Lecture Day 1

Introduction to Management
Science

Linear Programming

Introduction to
Management Science

Management Science
is
. . discipline devoted to studying and
. . ..the
developing procedures to help in the
process of making decisions.
. . . the use of the scientific method for
decision making.
. . . an interdisciplinary field comprising
elements of mathematics, economics,
computer science, and engineering.
. . . an experimental and applied science
devoted to observing, understanding, and
predicting the behavior of purposeful
human/machine
systems.
- Operations
Research Society of America

Historical Overview

Venetian shipbuilders of the fifteenth

century are known to have used an
assembly line in outfitting ships

Adam Smith and his study on the merits of

division of labor in 1776

Charles Babbage wrote On Economy of

Machines and Manufactures (1832) which
discussed issues relevant to management
science such as skill differential in wages

Historical Overview

Frederick W. Taylor is known as the father of

scientific management
he formally advocated a scientific approach
to the problems of manufacturing
which led
to the development of
industrial engineering
as a profession
he worked under the philosophy that there
was one best way or most efficient way to
accomplish a given task

Henry L. Gantt refined the content of early

scientific management by bringing into
consideration the human aspect of
managements attitude toward labor

Historical Overview

Frederick W. Lanchester attempted in 1914 to

predict the outcome of military battles based
on the numerical strength of personnel and
weaponry, which represented the first
attempt to model an organizational decision
problem mathematically.
Horace C. Levinson was one of the first to
apply sophisticated mathematical models to
business problems. In the 1930s, he studied
the relationship between advertising and sales
as well as the effect of income and residential
location on customer purchases.

Historical Overview

World War II developments:

Investigation on the effective use of radar,
anti-submarine warfare, civilian
defense, and the optimal deployment of
convoy vessels
to accompany supply
ships
British P.M.S. Blackett and his Blackett
Circus which exemplify the multidiscipline
team approach in using MS/OR models
John von Neumann developed game
theory and utility theory
George Dantzig developed the simplex
method of linear programming which uses
linear algebra to determine the optimal

Management Science
follows the
Scientific Method

Observation

Definition of the problem

Formulation of a
hypothesis

Experimentation

Verification

Management Science
follows the
Systems Approach

Consider an organization as a
human/machine system comprising
components such as machinery,
departments, and individual people.

Viewing the organization as a system

permits the management scientist to
consider
the individual components
in relation to
the entire organization.

Characteristics of the
Management Science Approach

Viewing the problem within a systems

perspective

Applying the scientific method to

develop the solution methodology

Using a team, or interdisciplinary,

approach

Using a mathematical model

Using a high-speed electronic

computer

Models in Management Science

A model is a representation or an
abstraction of an object or a particular
real-world phenomenon.

The purpose of the model is to gain

specific information about, and general
insight into, the phenomenon that it
represents.

A good model accurately displays the

key properties of the entity it represents.

Types of Models

Iconic model - a physical representation

that actually looks like the object it
represents
Analog
model- substitutes one property
for another; it can represent dynamic
situations statically

Symbolic or Mathematical model

attempts to represent non-mathematical
reality by means of equations and other
mathematical statements

A mathematical model must be detailed

enough to represent the essential realities
of the problem and yet manageable in
terms of computation and
implementation.
No mathematical model can capture all
the characteristics, properties, and
uncertainties of a real situation.

Most models created for Management

Science applications consist of the
following system of equations:

Objective Function
- a single equation
used to measure the effectiveness of
proposed solutions

Constraints- equations which ensure

that the solution satisfies certain
requirements dictated by the nature
of the problem

Consider the following

knapsack or cargo-loading
problem:
Item
Weight (lbs.) Value
1. Water

3.00

60

2. Tent

5.00

60

3. Food

4.00

40

4. Matches

0.01

10

5. Fishing
6. Tackle

4.00

20

3.00

10

7. Sleeping Bag
0.50
3
Snake Bite
Kit Maximum capacity of knapsack = 10 lbs.

Steps in Applying Management Science

Techniques
Available
Data
quantitative preparatio
models
n

Facts

1
Formulat
e the
problem

2
Choose
a
model

Problem
definition
(a verbal
model)

3
Solve the
proposed
model

Proposed
model

4
Test
the
solution

Propose
d
solution

Unsatisfactory solution

Possible
future
changes

Educatio
n,
publicity,
etc.

5
Establish
controls

6
Generate
acceptan
ce &
implement

Satisfactory
solution

Satisfactor
y
technique
for further
solutions

Report
generation

Useful
technique

MS / OR Applications

Public Sector:
Urban-Social
City planning

Health

Health care delivery

system
Courtroom congestion
evaluation
Air-water pollution control
Hospital admissions
Solid waste disposal
Disease control
Air & highway traffic
Dietary planning
patterns

Mass transit systems

Population planning
Municipal zoning
Political campaign
strategies

Blood inventory
policy

MS / OR Applications

Private Sector:
Service
Industrial
Portfolio management Production
Location of retail facility scheduling
Optimal inventory
Insurance and risk
policies
management
Distribution of
Actuarial science
products
Advertising media mix
Working capital
Airplane scheduling
management
Telephone switching
Plant layouts
Transportation scheduling
Quality control
Queuing analysis of

Linear Programming

Linear Programming (LP)

is . . .

