MANAGEMENT SCIENCE

DE SILVA, ANGEL ANN L. BSA-2 1ST SEMESTER

CHAPTER 1 The following are some of the many definitions of

management science:
Management science 1. Operations research is defined as the scientific
 is a tool used by managers and administrators in the process of transforming data into insights to
performance of their most vital task: making crucial making better decisions.
decisions. 2. Quantitative analysis is the process of collecting
 Common management decisions, such as inventory and evaluating measurable and verifiable data,
management, forecasting, project management, and such as revenues, market share, and wages, to
operational efficiency, require an objective basis understand the behavior and performance of a
when choosing the best solution. business.
 another term for operations research or decision 3. According to Lancaster University, management
science, carries an immense option of tools to aid science can be defined as a concept that is
managers when faced with decisions. "concerned with developing and applying models
and concepts that help to illuminate issues and
Lesson 1.1: solve managerial problems. The approach is
What does Management Science mean? essentially interested in looking at an
organization and finding ways it can manage
Management itself better and improve its productivity.
 refers to the process of administering and controlling 4. Management science, an approach to decision-
the affairs of the organization by creating an making based on the scientific method, makes
environment that will contribute to achieving the extensive use of quantitative analysis.
business goals effectively and efficiently.
 To attain a level of productivity, managers need to Lesson 1.3:
successfully execute the following functions: Special Characteristics of Management Science
planning, organizing, leading, and controlling. Such
functions are carried out by engaging in an endless The formal definitions of management science can be
cycle of making decisions. summarized through its special characteristics:
1. A primary focus on managerial decision-making
Business Decisions must be based on the results of a 2. The application of the scientific approach to
scientific investigation. decision-making
Successful executives and managers must be fully 3. The examination of the decision situation from a
equipped with new tools and techniques in their respective broad perspective
fields of expertise. 4. The use of methods and knowledge from several
disciplines
The management science approach views that precise 5. A reliance on formal mathematical models
decisions are a product of the following: 6. The use of technology, such as computers,
1. analysis of the circumstances that can be software, or applications
measured
2. verification of the quantifiable relationships In reality, however, the components of a business
3. test to determine the presence of cause-and-effect phenomenon, such as intuition, judgment, and attitude
relationships among factors or variables. toward a decision, are very difficult to translate into
quantifiable measures. The symbolic relationship between
The objective of management science is to translate the quantitative and qualitative models is shown in Figure 1.1.
many situations in business into quantifiable values that can
be utilized to select the best solutions according to the
available mathematical tools and techniques. Thus, this
enables managers to gain more confidence in deciding on
complex issues.

Lesson 1.2:
Definitions of Management Science
It can be gleaned from Figure 1.1 that the qualitative
There are many definitions of management science as it has approach to management is more important when there is a
evolved into several terminologies, such as operations higher degree of complexity and uncertainty in the business
research, operations analysis, quantitative analysis, situation.
quantitative methods, and decision science.
 MANAGEMENT SCIENCE
DE SILVA, ANGEL ANN L. BSA-2 1ST SEMESTER

