BUDT 732: Decision Analytics

Spring 2014

Instructor: Pamela Armstrong, Ph.D. Office: 4312 Van Munching Hall, UMCP Mobile Phone: (301) 852-1746 Email: parmstro@rhsmith.umd.edu Office Hours: Mondays, 12-1pm; Tuesdays, 3-4pm or by appointment (NOTE: Please feel free to contact me at any time via email or telephone (email is best!). I will make it a priority to respond as soon as possible.)

Course Overview: In this course, we will explore basic analytical principles that can guide a manager in making complex decisions. Since spreadsheets are intuitive and user-friendly platforms on which managers can easily organize information and perform what if analyses, we will focus on modeling and solving managerial decision problems using Excel spreadsheets. We will focus on two advanced analytics techniques: optimization and simulation. Optimization deals with design and operating decisions for complex systems, whereas simulation deals with the analysis of operating decisions of complex systems in an uncertain environment to assess risk or to deal with uncertainty. This course provides the student with a collection of optimization and simulation modeling and solution tools that can be useful in a variety of industries and functions. The main topics covered are linear, integer, and nonlinear optimization applications in a wide variety of industry segments, and Monte-Carlo Simulation and risk assessment. Extensive use of application-oriented cases will be used 1) for develop modeling and analytical skills, and 2) to simulate decision-making in a real-world environment. Learning Objectives: After completing this course, students should be able to: Identify an underlying analytical structure in a seemingly complex and amorphous problem. Translate a verbal description of a decision problem into a valid optimization or simulation model. Interpret the meaning and assess the validity of a particular optimization model. Express a given optimization model in an Excel spreadsheet, and find solutions to these problems using the most appropriate algorithm and settings in Solver. Perform sensitivity analysis by tracing the effects of varying a parameter on the optimal decision variables and the objective function. Understand the role of uncertainty and risk in the decision-making process. Build and run Monte-Carlo Simulation using @RISK.
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Course Materials: 1. Required textbook: Kenneth Baker. Optimization Modeling with Spreadsheets, 2nd Edition, Wiley, 2011. ISBN: 9780470928639 2. Recommended textbook: Stephen Sashihara. The Optimization Edge, McGraw-Hill, 2011. ISBN: 9780071746571 3. Software: The course will use Excel Solver and @RISK (part of the Palisade Decision Tools Suite that you used in BUSI630). Students wishing to use Risk Solver Platform (the upgraded version of Excels Solver that can also build and run simulation models) will be allowed to do so. However, the in class discussion will be based on Solver and @RISK. 4. Lecture notes will be posted on the course website on Canvas. Hard copies of the lecture notes will not be distributed in class. Students need to print and bring the lecture notes to class on their own if they wish. Additional handouts will be distributed in class as necessary. Check the course website periodically for materials.

Expectations for Each Class Meeting: You are expected to complete the assigned readings listed in the course schedule before class. Students should come to class prepared to discuss the chapter(s) being studied and the cases assigned. A detailed class schedule of topics, readings, examples and assignments is attached. Excel files of the problems modeled and analyzed in class should be downloaded from the course web page before (not during) the class. Preparation for each class involves reading and thinking about the problems to be covered in class. The process of modeling a problem can be tricky; it is deceptively simple to watch someone else do it, but the only way to learn this skill is by practicing it yourself. This is a hands-on course; during class, you will have an opportunity to work with your classmates to model and solve various decision problems, so practice the software before coming to class. Everyone is expected to attend all classes, and actively contribute to the class discussion, sharing ideas, experiences and insights in the process of modeling and spreadsheet analysis.

Use of Electronics In Class: You may find it useful to bring a laptop to class in order to follow along with some of the spreadsheet examples. This being said, you will need to be disciplined not to let it distract you from the rest of the lecture. In order to do the homework successfully, you will need to pay close attention to the lectures. The use of other devices is prohibited during class.

Required Work and Grading Policy: The final grade is based on your final score, weighted as follows: Homework Assignments (55%): o Assignments are due at the start of your registered session. Late assignments are not accepted; late assignments will receive zero points. Final exam (35%): In class final exam. Class attendance and participation (10%): o 5% will be based on attendance and conduct in class. Infrequent class attendance, late arrivals, early departures, usages of cell phones, etc., will affect your participation grade negatively. o 5% will be based on the degree to which your comments contribute to learning in case discussions and lectures and on you participation in classroom activities. o Please use your name card in each class.

