Introduction to Management Science

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Chapter 1

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Introduction

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Chapter Contents:
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Problem Solving and Decision Making
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Development of Operations Research
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The Nature of Management Science
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Models
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The Management Science Approach
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The Importance and Impact of Management Science
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Models of Cost, Revenue, and Profit
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Management Science Techniques

Management science, an approach to decision making based on the scientific method, makes extensive use of quantitative analysis. A variety of names exists for the body of knowledge involving quantitative approaches to decision making; in addition to management science, two other widely known and accepted names are operations research and decision science. Today, many use the terms management science, operations research, and decision science interchangeably.

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Learning Objectives
↗ After completing this chapter, you should be able to
↗ Define the term management science.
↗ Describe the nature of management science.
↗ Explain what a mathematical model is.
↗ Use a mathematical model to perform break-even analysis. ↗ Techniques of Management Science
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1.1 Problem Solving and Decision Making
Problem solving can be defined as the process of identifying a difference between the actual and the desired state of affairs and then taking action to resolve the difference.

For problems important enough to justify the time and effort of careful analysis, the problem solving process involves the following seven steps: 1. Identify and define the problem.
2. Determine the set of alternative solutions.
3. Determine the criterion or criteria that will be used to evaluate the alternatives. 4. Evaluate the alternatives.
5. Choose an alternative.
6. Implement the selected alternative.
7. Evaluate the results to determine whether a satisfactory solution has been obtained.

Decision making is the term generally associated with the first five steps of the problem solving process. Thus, the first step of decision making is to identify and define the problem. Decision making ends with the choosing of an alternative, which is the act of making the decision.

Let us consider the following example of the decision-making process. For the moment assume that you are currently unemployed and that you would like a position that will lead to a satisfying career. Suppose that your job search has resulted in offers from companies in Rochester, New York; Dallas, Texas; Greensboro, North Carolina; and Pittsburgh, Pennsylvania. Thus, the alternatives for your decision problem can be stated as follows: 1. Accept the position in Rochester.

2. Accept the position in Dallas.
3. Accept the position in Greensboro.
4. Accept the position in Pittsburgh.

The next step of the problem-solving process involves determining the criteria that will be used to evaluate the four alternatives. Obviously, the starting salary is a factor of some importance. If salary were the only criterion of importance to you, the alternative selected as “best” would be the one with the highest starting salary. Problems in which the objective is to find the best solution with respect to one criterion are referred to as single-criterion decision problems. Suppose that you also conclude that the potential for advancement and the location of the job are two other criteria of major importance....
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