MANAGEMENT

SCIENCE
Lecture Presented by:
Darwin V. Viray. MBA​
TOPIC FOR DISCUSSION
Introduction​
Meaning
​Special Characteristics of Management Science
Areas of Application
​Conclusion or Summary​
INTRODUCTION
3

Introduction to Management Science Part 1

Management Science is a tool used by managers and administrators in the
performance of their most vital task: making crucial decisions. Common
management decisions, such as inventory management, forecasting, project
management and operational efficiency require an objective basis when choosing
best solution. Management science which is another term for Operation Research or
decision science, carries an immense option of tools to aid managers when faced
with decisions.
-refers to the process of administering and controlling the affairs of the organization
by creating an environment that will contribute to achieving the business goals
effectively and efficiently. Managers should successfully execute the 5 functions of
management to attain the level of productivity but it should be engaged in a
multiple decision making.
 DEFINITION OF MANAGEMENT
SCIENCE
1. Operation Research is defined as the scientific process of transforming data into insights to
make better decisions.
2. Quantitative analysis is the process of collecting and evaluating measurable and verifiable
data, such as revenues, market shares, and wages to understand the behavior and
performance of a business.
3. According to Lancaster University, management science can be defined as a concept
that is “concerned with developing and applying models and concepts that help to
illuminate issues and solve managerial problems”. The approach is essentially interested
in looking at an organization and finding ways it can manage itself better and improve
its productivity.
4. Management science, an approach to decision-making based on the scientific method,
makes extensive use of quantitative analysis.
 SPECIAL CHARACTERISTICS 5

Special Characteristics of Management Science

 A primary focus on management decision making
 The application of the scientific approach to decision making
 The examination of the decision situation from a broad
perspective
 The use of methods and knowledge from several disciplines
 A reliance on formal mathematical models
 The use of technology such as computers, software or
applications
AREAS OF APPLICATION 6

 Inventory Control- means managing your inventory levels to ensure that you are keeping the optimal amount of
each product. Proper inventory control can keep track of your purchase orders and keep a functional supply chain.
Systems can be put in place to help with forecasting and allow you to set reorder points, too.
 Facility Design-is the overall layout of your facility -- including the equipment, work stations, offices, fixtures,
machinery, and more.
 Product-mix determination-also known as product assortment, refers to the total number of product lines a company
offers to its customers. The four dimensions to a company's product mix include width, length, depth and
consistency.
 Portfolio analysis for securities - The analysis of various tradable financial instruments is called security
analysis. Security analysis helps a financial expert or a security analyst to determine the value of
assets in a portfolio.
 Scheduling and sequencing-is the order of processing a set of tasks over available resources. Scheduling involves
sequencing'' task of allocating as well as the determination of process commencement and completion times i.e.,
time-tabling.
 Transportation planning-is a cooperative process designed to foster involvement by all users of the system, such as
businesses, community groups, environmental organizations, the traveling public, freight operators, and the general
public, through a proactive public participation process.
 7
 Design of management information systems-is a formal method of making available to management, the
accurate and timely information to facilitate the decision-making process.
 Allocation of scarce resources-apportionment of productive assets among different uses. Resource
allocation arises as an issue because the resources of a society are in limited supply, whereas human
wants are usually unlimited, and because any given resource can have many alternative uses.
 Investment decisions or capital budgeting- is the process by which investors determine the value of a potential
investment project.
 Project management-focuses on planning and organizing a project and its resources. This includes identifying and
managing the lifecycle to be used, applying it to the user-centered design process, formulating the project team, and
efficiently guiding the team through all phases until project completion.
 New product decisions- are based on how much the organisation has to adjust the product on the
standardisation - adaptation continuum to differing market conditions.
 Manpower or sales force management decisions- The main objective of sales force management is to
optimise the performance of the sales and marketing teams. We could even say that sales force
management is a strategy to increase business sales since it also relates to performance and results. 
 Market research decisions-This process provides a simple way to get the information you need to address any
problem using the marketing Research.
 Research and development decisions- includes activities that companies undertake to innovate and introduce 8
new products and services. It is often the first stage in the development process. The goal is typically to take new
products and services to market and add to the company's bottom line.
 Pricing decisions- is a process whereby a business sets the price at which it will sell its products and services, and
may be part of the business marketing plan.
 Distribution decisions-refer to all decisions that ensure the efficient delivery of goods and services to the end user.
 Credit policy analysis-evaluates the riskiness of debt instruments issued by companies or entities to measure the
entity's ability to meet its obligations
 Machine setup problems in productions-During the manufacturing process, there are many production issues that
can occur: poor quality, long lead times, high on-hand inventory, supply chain interruptions, etc. These things all
affect the product you’re putting out there, which in turn affects the public’s perception of your brand.
 Research and development effectiveness -measured according to your company's strategy and project
constraints.
 9

