QUANTITATIVE

ANALYSIS
QUANTITATIVE ANALYSIS
 IS THE SCIENTIFIC APPROACHTO MANAGERIAL
DECISION MAKING
 MANIPULATION OF RAW DATA INTO
INFORMATION THAT IS VALUABLE TO DECISION
MAKERS
 QUALITATIVE FACTORS SHOULD BE
CONSIDERED:
 WEATHER
 GOVERNMENT REGULATIONS
 NEW TECHNOLOGICAL BREAKTHROUGHS
 ELECTION OUTCOMES
 THE QUALITATIVE ANALYSIS
APPROACH
 DEFINING THE PROBLEM
 DEVELOPING THE MODEL
 ACQUIRING INPUT DATA
 DEVELOPING A SOLUTION
 TESTING THE SOLUTION
 ANALYSIS OF RESULTS
 IMPLEMENTING THE RESULTS
 WHAT IS A MODEL?
 A REPRESENTATION OF A SITUATION
 PHYSICAL
 SCALE
 SCHEMATIC
 MATHEMATICAL
 ACQUIRING DATA
 GARBAGE IN, GARBAGE OUT
 DEVELOPING THE SOLUTION
 TRIAL AND ERROR
 COMPLETE ENUMERATION
 ( TRY ALL POSSIBLE VALUES)
 ALGORITHM OR A SERIES OF
REEPLICATED STEPS
 ACCURACY OF THE SOLUTION
DEPENDS ON INPUT DATA AND THE
MODEL
 TESTING THE SOLUTION
 COLLECTING ADDITIONAL DATA AND
COMPARING TO ORIGINAL DATA
 TEST FOR ACCURACY AND
CONSISTENCY
ANALYZING THE RESULTS AND
SENSITIVITY ANALYSIS
 SENSITIVITY ANALYSIS
 DETERMINES HOW THE SOLUTION WILL
CHANGE WITH A DIFFERENT MODEL OR
INPUT DATA
 MATHEMATICAL MODEL
 MATHEMATICAL REPRESENTATION OF
A SITUATION
 VARIABLE
 A MEASURABLE QUANTITY THAT MAY
VARY
 CONTROLLABLE OR UNCONTROLLABLE
 PARAMETER
 MEASURABLE QUANTITY INHERENT IN
THE PROBLEM
 SOME MATHEMATICAL
MODELS
 REGRESSION MODELS
 TIME SERIES MODELS
 LINEAR PROGRAMMING
 SIMULATION
 TRANSPORTATION MODEL
 INVENTORY CONTROL MODEL
 PERT /CPM
REGRESSION
ANALYSIS
 Regression Methods
 Linear regression
 a mathematical technique that relates a dependent
variable to an independent variable in the form of a
linear equation
 Correlation
 a measure of the strength of the relationship
between independent and dependent variables

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INDEPENDENT VARIABLE DEPENDENT VARIABLE
 VARIABLE WHICH  VARIABLE AFFECTED

COULD BE CHANGED BY THE INDEPENDENT

OR MANIPULATED VARIABLE
 Linear Regression

y = a + bx a = y-bx
xy - nxy
b =
x2 - nx2
where
a = intercept
b = slope of the line
x
x = = mean of the x data
n
y
y = n = mean of the y data
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 Linear Regression Example

x y
(WINS) (ATTENDANCE) xy x2
4 36.3 145.2 16
6 40.1 240.6 36
6 41.2 247.2 36
8 53.0 424.0 64
6 44.0 264.0 36
7 45.6 319.2 49
5 39.0 195.0 25
7 47.5 332.5 49
49 346.7 2167.7 311

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Linear Regression Example
(cont.)
49
x= = 6.125
8
346.9
y= = 43.36
8

xy - nxy2
b=
x2 - nx2
(2,167.7) - (8)(6.125)(43.36)
=
(311) - (8)(6.125)2
= 4.06

a = y - bx
= 43.36 - (4.06)(6.125)
= 18.46
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 Linear Regression Example
Regression equation (cont.)
Attendance forecast for 7 wins
y = 18.46 + 4.06x y = 18.46 + 4.06(7)
= 46.88, or 46,880
60,000 –

50,000 –

40,000 –
Attendance, y

30,000 –
Linear regression line,
20,000 –
y = 18.46 + 4.06x

10,000 –

| | | | | | | | | | |
0 1 2 3 4 5 6 7 8 9 10
Wins, x 11
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Correlation and Coefficient of
Determination

 Correlation, r
 Measure of strength of relationship
 Varies between -1.00 and +1.00
 Coefficient of determination, r2
 Percentage of variation in dependent
variable resulting from changes in the
independent variable

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 Computing Correlation

n xy -  x y
r=
[n x2 - ( x)2] [n y2 - ( y)2]

(8)(2,167.7) - (49)(346.9)
r=
[(8)(311) - (49)2] [(8)(15,224.7) - (346.9)2]

r = 0.947

Coefficient of determination
r2 = (0.947)2 = 0.897
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 Multiple Regression
Study the relationship of demand to two or
more independent variables

y = 0 + 1x1 + 2x2 … + kxk

where
0 = the intercept
1, … , k = parameters for the
independent variables
x1, … , xk = independent variables
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 Exercises