Chapter 1-2 Flashcards
Also called operations research, it’s a field that utilizes a scientific approach to aid decision-making. It
uses scientific methodologies and mathematical models to examine and address intricate issues.
Management Science
It aims to assist managers in making more effective decisions by providing them with the necessary tools and techniques to understand and resolve problems. Additionally, it facilitates communication among different specialists within a company.
Management Science
It’s an interdisciplinary field that applies scientific methods and quantitative techniques to decision-making and problem-solving within organizations. It integrates knowledge from various domains, including economics,
engineering, and business consulting, to enhance organizational efficiency and effectiveness.
Management Science
Special Characteristics of Management Science
- A primary emphasis on decisions made by managers.
- The utilization of scientific methods in the process of decision-making.
- Analyzing the decision-making scenario from a comprehensive viewpoint.
- Incorporating methodologies and knowledge derived from various disciplines.
- Depending on well-defined mathematical models.
- Employing technology, such as computers, software, or applications
Management science is a valuable tool for decision-makers. However, a significant limitation is the reliance on interpretation by managers. The scientific analysis involved often necessitates expertise in translating numerical values into actionable steps, potentially posing a challenge for individuals without such skills. Some individuals believe that
optimal solutions cannot be conveyed to those who do not possess the skills to arrive at them.
Some may argue against the idea of management science, claiming that it can be time-consuming. They argue that if inappropriate models are applied or inaccurate data is used, the result would be more detrimental to the organization’s
operations. But those who were able to implement its full potential were attested its benefits.
Major Limitations of Management Science
Major Limitations of Management Science
- Time-consuming
- Difficulty in assessing uncertainties
- The tendency to be more costly relative to the size of the problem
- Some decision-makers do not appreciate the results
- The use of oversimplified mathematical tools that do not match real-life situations
- Experiments/studies are not used for various reasons, which take up unnecessary expenses.
Areas of Application of Management Science
Since management science deals with an interdisciplinary approach to problem-solving and decision-making, the list of its
applications has expanded continuously. Some of the typical managerial applications of management science are the
following:
- Inventory control
- Facility design
- Portfolio analysis and securities
- Product-mix determination
- Scheduling and sequencing
- Transportation planning
- Design of management information systems
- Allocation of scarce resources
- Project management or capital budgeting
- Investment decisions
- New product decisions
- Manpower or sales force decisions
- Market research and development decisions
- Pricing decisions
- Distribution decisions
- Credit policy analyses
- Machine setup problems in production
- Research and development effectiveness
This could involve determining the optimal quantity of raw materials a manufacturing company needs
to keep on hand to minimize storage costs while ensuring production needs are met
*Inventory control
An example is deciding the layout of a new factory to optimize workflow and minimize transportation time
between different production stages
*Facility design
This might include choosing the best combination of stocks, bonds, and other
investments for a client’s portfolio, based on their risk tolerance and financial goals.
*Portfolio analysis and securities
An example would be deciding how many of each product a company should produce to
maximize profit given constraints on production capacity and demand
*Product-mix determination:
This could involve creating a schedule for a construction project that minimizes the total
project time by ordering the different tasks efficiently.
*Scheduling and sequencing
Determining the most cost-effective routes for delivering goods from warehouses to retail stores
is an example.
*Transportation planning
An example is creating a database and reporting system that allows a
company to monitor sales performance and inventory levels in real-time
*Design of management information systems
Deciding how to distribute limited funds among different departments within a company
to maximize overall productivity is an example.
*Allocation of scarce resources
This may involve evaluating whether to invest in a new piece of equipment by
calculating its net present value and return on investment.
*Project management or capital budgeting
Deciding which new projects to invest in based on their projected cash flows and return on
investment.
*Investment decisions
An example is a pharmaceutical company deciding whether to develop and launch a new drug
based on market analysis and projected profitability.
*New product decisions
This could involve determining how many sales representatives a company should
hire to cover a specific territory, based on the potential sales volume.
*Manpower or sales force decisions
An example is deciding which customer segments to target with a new marketing campaign after market research has been conducted.
*Market research and development decisions
This includes determining the best prices for a company’s products based on competitive pricing and
market demand analysis.
*Pricing decisions
Selecting the optimal locations for warehouses and distribution centers to minimize shipping
costs and delivery times is an example.
*Distribution decisions
Determining the optimal credit terms for customers to balance sales revenue with the risk of bad
debt.
*Credit policy analyses
Optimizing the sequence of production to minimize machine setup time and
increase efficiency is an example.
*Machine setup problems in production