. . . primarily concerned with the determination

of the best allocation of scarce resources.
. . . a component of the more general field of
mathematical programming that is
concerned with the development of
modeling and solution procedures for the
purpose of maximizing
the extent to
which the goals and objectives
of the
decision maker are realized.

Despite the implication of its name, LP

has little to do with computer
programming. In LP, the word
programming is related to planning.
Specifically, it refers to modeling a
problem and subsequently solving it by
mathematical techniques.

General Problem Situations To

Which
Linear Programming Can
Be Applied :
Blending.In such problems, several raw
ingredients are mixed into a final product that
must fulfill certain specifications. The objective
is to determine the blend of ingredients that
does not exceed available supply, meets all
technical specifications,
minimizes
costs.
Determining
Product Mix.
Inand
these
problems,
it is
necessary to determine the kinds and
quantities
of products to be manufactured
to maximize profits. The final product mix
must take into consideration the limited
resources, expected demand for each product,
and various management policies.

General Problem Situations To

Which
Linear Programming Can
Be Applied :
Purchasing.LP can be used to help confront the
kind of purchasing decisions in which products
are available at different quantities, qualities,
and prices. The purchase decision must take
into consideration the output requirements and
specifications as well as budget limitations. LP
can also be used in make-or-buy situations.

General Problem Situations To

Which
Linear Programming Can
Be Applied :
Physical Distribution and Assignment.
In these
problems, it is necessary to ship/transfer
goods from supply points or production
facilities to warehouses or centers of customer
demand. The problem is to determine the
shipping pattern that minimizes shipping
costs, meets all demand, and does not exceed
available supply. In assignment problems, the
objective is to assign facilities or people to
specified jobs to maximize performance or
minimize costs or time.

Canonical Form of a
Linear Programming Model
Maximize:

c1x1 + c2x2 + . . . + cnxn

Subject to: a11x1 + a12x2 + . . . + a1nxn < b1

a21x1 + a22x2 + . . . + a2nxn < b2
.
.
.
am1x1 + am2x2 + . . . + amnxn < bm
and
x1 > 0, x2 > 0, . . ., xn >
0
where: xj - decision variables
- they are the variables whose value
is determined when the LP model is
aij, c
, bi - parameters
solved
j
- input data

Product Mix Example

The Cordoba Company is a manufacturer of power
amplifiers and preamplifiers. It has the facilities to
produce only power amplifiers, only preamplifiers, or a
combination of both. Production resources are limited,
and it is critical that the firm produce the appropriate
number of power amplifiers and/or preamplifiers to
maximize profit. Currently, the power amplifier is selling
for P799.95 and is contributing P200 toward profit. The
preamplifier
sells for process
P1,000 and
contributes
P500 of
profit.
The production
is limited
by scarcity
high-quality transistors for the preamplifiers, assembly
worker hours, as well as testing and inspection working
hours. Because of a shortage of high-quality transistors,
at most 40 preamplifiers can be manufactured on a daily
basis; all other electronic components are in adequate
supply. There are only 240 hrs. of assembly worker time
available each day with each power amplifier requiring
1.2 hrs. and 4 hrs. for each preamplifier. There are 81
worker hours available for inspection and testing each
day, and the two components require 0.5 and 1 hour,

Let: X1 = number of power

amplifiers
X2 = number of
preamplifiers
Max. Z

200X1 +500X2
=
Subject to:
X2 < 40
1.2X1 4X2 <
240
+
0.5X1 + X2 <
81
Xi > 0

Diet Problem Example

The objective is to determine the type and amount of
foods to include in a daily diet to meet certain nutritional
requirements at minimum cost. The foods included are
tuna fish, milk, spinach, and whole-wheat bread; the only
nutrients being considered are vitamins A, C, and D, as
well as iron. Following are the nutritional and cost data for
this problem:

Nutrient

Gallo
n of
milk

Pound
of
tuna

Loaf
of
bread

Vit. A

6,400

237

Vit. C

40

Vit. D

540

28

13

Iron
Cost

P1.95

P1.80

P0.75

Pound
of
spinach

RDA

34,00 5,000 IU
0
75 mg
71
400 IU
0
8
P0.80

12 mg

Let: X1 = gallons of milk

X2 = pounds of tuna
X3 = loaves of bread
X4 = pounds of spinach
Min. Z =1.95X1 +1.80X2
+ 0.75X3 + 0.80X4
Subject to:
>4
6,400X1 + 237X2 +34,000X
40X1 + 71X4 >

5,000
75

540X1 > 400

28X1 + 7X2 + 13X3 + 8X4 >
Xi > 0

12

End of Lecture Day 1