SUMMARY
With the ever-changing global business environment increasing,
and as more traditional businesses are being disrupted,
companies must find ways to increase their operational
efficiencies without comprising the quality of their
products/services. Based on research, the main reason for most
companies experiencing unfavorable sales performances or even
bankruptcy can be traced to a single faulty decision. Thus,
managers must be knowledgeable of modern techniques, tools
and technologies to ensure the continued success of the
organization.
 10

“ BUSINESS OPPORTUNITIES ARE

LIKE BUSES. THERE'S ALWAYS

”
ANOTHER ONE COMING.
Richard Branson
PART 2

Management Science
TOPIC FOR DISCUSSION
Features of Management Science
Tools of Management Science
​Feasible or Infeasible, Optimal or Non-Optimal and
Unique or Multiple Solutions​
LEARNING OUTCOMES
• Explain the features, process, and tools of
management science
• Demonstrate the steps of the quantitative analysis
process
• ​Define the different mathematical tools and
understand their role in decision-making.
• Describe feasible or infeasible, optimal or non –
optimal, and unique or multiple solutions
​
Presentation title 14

STEPS IN DECISION MAKING

• Step 1. Defining a Problem

• ​Step 2. Collecting Information
• Step 3. Identifying Alternatives
• Step 4. Weighing the alternatives
• Step 5. Selecting the best possible option
• Step 6. Planning and Implementing
• Step 7. Reviewing and evaluating the outcome
 DECISION MAKING 15

STEPS
Step 1: Defining a Problem
Step 2: Collecting Information
Step 3: Identifying Alternatives
Step 4: Weighing the alternatives
Step 5: Selecting the best possible option
Step 6: Planning and Implementing
Step 7: Reviewing and Evaluating the outcome
Presentation title 16

STEPS IN SCIENTIFIC METHOD

• Step 1. Formulate the question or hypothesis

• ​Step 2. Collect data
• Step 3. Test Hypothesis
• Step 4. Draw Conclusion
Presentation title 17

THE MAJOR REASON IN USING

MATHEMATICAL MODELS
• The Advancement of technology has resulted to more alternatives
• Mathematical models are easing to manipulate than the real system, making experimentation easier
• The cost of blunders during the trial-and –error experiment will be lower when using mathematical models
• Mathematical models allow managers to take advantage of calculated risks in the decision-making process.
This will minimize the uncertainty presented in the environment
• With the use of modelling analysis, the cost will be relatively lower compared to a similar process done with
the real system
TOOLS OF MANAGEMENT SCIENCE
 Allocation Models- are used for problems involving the allocation of
resources to obtain optimal effectiveness
 Inventory Models-determine the best inventory model and the best
time to place an order.
 Queuing Models-waiting lines demonstrate how to achieve an ideal
balance between providing an appropriate level of service and the
waiting time of a customer in a queuing system.
 Competitive Models-Competitive models (or game theory) present an
analytical framework on the behavior of competing players in the
achievement of their conflicting goals.
 Network Models-are employed for proper management of interrelated activities
or “networks”, such as large construction projects
 Dynamic Programming Models- deal with the optimization of multistage
decision situations. This model solve the original problem by subdividing it into
sub-problmes that will be worked out sequentially
 Markov Analysis- describes and forecasts the possible outcome of a system that
undergoes transition over time
 Decision Analysis Models- are employed for managerial situations involving the
selection of an optimal course of action given potential return and the
corresponding probabilities of the states of nature
 Forecasting- involves the prediction of the future under various scenarios
 SOLUTIONS
 Feasible and Infeasible Solutions- A feasible solutions requires that all
conditions and constraints given on the problem are satisfied. Defiance
of said constraints would cause the unacceptability of the solutions.
This, the said solution is considered infeasible
 Optimal and Non Optimal Solutions-The best among all feasible
solutions is called an optimal solution. All possible solutions have to be
examined before an optimal solution will be chosen. An non-optimal
solution is a feasible solution that is not considered optimal
 Unique and Multiple Solutions – if there will be a single optimal
solution, it will be classified as a unique solution. On the other hand, if
there will be more optimal solutions, then there are”multiple
solutions”. Greater flexibility is presented by the latter case, which is
considered more favorable by management
DECISION
THEORY
PART 1
Management Science
 DECISION THEORY-PART 1
TOPICS TO BE DISCUSSED
 Definition of State of nature, Alternatives Courses of Actions,
Payoff and Probability of Occurrence of a State of Nature
 Role and Structure of Decision Makers
 Problems under Certainty, Uncertainty and Risk
 Solutions to Decision Under Risk
 Solution to Decision under Uncertainty
 INTRODUCTION
Decision Theory deals with methods
in determining the optimal course of
action when a number of
alternatives are available and their
consequences cannot be forecast
with certainty.
 24

 Definition of State of nature, Alternatives Courses of Actions, Payoff and Probability of Occurrence of a
State of Nature
 Alternative Courses of Action-
 State of Nature-
 Probabilities of Occurrence of the states of nature-
 Payoffs-

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