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Chapter 1

Chapter 1. The Art and Science of Becoming a More Effective and Efficient Problem Solver. What is Business Decision Modeling?. “The application of scientific approach to solving management problems in order to help managers make better decisions” - Taylor

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Chapter 1

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  1. Chapter 1 The Art and Science of Becoming a More Effective and Efficient Problem Solver

  2. What is Business Decision Modeling? • “The application of scientific approach to solving management problems in order to help managers make better decisions” - Taylor • “...the application of quantitative analysis to managerial decision making.” - Lee • “...operations research may be described as a scientific approach to decision making.” - Hillier and Lieberman • “Operations management is the study of decision making in the operations function.” - Schroeder

  3. QM, OR, OM? • Business Decision Modeling (BDM) can be referred to as all of the above: • Management science • Operations research • Quantitative analysis • Operations management • However, it is actually a process for solving problems • What type of problems? In what Industries?

  4. Banking Loan portfolio optimization Credit Card Management Manufacturing Quality Control Production Scheduling Entertainment Demand Forecasting Queuing/Crowd Control Airline/Travel Industry Ticketing/Reservations Airplane Maintenance Marketing Market Research Consumer Preferences Computer Science Software Development Simulation BDM is Used Extensively In

  5. Companies Using MS • SABRE Decision Technologies • airline reservation systems • Signet Bank, GE Capital, Providian, Capital One • credit card and financial management • CSX and Union Pacific Railroad • freight transportation • Ernst & Young, McKinsey, Accenture Consultants • business reengineering, forecasting, MIS

  6. BDM Process • Identification of the Problem • Definition of the Problem • Modeling of the Problem • Initial Model Solutions/Conclusions • Review and Iteration • Implementation • Feedback

  7. Variable expenses Fixed expenses Sales – = Total revenues = Total costs Break-Even Analysis • The break-even point occurs when

  8. Breakeven Revenue Total costs Fixed costs Break-Even Graph

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