4/13/2025
MANAGEMENT SCIENCE
TRAN THI BICH NHUNG
Tranthibichnhung.cs2@ftu.edu.vn
Contents
Chapter 1: Principles of scientific management
Chapter 2: Business resource management
Chapter 3: Business analysis model
Chapter 4: Process management
Chapter 5: Managers and management skills
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CHAPTER 1: PRINCIPLES OF
SCIENTIFIC MANAGEMENT
TRAN THI BICH NHUNG
Tranthibichnhung.cs2@ftu.edu.vn
Learning Objectives
1. Definitions
2. Characteristics
3. The science and art of management
4. Fundamental principles
5. Models and management methods
6. Affecting factors
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Management involves coordinating and overseeing
the work activities of others so that their activities are
completed efficiently and effectively.
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Management involves coordinating and overseeing
the work activities of others so that their activities are
completed efficiently and effectively.
Efficiently Effectively
Doing things right Doing the right things
Getting the most output Attaining organizational
from the least inputs goals
Efficiently Effectively
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Management involves coordinating and overseeing
the work activities of others so that their activities are
completed efficiently and effectively.
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The Four Management Functions
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Definitions
- Management science is a scientific approach to solving
management problems.
- Management science encompasses a logical approach to
problem solving
- Management science can be used in a variety of
organizations to solve many different types of problems
- Management science, also known as operations research,
quantitative methods, etc., involves a philosophy of problem
solving in a logical manner.
The Management Science Process
The Management Science Approach to Problem Solving
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The Management Science Process
Step 1: Observation - Identification of a problem that
exists (or may occur soon) in a system or organization.
Step 2: Definition of the Problem - problem must be
clearly and consistently defined, showing its boundaries
and interactions with the objectives of the organization.
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The Management Science Process
Step 3: Model Construction - Development of the
functional mathematical relationships that describe the
decision variables, objective function and constraints of
the problem.
These mathematical relationships are made up of numbers
and symbols
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The Management Science Process
Step 3: Model Construction - Development of the
functional mathematical relationships that describe the
decision variables, objective function and constraints of
the problem.
A variable is a symbol used to represent an item that can take on any value
Parameters are known, constant values that are often coefficients of
variables in equations. The parameter values are derived from data (i.e., pieces of
information) from the problem environment
Data are pieces of information from the problem environment
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The Management Science Process
Step 3: Model Construction - Development of the
functional mathematical relationships that describe the
decision variables, objective function and constraints of
the problem.
- A model is a functional relationship that includes variables,
parameters, and equations
- The equation as a whole is known as a functional relationship
(also called function and relationship). The term is derived
from the fact that profit, Z, is a function of the number of units
sold, x, and the equation relates profit to units sold.
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Example of Model Construction (1 of 3)
Information and Data:
Business firm makes and sells a steel product
Product costs $5 to produce
Product sells for $20
Product requires 4 pounds of steel to make
Firm has 100 pounds of steel
Business Problem:
Determine the number of units to produce to
make the most profit, given the limited amount
of steel available.
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Example of Model Construction (2 of 3)
Variables: X = # units to produce (decision variable)
Z = total profit (in $)
Model: Z = $20X - $5X (objective function)
4X = 100 lb of steel (resource constraint)
Parameters: $20, $5, 4 lbs, 100 lbs (known values)
Formal Specification of Model:
maximize Z = $20X - $5X
subject to 4X = 100
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Example of Model Construction (3 of 3)
Solve the constraint equation:
4x = 100
(4x)/4 = (100)/4
x = 25 units
Substitute this value into the profit function:
Z =
$20x - $5x
= (20)(25) – (5)(25)
= $375
(Produce 25 units, to yield a profit of $375)
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The Management Science Process
Step 4: Model Solution - Models solved using
management science techniques.
- A management science solution can be either a recommende
d decision or information that helps a manager make a decisi
on, some management science techniques provide
descriptive results:
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The Management Science Process
Step 5: Implementation is the actual use of the
model once it has been developed
The person responsible for putting the model or
solution to use is not the same person who developed
the model
Individuals are also sometimes hesitant to change the
normal way they do things or to try new things
if they are not carefully explained and their benefit
fully demonstrated
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Model Building:
Break-Even Analysis (1 of 9)
■ Used to determine the number of units of a
product to sell or produce that will equate total
revenue with total cost.
■ The volume at which total revenue equals total
cost is called the break-even point.
■ Profit at break-even point is zero.
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Model Building:
Break-Even Analysis (2 of 9)
Model Components: Volume – Cost - Profit
- Volume (v) – the number of units produced or
sold
- Fixed Cost (cf) - costs that remain constant
regardless of number of units produced.
- Variable Cost (cv) - unit production cost of
product.
- Total variable cost (v.cv) - function of volume
(v) and unit variable cost.
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Model Building:
Break-Even Analysis (3 of 9)
Model Components
Total Cost (TC) - total fixed cost plus total
variable cost. 𝑇𝐶 = 𝑐 − 𝑣. 𝑐
Profit (Z) - difference between total revenue
v.p (p = unit price) and total cost, i.e.
𝑍 = 𝑣. 𝑝 − 𝑐 − 𝑣. 𝑐
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Model Building:
Break-Even Analysis (4 of 9)
Computing the Break-Even Point
The break-even point is that volume at
which total revenue equals total cost and
profit is zero:
𝑣. 𝑝 − 𝑐 − 𝑣. 𝑐 = 0
𝑣. (𝑝 − 𝑐 ) = 𝑐
The break-even point 𝑐
𝑣=
𝑝−𝑐
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Model Building:
Break-Even Analysis (5 of 9)
Example: Western Clothing Company
Fixed Costs: cf = $10000
Variable Costs: cv = $8 per pair
Price : p = $23 per pair
The Break-Even Point is:
v = (10,000)/(23 -8)
= 666.7 pairs
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Model Building:
Break-Even Analysis (6 of 9)
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Model Building:
Break-Even Analysis (7 of 9)
Sensitivity analysis - sees how sensitive a management model is to changes
In general, an increase in price lowers the break-even point, all other things held constant.
