Introduction to Quantitative AnalysisIntroductionNeed for Operations ManagementNeed for OMSlide 5Slide 6Slide 7Slide 8Examples of Quantitative AnalysesWhat is Quantitative Analysis?Slide 11The Quantitative Analysis ApproachDefining the ProblemDeveloping a ModelSlide 15Acquiring Input DataDeveloping a SolutionTesting the SolutionAnalyzing the ResultsImplementing the ResultsModeling in the Real WorldHow To Develop a Quantitative Analysis ModelSlide 23Slide 24Bagels ‘R UsBreakeven ExamplePritchett’s Precious Time PiecesSlide 28Slide 29ExamplesSlide 31Slide 32Advantages of Mathematical ModelingModels Categorized by RiskComputers and Spreadsheet ModelsSlide 36Slide 37Slide 38Slide 39Slide 40Slide 41Possible Problems in the Quantitative Analysis ApproachSlide 43Implementation – Not Just the Final StepSlide 45© 2008 Prentice-Hall, Inc.Chapter 1To accompanyQuantitative Analysis for Management, Tenth Edition, by Render, Stair, and Hanna Power Point slides created by Jeff HeylIntroduction to Quantitative Analysis© 2009 Prentice-Hall, Inc.© 2009 Prentice-Hall, Inc. 1 – 2IntroductionMathematical tools have been used for thousands of yearsQuantitative analysis can be applied to a wide variety of problemsIt’s not enough to just know the mathematics of a techniqueOne must understand the specific applicability of the technique, its limitations, and its assumptions© 2009 Prentice-Hall, Inc. 1 – 3Need for Operations ManagementThe increased complexity of running a successful business. Many large companies with complex business processes have used OM for years to help executives and managers make good strategic and operational decisions.American Airlines and IBM have incredibly complex operations in logistics, customer service and resource allocation that are built on OM technologies. As the trend of increased business complexity moves to smaller enterprises, OM will play vital operational and strategic roles.© 2009 Prentice-Hall, Inc. 1 – 4Need for OMLots of information, but no decisions. Enterprise resource planning (ERP) systems and the Web have contributed to a pervasive information environment; decision-makers have total access to every piece of data in the organization. The problem is that most people need a way to transform this wealth of data into actionable information that helps them make good tactical and strategic decisions. The role of OM decision methods is to help leverage a company’s investment in information technology infrastructure by providing a way to convert data into actions.© 2009 Prentice-Hall, Inc. 1 – 5Need for OMA large nationwide bank is using OM techniques to configure complicated financial instruments for their customers. A process that previously required a human agent and took minutes or hours to perform is now executed automatically in seconds on the bank’s Intranet. The resulting financial products are far superior to those produced by the manual process.© 2009 Prentice-Hall, Inc. 1 – 6Need for OMA major retail enterprise is using OM methodology for making decisions about customer relationship management (CRM). They are using mathematical optimization to achieve the most profitable match between a large number of customer segments, a huge variety of products and services, and an expanding number of marketing and sales channels such© 2009 Prentice-Hall, Inc. 1 – 7Need for OMSears, Roebuck and Company Manages a U.S. fleet of more than 1,000 delivery vehicles, some company owned and some not. The company makes more than 4 million deliveries a year of 21,000 uniquely different items. It has 46 routing offices and provides the largest home delivery service of furniture and appliances in the United States. The company also operates a U.S. fleet of 12,500 service vehicles, together with an associated staff of service technicians.Service demand is on the order of 15 million calls per year and revenue generated is approximately $3 billion.© 2009 Prentice-Hall, Inc. 1 – 8Need for OMOM researchers designed a system to deal with such variables as customer schedules and requested performance times, time estimates for the required service, vehicles and personnel available, skills needed, parts and product availability and so on. The system was designed to automatically schedule all facets of performance in such a way as toProvide accurate and convenient time windows for the Sears customerMinimize costsMaximize certain objective measures of task performance, including customer satisfaction. This effort generated a one time cost reduction of $9 million as well as ongoing savings of $42 million per year.© 2009 Prentice-Hall, Inc. 1 – 9Examples of Quantitative AnalysesTaco Bell saved over $150 million using forecasting and scheduling quantitative analysis modelsNBC television increased revenues by over $200 million by using quantitative analysis to develop better sales plansContinental Airlines saved over $40 million using quantitative analysis models to quickly recover from weather delays and other disruptions© 2009 Prentice-Hall, Inc. 1 – 10MeaningfulInformationQuantitativeAnalysisQuantitative analysisQuantitative analysis is a scientific approach to managerial decision making whereby raw data are processed and manipulated resulting in meaningful informationRaw Data What is Quantitative Analysis?© 2009 Prentice-Hall, Inc. 1 – 11Quantitative factorsQuantitative factors might be different investment alternatives, interest rates, inventory levels, demand, or labor costQualitative factorsQualitative factors such as the weather, state and federal legislation, and technology breakthroughs should also be consideredInformation may be difficult to quantify but can affect the decision-making process What is Quantitative Analysis?© 2009 Prentice-Hall, Inc. 1 – 12Implementing the ResultsAnalyzing the ResultsTesting the SolutionDeveloping a SolutionAcquiring Input DataDeveloping a ModelThe Quantitative Analysis ApproachDefining the ProblemFigure 1.1© 2009 Prentice-Hall, Inc. 1 – 13Defining the ProblemNeed to develop a clear and concise statement that gives direction and meaning to the following stepsThis may be the most important and difficult stepIt is essential to go beyond symptoms and identify true causesMay be necessary to concentrate on only a few of the problems – selecting the right
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