniques with an emphasis on problem solving. In addition, a problem-scenario approach introduces quantitative procedures through situations that include both problem formulation and technique application. A notes and comments section provide warnings, limitations, recommended applications, and other tips. Extensive linear programming coverage includes problem formulation, computer solution, and practical application. The text covers transportation, assignment, and the integer programming extension of linear programming, as well as advanced topics like waiting line problems, simulation, and decision analysis. It also includes a large selection of problems includes self-test problems with complete solutions and 20 case problems.