Course Grading: In R. H. Smith MBA elective courses, the proportion of A-, A, and A+ grades lie between 50% and 70% in the event that no C or lower grades are given. This recommended target is across all sections of the elective that a faculty member teaches in a given semester. Otherwise stated, we are recommending a class-average GPA of approximately 3.60 as a target.

Academic Integrity: The University's Code of Academic Integrity is designed to ensure that the principles of academic honesty and integrity are upheld. All students are expected to adhere to this Code. The Smith School does not tolerate academic dishonesty. All acts of academic dishonesty will be dealt with in accordance with the provisions of this code. Please visit the following website for more information on the University's Code of Academic Integrity: http://www.president.umd.edu/policies/iii100a.html

Plagiarism (see code above for definition) is not condoned or allowed in any way. You will be asked to certify compliance with the Code of Academic Integrity on each assignment/case/exam turned in by writing out and signing the following pledge: "I pledge on my honor that I have not given or received any unauthorized assistance on this exam/assignment." All sources used must be properly referenced using Smith School approved citation style. See link below for citation style guidance and examples. Click on the links to Business and the NetLibrary e-version of the AMA Style manual: http://www.lib.umd.edu/guides/style_manuals.html
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Special needs: Any student with special needs or issues of any kind must bring this to the attention of the instructor before the start of the first class. Religious observances: If your religious observances conflict with any aspect of the course activities, please bring this to the attention of the instructor to discuss alternative arrangements for learning about project management. Other situations: Please let the instructor know immediately if work or personal issues preclude you from preparing for or attending class, submitting assignments, or completing the exam. If possible, in accordance with university policy, arrangements will be made to enable you to complete the class successfully. If I am unable to teach a class, and a substitute instructor cannot be obtained, I or the teaching assistant will notify you by e-mail.

Who Can Do Well in Decision Analytics? Decision Analytics is not a math course. It is a business course. If you have done well in math courses in the past, you may possibly find it easy to understand much of the material. However, good performance in prior math courses is absolutely no guarantee of doing as well in this course. Conversely, if you have not done well in math courses in the past, there is no reason to believe that you will not do well in this course. The fundamental difference between Decision Analytics and most of your prior math courses is that here problems will be word problems. This calls for two distinctly different skills, both of which are absolutely essential for a successful performance in this course. On one hand, you will need verbal skills in order to quickly comprehend a situation from a short paragraph and in order to justify your calculations using a few short sentences. On the other hand, you will also need strong analytical skills in figuring out which particular technique to apply to the problem, as you understand it.

Tips on Studying for this Course: Attendance Try not to miss class meetings given the cumulative nature of most sessions, it is usually impossible to adequately make up a missed session. Reading Complete the assigned reading for class. Otherwise, the pace of the class will seem too fast. Solving Problems Reading the textbook is necessary but not sufficient. To truly master the concepts (and software) it is essential to solve as many problems as possible the textbook has many problems at the end of each chapter
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Planned Course Schedule (subject to change)

Topics Class 1 Jan. 21 Class 2 Jan. 23 Class 3 Jan. 28 Class 4 Jan. 30 Class 5 Feb. 4 Class 6 Feb. 6 Class 7 Feb. 11 Class 8 Feb. 13 Class 9 Feb. 18 Class 10 Feb. 20 Class 11 Feb. 25 Class 12 Feb. 27 Class 13 Mar. 4 Class 14 Mar. 6 Mar. 11 Introduction to Optimization Linear Optimization Common LP Models Sensitivity Analysis Textbook Readings Ch. 1 & 2 Chapter 4, p. 119-120,138-144 Exercise 2.1 Homework Due

Sashihara discussion Network Models DEC Case discussion Network Models 2 Decision Making Under Uncertainty Filatoi Riuniti case discussion Integer Optimization Integer Optimization Discussion: Sashihara reading

Sashihara Chapter 3 Sashihara highlights Text, Ch. 3 Ch. 3 Reading on Canvas Ch. 6 Homework 1 LP Filatoi Riuniti report Homework 2 networks Sashihara highlights Homework 3 IPa

Ch. 6 Sashihara Chapter 4

Integer Optimization Ch. 7 International Industries Case discussion Nonlinear Optimization Nonlinear Optimization 2 Discussion: Sashihara reading Introduction to Simulation Case Discussion: Digitron Hedging Simulation Case Discussion: Ontario Gateway Exam Review Simulation reading (on Canvas) Ch. 8

Ch. 7 Sashihara Ch. 7 Simulation reading (on Canvas)

Homework 4 IPb

Homework 5 NLP

Homework 6 simulation

FINAL EXAM