Learning Objectives

SCMT 336:
Decision Support Systems

Understand the purpose and structure of the course

Understand the concept of mathematical model
Understand the concept of OR (operations research)
modeling approach

Introduction and course overview

Decision Support Systems

Topics
Excel
Essential worksheet operations
Formatting
Functions
Tables and pivot tables
Graphs
Data analysis
Visual Basic macros

Computer based systems that utilize data and quantitative

models to solve problems and to help managers make
decisions
Focusing on structuring, analyzing, and solving managerial
decision problems using Excel spreadsheets.
Excel is an intuitive and indispensible tool for data
organization, analysis, and presentation
Linear programming is a widely used, powerful,
quantitative tool

Linear programming
Allocation, covering and blending models
Network models
Integer programming models with logical constraints
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Application Oriented

Common Business Decisions

In each area, we consider specific managerial decision

problems, model them on Excel spreadsheets, analyze and
solve the models, and then interpret the solutions obtained.

Product lineup, production & inventory plan

Staffing plan
Maintenance plan

Practice makes perfect

Transportation/distribution plan
Location and network plan

Ten thousand hours of practice is required to achieve

the level of mastery associated with being a world-class
expert in anything Daniel Levitin, neurologist

Financial plan

Problem Formulation

Formulation Example

What do you want to achieve? (What is your objective?)

What are the factors that need to be determined? (What are
the decision variables?)
What are the other factors that are known and also influence
the objective? (What are the parameters?)
How do the parameters, decision variables interact with each
other? What are the limitations set by the business
environment? (What are the constraints?)

A bank wants to reduce expenditures on tellers weekly

salaries while still maintaining an adequate level of customer
service.

Do you need a numerical solution?

Basic Steps in the

OR Modeling Approach

Mathematical Model
Typical components
A set of decision variables
An objective function, expressed in terms of the decision
variables, that is to be minimized or maximized
A set of parameters (known quantities) concerning the
process being studied
A set of constraints that limit the possible values of the
decision variables
Abstractions
From inputs to outputs
Computability varies
Deterministic or probabilistic/stochastic

Problem identification & definition

Formulation
Define the problem
Develop a model
Acquire input data
You are only as good as your source?
Derivation of optimal solution(s)
Interpretation and What-if analysis (sensitivity analysis)
Implementation (includes monitoring and controlling)

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Get Started with Excel

(Payment Calculations Example)

Get Started with Excel

At Bubba's Used Cars you can get a 5 year car loan at an

annual rate of 8.9%. If you agree to pay it off in a shorter time
period, Bubba will charge less. Specifically, the annual rate
is 7.9% if you pay off in 4 years, 6.9% in 3 years, 3.9% in 2
years, and 2.9% in 1 year.

Computer accounts
User name: First 2 letters of last name (lower case) + last 4 of UIN
Password: Mays + last 4 of UIN
Problems: bring your ID to Room 235

Enter data into Excel

Format worksheet

You want to construct a spreadsheet that calculates your

monthly payment and finance charges given an amount
financed and the payoff period.

Enter, copy and paste formulas

Set the amount financed at $14,500.

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Payment Calculations Worksheet

Amt. Financed

Years

Formulas Needed in the Example

$14,500

Annual
Monthly
Finance Rate Finance Rate

Months
Financed

Monthly
Payment

Total
Payment

Finance
Charge
$229

2.9%

0.24%

12

$1,227

$14,729

3.9%

0.33%

24

$629

$15,096

$596

6.9%

0.58%

36

$447

$16,094

$1,594

7.9%

0.66%

48

$353

$16,959

$2,459

8.9%

0.74%

60

$300

$18,018

$3,518

Monthly Payment = -PMT(rate, nper, pv)

rate represents the monthly finance rate
nper represents the number of payment periods of the loan
pv represents the amount financed
Monthly Finance Rate = Annual Finance Rate / 12
Months Financed = Years Financed * 12
Total Payment = Monthly Payment * Months Financed
Finance Charge = Total Payment Amount Financed

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