Quiz

1.Data collection methods for business analytics include all of the following
EXCEPT: 
a)Market research
b)Analyst data
c)Present sales performance
d)Market growth
2.Examples of business analytics include all of the following EXCEPT: 
a)Multiple regression analysis
b)Future value analysis
c)Activity based costing
d)Market

3.What is Data Science?

Excel Optimization
Software

• Optimization-
• Find the best set of decisions for a particular measure of performance
• Includes:
• The goal of finding the best set
• The algorithms (procedures) to accomplish this goal
Learning Objectives

• Decision-making situations - that may benefit from an optimization

modeling approach
• Interpret the results of models and perform basic sensitivity analysis.
Optimization Problem
Components

• Decision Variables
• Objective Function (to maximize or minimize)
• Constraints (requirements or limitations)
Business Analyst
Excel Optimization Software

• Solver
• Standard with Excel
• Analytic Solver Platform
• Comes with text – install off text CD
• More advanced than standard solver
• Is preferred tool throughout text
Decision Variables

• Levers used to improve performance

• Want to find the best values for the variables
• Finding these best values can be challenging
• Need Solver’s sophisticated software
• Still relatively easy to construct models beyond Solver’s
capabilities
Formulation

• Decision variables
• What must be decided? Be explicit with units
• Objective function
• What measure compares decision variables?
• Use only one measure (as a “yardstick”) – put in target cell
• Constraints
• What restrictions limit our choice of decision variables?
Interpreting Results

• Optimal values of decision variables

• Best course of action for the model
• Optimal value of objective function
• Best level of performance possible
• Constraint outcomes
• Throughout optimization, generally only some constraints are binding
Programming Examples

• Facility location
• Revenue maximization
• Maximize revenue in the presence of a demand curve
• Curve fitting
• Fit a function to observed data points
• Economic Order Quantity
• Trade-off ordering and carrying costs for inventory
Problem

• A company produces tables & chairs.

• To produce table company requires 3 kg material & 6 minutes labour
• To produce chair company requires 4kg material & 3 minutes of labour
• Profit for table = Rs. 2
• Profit for chair = Rs. 1.5
• 1000 kg of material & 1200 Hours labour are available
• Due to more inventory of table production manager has decided limit the
production of table no more than 180
• Solve the given problem perform sensitivity
Problem

Decision Variables x1 x2 Constraint

Quantity produced
Profit 2 1.5
Material 3 4 <=1000
Labour 6 3 <=1200
Table 1 <=180
Problem

• Mathematical Model Formulation

Problem

• Solver Method
Problem

• Add Solver
Problem

• Target cell-I8
• Max
• Changing Cell-G6:H6
• Constraint
• <=
• Subject to the constraint
• I9:I11<=K9:K11
• Solve
Solution

• Answer
Sensitivity
Analysis

• The technique used to determine how independent variable values will impact a
particular dependent variable under a given set of assumptions is defined
as sensitive analysis.

• It’s usage will depend on one or more input variables within the specific
boundaries

• It is also known as the what – if analysis.

• It helps in analyzing how sensitive the output is, by the changes in one input while
keeping the other inputs constant.
Sensitivity Analysis

• Principles
• Change the model and observe the behavior
• Experimental design: It includes combination of parameters that are to be varied
• What to vary:
• The different parameters that can be chosen to vary in the model could be: 
a) the number of activities
b) the objective in relation to the risk assumed and the profits expected
c) technical parameters
d) number of constraints and its limits
• What to observe:
a) the value of the objective as per the strategy
b) value of the decision variables
c) value of the objective function between two strategies adopted
Methods of Sensitivity Analysis

• There are different methods to carry out the sensitivity analysis:

• Modeling and simulation techniques
• Scenario management tools through Microsoft excel

• There are mainly two approaches to analyzing sensitivity:

• Local Sensitivity Analysis
• Global Sensitivity Analysis
Techniques of Sensitivity Analysis

• Correlation analysis helps in defining the relation between independent and

dependent variables.

• Regression analysis is a comprehensive method used to get responses for

complex models.

• Subjective sensitivity analysis: In this method the individual parameters are

analyzed. This is a subjective method, simple, qualitative and an easy method to
rule out input parameters.
Uses of Sensitivity Analysis

• To indicate the sensitivity of simulation to uncertainties in the input values

of the model.
• They help in decision making
• Sensitivity analysis is a method for predicting the outcome of a decision if
a situation turns out to be different compared to the key predictions.
• It helps in assessing the riskiness of a strategy.
• Helps in identifying how dependent the output is on a particular input
value.
• Helps in taking informed and appropriate decisions
• Aids searching for errors in the model
 Conclusion

• Sensitivity analysis is one of the tools that help decision makers with more than a
solution to a problem.

• It provides an appropriate insight into the problems associated with the model
under reference.

• Finally the decision maker gets a decent idea about how sensitive is the optimum
solution chosen by him to any changes in the input values of one or more
parameters.
Sensitivity Report

• Report
Business Analyst
 Answer

• 1-c
• 2-d
• 3- Defined as an interdisciplinary field about scientific methods, processes and
systems to extract knowledge or insights from data in various forms, either
structured or unstructured
Data Science

Application programming
interface