MT 340: Quantitative Methods Dr. Caulk Quantitative Decision Making 7 th ed by Lapin and Whisler

Goals of this course Apply mathematical models to situations of decision making Apply mathematical models to situations of decision making Construct decision trees Construct decision trees Calculate optimal payoffs and strategies Calculate optimal payoffs and strategies Formulate and use forecasting methods Formulate and use forecasting methods Formulate and solve linear optimization problems Formulate and solve linear optimization problems Perform sensitivity analysis Perform sensitivity analysis

Grade Breakdown Three exams – 20% each Three exams – 20% each Homework – 35% Homework – 35% Attendance- 5% Attendance- 5%

Quantitative methods are research techniques that are used to gather quantitative data - information dealing with numbers and anything that is measurable. Quantitative methods are research techniques that are used to gather quantitative data - information dealing with numbers and anything that is measurable.

Motivation Controlling inventories Controlling inventories Waiting lines Waiting lines Mail delivery systems Mail delivery systems Reservation systems Reservation systems Schedules Schedules Locating warehouses, fire-stations Locating warehouses, fire-stations Improve Investing Improve Investing Distribution of Goods Distribution of Goods

Models and Decision Making Learn to select the alternatives that best satisfy the decision maker’s goals. Learn to select the alternatives that best satisfy the decision maker’s goals. Identify goals Identify goals Identify alternatives Identify alternatives Yardsticks for comparison Yardsticks for comparison Cost Cost Profit Profit

Mathematical Models Express the problem mathematically Express the problem mathematically Variables Variables Constants (or parameters) Constants (or parameters) Use formulas to link variables and constants Use formulas to link variables and constants

Inventory Problem Total annual cost = Total annual cost = ordering cost + holding cost + procurement cost ordering cost + holding cost + procurement cost Objective Objective Minimize: Total annual cost =(A/Q)k+hc(Q/2)+Ac Where A = annual number of items demanded k = cost of placing an order k = cost of placing an order h = annual cost per dollar value for holding h = annual cost per dollar value for holding items in inventory items in inventory c = unit cost of procuring an item c = unit cost of procuring an item Q = order quantity Q = order quantity