Management Science Models and Techniques

Management science is the application of the scientific approach to solving management problems. It helps managers make better and effective decisions, and can be used in a variety of organizations to solve different problems. It encompasses a logical, consistent, and systematic approach to problem solving

The purpose of break-even analysis is to determine the number of units of a product (i.e., the volume) to sell or produce that will equate total revenue with total cost. The point where total revenue equals total cost is called the break-even point, and at this point profit is zero.

The break-even point gives a manager a point of reference in determining how many units will be needed to ensure a profit.

Learn through a hands-on tutorial on conducting a Break Even analysis

The term 'programming' does not imply computer programming; rather to a predetermined set of mathematical steps used to solve a problem. Most frequently used and popular technique in management science.

It helps managers determine solutions (i.e., make decisions) for problems that will achieve some objective in which there are restrictions, such as limited resources or a recipe or perhaps production guidelines.

Objectives of a business frequently are to maximize profit or minimize cost. Linear programming is a model that consists of linear relationships representing a firm's decision(s), given an objective and resource constraints.

The linear programming technique derives its name from the fact that the functional relationships in the mathematical model are linear, and the solution technique consists of predetermined mathematical steps—that is, a program.

Linear Programming tutorial: Maximization example

Linear Programming tutorial: Minimizing transportations costs example

Management is generally perceived to be concerned with the planning, organization, and control of an ongoing process or activity such as the production of a product or delivery of a service. Project management is different in that it reflects a commitment of resources and people to a typically important activity for a relatively short time frame, after which the management effort is dissolved.

The two categories of decision situations are:

Probabilities that can be assigned to future occurrences

Probabilities that cannot be assigned

A decision-making situation includes several components

The decisions themselves and the actual events that may occur in the future, known as states of nature.

Suppose a distribution company is considering purchasing a computer to increase the number of orders it can process and thus increase its business. If economic conditions remain good, the company will realize a large increase in profit; however, if the economy takes a downturn, the company will lose money. In this decision situation, the possible decisions are to purchase the computer and to not purchase the computer. The states of nature are good economic conditions and bad economic conditions.

This module is a recap of what was covered in the course