Lesson 1.4: According to those who do not support the idea of

Development of Management Science management science, this scientific management tool can
sometimes be costly and time consuming. But for those
As early as the industrial revolution or even at earlier who were able to implement its full potential can attest its
periods, traces of the scientific approach to management benefits (Turban and Meredith 1986):
were evident. 1. A methodical approach to problem-solving and
decision-making
 It was during the 1900s when Frederick W. Taylor 2. Facilitates communication among the different
initiated the scientific management revolution that experts in the organization
marked the beginning of industrial engineering. At 3. Allows exhaustive analysis of different options to
that time, some mathematical models were being used, arrive at a solution
such as Erlang's work on waiting to line problems, 4. Permits proper evaluation of situations with
Edison's work on war games, and the notable uncertainty
inventory management formula by Harris, the 5. Helps the decision-makers decide on how much
economic order quantity (EOQ). data needs to be gathered based on a given
problem
 Modern management science was established during 6. Improves effectiveness of the decision
World War II when teams composed of different 7. Identifies the finest solution
disciplines were formed to aid the military with the 8. A more cost-efficient means of examining a large
strategic and tactical problems. Mathematicians, number of alternative solutions
scientists, and engineers joined together to solve 9. A wide selection of available mathematical
problems using the scientific method. After the war, models that prevents erroneous calculations
these teams continued their practice and joined while experimenting with real-life situations
industries, such as oil refineries, steel, and paper mills.
These industries operate on large volumes, resulting in On the other hand, arguments against management
high savings on production expense. science are the following:
1. time consuming
 The most significant development post-World War 2. some decision-makers do not appreciate the
was the discovery of simplex method for solving results
linear problems by George Dantzig in 1947. 3. difficulty in assessing uncertainties
4. the use of oversimplified mathematical tools that
 During the 1970s, the use of management science had do not match real-life situations
extended into the social and urban systems like 5. the tendency to be more costly relative to the size
healthcare, education, and criminal justice. of the problem
6. some experiments/studies are not used for
 In the 1980s, with the rise of computer technology, various reasons, which take up unnecessary
management information system was integrated into expense.
management science.
Lesson 1.6:
 The explosion of computer technology in the 1990s Areas of Application
was manifested in the production of more advanced
devices that can solve mathematical problems with the Since management science deals with an interdisciplinary
same speed as the mainframes. approach to problem- solving and decision-making, the list
of its applications has expanded continuously. Some of the
 More recently, the growth of data sources from smart typical managerial applications of management science are
phones and other personal electronic devices provides the following:
access to reliable data, which are used in varied ways  Inventory control
for more cost-efficient business processes, forecasting,  Facility design
and marketing promotion activities.  Product-mix determination
 Portfolio analysis for securities
Lesson 1.5:  Scheduling and sequencing
Major Limitations of Management Science  Transportation planning
 Design of management information systems
Management science is a very reliable tool for decision-  Allocation of scarce resources
makers. It involves skilled and experienced individuals to  Investment decisions or capital budgeting
be able to arrive at optimal solutions to complex  Project management
management problems.  New product decisions
 MANAGEMENT SCIENCE
DE SILVA, ANGEL ANN L. BSA-2 1ST SEMESTER

 Manpower or sales force decisions Scientific method

 Market research decisions  is the highest standard in investigating the natural
 Research and development decisions world.
 Pricing decisions  It consists of systematic observation,
 Distribution decisions measurement, experiment, and the formulation of
 Credit policy analysis questions or hypotheses (explorable.com).
 Machine setup problems in production
 Research and development effectiveness The steps in a scientific method consist of the following:
 Some applications mentioned in the list are given Step 1. Formulate the question or hypothesis.
as examples and problems in this book. Step 2. Collect data.
Step 3. Test hypothesis.
Based on research, the main reason for most companies Step 4. Draw a conclusion.
experiencing unfavorable sales performances or even Using the scientific method on management problems is
bankruptcy can be traced to a single faulty decision. Thus, more effective through the use of various
managers must be knowledgeable of modern techniques, methodologies/tools of management science.
tools, and technologies to ensure the continued success of
the organization. Management science enables a system approach that views
that all systems are comprised of subsystems.

CHAPTER 2 Systems are divided into three well-defined parts:

 Inputs
As a key management function, decision- making should  Processes
involve a critical review of the different alternative courses  Outputs
of action. The systematic process of management science
utilizes several quantitative tools that can lead managers to Outside the system exist elements in the environment:
the most optimal decisions.  Social
 Political
Lesson 2.1:  Legal
Features of Management Science  Physical
 Economic
Management science is characterized as a managerial  technological.
decision-making's focal point because of the following: Such elements can have an effect on the performance of the
1. the implementation of the scientific approach systems.
2. the use of a systematic process to solve problems
3. the use of an interdisciplinary approach There are problems that are too simple and can be solved by
4. the utilization of mathematical tools trained researchers, most especially those who have training
5. the use of some software applications. in management science. However, there are instances when
According to Businessjargons.com, decision- making is a problem has several aspects that require the attention of
the cognitive process of selecting a course of action, out of an interdisciplinary team. Management science enables
a set of available alternatives, to achieve the goals of the some problems that need to be solved through a team
organization. approach.