For example: increase the price from $23 to 30$
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Model Building:
Break-Even Analysis (8 of 9)
Sensitivity analysis - sees how sensitive a management model is to changes
In general, an increase in variable costs results in higher the break-even point
For example: variable costs increase from $8 to $12
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Model Building:
Break-Even Analysis (9 of 9)
Sensitivity analysis - sees how sensitive a management model is to changes
an increase in fixed costs results in higher the break-even point.
For example: increase in advertising expenditures by $3.000 => Fixed costs increase from
$10.000 to $13.000
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Classification of Management Science Techniques
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Characteristics of Modeling Techniques
Linear Mathematical Programming
- The term programming used to identify this technique does not
refer to computer programming but rather to a predetermined set of
mathematical steps used to solve a problem.
- Clear objective; restrictions on resources and requirements;
parameters known with certainty
- …help managers determine solutions for problems that will
achieve some objective in which there are restrictions, such as
limited resources or a recipe or perhaps production guidelines.
- … help manufacturing companies decide how many units of
different products they should produce to maximize their profit (or
minimize their cost), given scarce resources such as capital, labor
and facilities.
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Characteristics of Modeling Techniques
Probabilistic Techniques - results contain uncertainty.
- Probabilistic techniques contain uncertainty, with some possibility
that alternative solutions might exist
- An example of a probabilistic technique is decision analysis. In
decision analysis, it is shown how to select among several
different decision alternatives, given uncertain future conditions
- Given future economic conditions might be good, fair, or poor,
each with a probability of occurrence
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Characteristics of Modeling Techniques
Network Techniques - model often formulated as
diagram; deterministic or probabilistic. (Chap 7-8)
- These models represent either probabilistic or
deterministic systems
- a network is drawn that shows the relationships of all
the tasks and activities for a project
- You could use this type of technique to plan for a
concert or an intramural volleyball tournament on your
campus.
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Characteristics of Modeling Techniques
Other Techniques - variety of deterministic and probabilistic
methods for specific types of problems including forecasting,
inventory, simulation, multicriteria, etc. (Chap 10, 14-16)
- Simulation is probably the single most unique topic. It has the
capability to solve probabilistic and deterministic problems and is
often the technique of last resort
- Both forecasting and inventory management also include
probabilistic as well as deterministic aspects
- The analytical hierarchy process (AHP) is a mathematical
technique for helping the decision maker choose between several
alternative decisions, given more than one objective
- Nonlinear programming can be nonlinear instead of linear, thus
requiring the use of calculus to solve them
-
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Business Use of Management Science
Some application areas:
- Project Planning
- Capital Budgeting
- Inventory Analysis
- Production Planning
- Scheduling
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Management science models in
Decision Support Systems (DSS)
A decision support system is a computer-based system that
helps decision makers address complex problems that cut
across different parts of an organization and operations.
Features of Decision Support Systems
Interactive
Use databases & management science models
Examples include:
ERP – Enterprise Resource Planning
OLAP – Online Analytical Processing
Address “what if” questions - Perform sensitivity analysis
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Management science models in
Decision Support Systems (DSS)
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Management science models in
Decision Support Systems (DSS)
A decision support system
- ERP – Enterprise Resource Planning
+ is software that can connect the components and functions of
an entire company. + It can transform data, such as individual
daily sales, directly into information that supports immediate d
ecisions in other parts of the company, such as ordering, manuf
acturing, inventory, and distribution
- OLAP – Online Analytical Processing
+ focuses on the use of analytical techniques such as managem
ent science models and statistics for decision making
+ A single user can be a spreadsheet program such as Excel to
develop specific solutions to individual problems
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Management science models in
Decision Support Systems (DSS)
A decision support system
+ Address “what if” questions - Perform sensitivity analysis
By linking various management science models together with
different databases, a user can change a parameter in one mode
l related to one company function and see what the effect will
be in a model related to a different operation in the company
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Affecting factors
Customers – Technology –
Social media - Innovation –
Sustainability - Employee
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The Importance of Customers
• Customers: the reason that organizations
exist
– Managing customer relationships is the
responsibility of all managers and employees.
– Consistent high quality customer service is
essential for survival.
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The Importance of Technology
• Technology:
– Software programming can systemize human
decision making and physical tasks, which
can be carried out by machinery.
– However, technological advances have fallen
short of replicating human interactions and
technology falls short of substituting human
judgment
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The Importance of Social Media
• Social media
– Forms of electronic communication through
which users create online communities to
share ideas, information, personal messages,
and other content.
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The Importance of Innovation
• Innovation
– Doing things differently, exploring new
fields, and taking risks.
– Managers should encourage employees to
be aware of and act on opportunities for
innovation.
– Product innovation and process innovation
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The Importance of Sustainability
• Sustainability – a company’s ability to achieve
its business goals and increase long-term share-
holder value by integrating economic,
environmental, and social opportunities into its
business strategies.
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The Importance of Employee
• Employee
- Successful managers regularly provide performance feedback
that serves as an evaluation of an employee’s performance and
provides the foundation for discussing developmental
opportunities.
- Successful managers often embrace work-life practices and
provide encouragement to employees who wish to use them
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THANK YOU
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