Documente Academic
Documente Profesional
Documente Cultură
Chapter 2
Irwin/McGraw-Hill
What is a model?
Prepare Ship
shipment goods
Receive
payment
Requirement
for material
has arisen
Purchase
Contact Requisition
customer
Requisition Purchase
released requisition
for scheduling released
agreement for purchase
schedule/SA release order
Purchasing
Goods
Receipt
Goods
receipt
posted
TO item Transfer
confirmed order Invoice
without item Verification
differences is confirmed
Payment
must
be effected
Models
Symbolic World
Analysis
Model Results
Interpretation
Abstraction
Management Decisions
Situation Intuition
Real World
Decision Models
• Inputs
– Decisions which are controllable
– Parameters which are uncontrollable
• Outputs
– Performance variables, or objective functions, that
measure the degree of goal attainment
– Consequence variables that display other consequences
so results can be better interpreted
Deterministic –vs- Probabilistic Models
• In deterministic models, all of the relevant data
(parameter values) are assumed to be known with
certainty.
Uncontrollable
Variables
Intermediate
Variables
Examples - Components of Models
Optimization- Introduction
• a.k.a. Optimization
Common Optimization Problems
KeyCorp
NYNEX
• Decisions
• Constraints
• Objectives
Characteristics of Optimization Problems
• Optimization problems:
– Can be used to support and improve managerial
decision making
– Maximize or minimize some function, called
the objective function, and have a set of
restrictions known as constraints
– Can be linear or nonlinear
Characteristics of Optimization Problems
• Linear programming:
– A problem-solving approach developed to help
managers make better decisions
– Numerous applications in today’s competitive
business environment
– For instance, GE Capital uses linear
programming to help determine optimal lease
structuring
Linear Programming