As a crucial management responsibility, decision-making  Several mathematical models were developed over
includes the following steps: the years to aid the management science analysis.
Step 1. Defining a problem  According to Turban and Meredith (1986), the
Step 2. Collecting information major reasons for using mathematical models are the
Step 3. Identifying alternatives following:
Step 4. Weighing the alternatives 1. The advancement of technology has resulted to
Step 5. Selecting the best possible option more alternatives. Sometimes the possible
Step 6. Planning and implementing solutions are infinite.
Step 7. Reviewing and evaluating the outcome 2. Mathematical models are easier to manipulate
than the real system, making experimentation
These steps are quite similar to the general process of easier.
scientific analysis employed in management science. 3. The cost of blunders during the trial-and-error
experiment will be lower when using
mathematical models.
 MANAGEMENT SCIENCE
DE SILVA, ANGEL ANN L. BSA-2 1ST SEMESTER

4. Mathematical models allow managers to take Network Models

advantage of calculated risks in the decision-  employed for proper management of interrelated
making process. This will minimize the activities or "networks," such as large construction
uncertainty presented in the environment. projects.
5. With the use of modeling analysis, the cost will  These models apply techniques that will improve the
be relatively lower compared to a similar coordination of subtasks while providing ways to use
process done with the real system. resources efficiently.

Dynamic Programming Models

 The development of management science is  deal with the optimization of multistage decision
synchronized with the advancement in information situations.
technology.  These models solve the original problem by
 Some management problems take a long time to be subdividing it into sub-problems that will be worked
solved manually, especially those that are too complex. out sequentially.
 Most business organizations utilize software
applications that will enable them to make Markov Analysis
quantitative- based decisions in seconds.  describes and forecasts the possible outcome of a
system that undergoes transition over time.
Lesson 2.2:
Tools of Management Science Decision Analysis Models
 are employed for managerial situations involving the
Several studies over the years resulted in a body of tools selection of an optimal course of action given
and techniques that are useful for solving managerial potential return and the corresponding probabilities of
problems. The following are management science tools the states of nature.
that are covered in this book:
Forecasting
Allocation Models  involves the prediction of the future under various
 used for problems involving the allocation of scenarios.
resources to obtain optimal effectiveness.
 Mathematical programming is the broad term for Lesson 2.3:
tools that are used to solve problems in which the Feasible or Infeasible, Optimal or Non-Optimal, and
decision-makers must allocate limited resources Unique or Multiple Solutions
among various activities to optimize a managerial
objective. feasible solution - requires that all conditions and
 These tools include linear programming and constraints given on the problem are satisfied.
distribution models. Infeasible solution - Defiance of said constraints would
cause the unacceptability of the solution.
Inventory Models
 determine the best inventory model and the best time optimal solution - The best among all feasible solutions.
to place an order. All possible feasible solutions have to be examined before
 The objective of these models is to minimize the an optimal solution will be chosen.
following costs: cost of holding or carrying extra non-optimal solution - is a feasible solution that is not
inventory, ordering cost, and shortage cost. considered optimal.

Queuing Models unique solution - If there will be a single optimal solution

 “waiting lines” demonstrate how to achieve an ideal multiple solutions - if there will be more optimal solutions,
balance between providing an appropriate level of it has a greater flexibility which is considered more
service and the waiting time of a customer in a favorable by management.
queuing system.
 These models aim to manage waiting line problems Decision-makers need management science to be able to
based on the arrival process, queue structure, and interpret the countless number of variables in a very fluid
service process. business environment. Computers can now capture big
data and are used by managers to foster better decisions on
Competitive Models innovation of business strategies, products, and services.
 (or game theory) present an analytical framework on
the behavior of competing players in the achievement
of their conflicting goals.