To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-1 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ PERTEMUAN 1

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-2 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Materi Riset Operasi Bisnis dan Industri Pemrograman Linear Teori Permainan Teori Keputusan Model Peramalan Model Pengendalian Persediaan Metode Transportasi Masalah Penugasan Manajemen Proyek Model Antrian Model Rantai Markov

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-3 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Introduction to Quantitative Analysis

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-4 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Learning Objectives Students will be able to:  Describe the quantitative analysis approach  Understand the application of QA in a real situation  Describe the use of modeling in QA  Use computers and spreadsheet models to perform QA  Discuss possible problems in using quantitative analysis  Perform breakeven analysis

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-5 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Chapter Outline 1.1 Introduction 1.2 What is Quantitative Analysis (QA) 1.3 The QA Approach 1.4 How to Develop a QA Model 1.5 The Role of Computers and Spreadsheet Models in the QA Approach 1.6 Possible Problems in the QA Approach 1.7 Implementation - Not Just the Final Step

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-6 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Introduction Mathematical tools have been used for thousands of years QA can be applied to a wide variety of problems One must understand: the specific applicability of the technique, its limitations and its assumptions

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-7 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Expert Systems and Artificial Intelligence Decision Support Information System Goal Programming Decision Theory Network Models Dynamic Programming Game Theory Transportation Assignment Technique Inventory Control Queuing Theory Markov Analysis The Evolution of QA

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-8 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Problem Quant.Analysis Logic Historic Data Marketing Research Scientific Analysis Modeling Qual. Analysis Weather State and federal legislation New technological breakthroughs Election outcome Decision ? The Decision-Making Process

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-9 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Scientific Approach to Managerial Decision Making Consider both Quantitative and Qualitative Factors Raw Data Quantitative Analysis Meaningful Information Overview of Quantitative Analysis Overview of Quantitative Analysis

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-10 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ The Quantitative Analysis Approach Define the problem Develop a model Acquire data Develop a solution Test the solution Analyze the results and perform sensitivity analysis Implement the results

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-11 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ The QA Approach - Fig 1.1 Define the Problem Develop a Model Acquire Input Data Develop a Solution Test the Solution Analyze the Results Implement the Results

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-12 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Define the Problem All else depends on this Clear and concise statement required May be the most difficult step Must go beyond symptoms to causes Problems are related to one another Must identify the “right” problem May require specific, measurable objectives

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-13 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Develop the Model Model: representation of a situation Models: physical, logical, scale, schematic or mathematical Models: variables (controllable or uncontrollable) and parameters Controllable variables  decision variables Models must be: solvable realistic easy to understand easy to modify

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-14 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Acquire Data Accurate data is essential (GIGO) Data from: company reports company documents interviews on-site direct measurement statistical sampling

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-15 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Develop a Solution Manipulate the model, find the “best” solution Solution: practical implementable Various methods: solution of equation(s) trial and error complete enumeration implementation of algorithm

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-16 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Test the Solution Must test both Input data Model Determine: Accuracy Completeness of input data collect data from a different sources and compare Check results for consistency Do they make sense? Test before analysis!

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-17 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Analyze the Results Understand the actions implied by the solution Determine the implications of the action Conduct sensitivity analysis - change input value or model parameter and see what happens Use sensitivity analysis to help gain understanding of problem (as well as for answers)

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-18 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Implement the Results Incorporate the solution into the company Monitor the results Use the results of the model and sensitivity analysis to help you sell the solution to management

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-19 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Modeling in the Real World Models are complex Models can be expensive Models can be difficult to sell real worldrealorganizations real problemsModels are used in the real world by real organizations to solve real problems

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-20 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ How to Develop a QA Model Profits = Revenue - Expenses Profits = Revenue (Price per Unit)  (Number Sold) Expenses - Fixed Cost - (Variable Cost/Unit)  (Number Sold) Profits = $10Q - $1,000 - $5Q Profit

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-21 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ How to Develop a QA Model Breakeven Point Set Revenue = 0 PQ - F – VQ = 0 Then F = PQ – VQ And: Q = F/(P – V) Q = quantity sold F = fixed cost V = variable cost/unit Breakeven Quantity = F/(P-V)

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-22 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Models Can Help Managers to Gain deeper insight into the nature of business relationships Find better ways to assess values in such relationships; and See a way of reducing, or at least understanding, uncertainty that surrounds business plans and actions

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-23 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Models Are less expensive and disruptive than experimenting with real world systems What ifAllow “What if” questions to be asked Are built for management problems and encourage management input Enforce consistency in approach Require specific constraints and goals

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-24 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Models: The Up Side Models Accurately represent reality Help a decision maker understand the problem Save time and money in problem solving and decision making Help communicate problems and solutions to others Provide the only way to solve large or complex problems in a timely fashion

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-25 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Models: The Down Side Models May be expensive and time- consuming to develop and test Are often misused and misunderstood (and feared) because of their mathematical complexity Tend to downplay the role and value of nonquantifiable information Often have assumptions that oversimplify the variables of the real world

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-26 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Using Models (from Dr. J.N.D. Gupta) Some Suggestions Use descriptive models Understand why the managers involved decide things the way they do Identify managerial and organizational changes required by the model Analyze each situation in terms of its impact on management Prepare a realistic cost/benefit analysis of tradeoffs of alternate solutions

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-27 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Mathematical Models Characterized by Risk Deterministic models - we know all values used in the model with certainty Probabilistic models - we know the probability that parameters in the model will take on a specific value

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-28 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ QM For Windows

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-29 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ QM For Windows

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-30 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Excel QM

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-31 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Excel QM’s Main Menu of Models

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-32 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Possible Problems in Using Models Define the Problem Conflicting viewpoints Departmental impacts Assumptions Develop a Model Fitting the Model Understanding the Model Acquire Input Data Accounting Data Validity of Data Develop a Solution Complex Mathematics Only One Answer is Limiting Solutions become quickly outdated

To accompany Quantitative Analysis for Management, 8e by Render/Stair/Hanna 1-33 © 2003 by Prentice Hall, Inc. Upper Saddle River, NJ Possible Problems - Continued Test the Solution Identifying appropriate test procedures Analyze the Results Holding all other conditions constant Identifying cause and effect Implement the Solution Selling the solution to others