Professional Documents
Culture Documents
Business Intelligence
Systems
(9th Ed., Prentice Hall)
Chapter 4:
-2
Learning Objectives
Understand the basic concepts of
management support system (MSS)
modeling
Describe how MSS models interact with
data and the users
Understand the well-known model
classes and decision making with a few
alternatives
Describe how spreadsheets can be used
for MSS modeling and solution
Explain the basic concepts of
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2011 Pearson Education, Inc. Publishing as Prentice Hall
-3
Learning Objectives
Describe how to structure a linear
programming model
Understand how search methods are
used to solve MSS models
Explain the differences among
algorithms, blind search, and heuristics
Describe how to handle multiple goals
Explain what is meant by sensitivity
analysis, what-if analysis, and goal
seeking
Describe
the Inc.key
issues
of model
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2011 Pearson Education,
Publishing
as Prentice Hall
-4
Opening Vignette:
Model-Based Auctions Serve More
Lunches in Chile
Background: problem situation
Proposed solution
Results
Answer and discuss the case
questions
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MSS Modeling
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Forecasting/predicting
Model management
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Categories of Models
Category
Objective
Techniques
Optimization of
problems with few
alternatives
Optimization via
algorithm
Optimization via
an analytic formula
Some inventory
models
Simulation
Several types of
simulation
Heuristics
Heuristic
programming and
expert systems
Predictive and
Predict future
Forecasting, Markov
Copyright
2011 Pearson Education,
Inc. Publishing
as Prentice Hall chains, financial,
other
models
occurrences,
what-if
analysis,
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Static Analysis
Dynamic Analysis
Dynamic models
Evaluate scenarios that change over time
Time dependent
Represents trends and patterns over time
More realistic: Extends static models
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Decision Making:
Treating Certainty, Uncertainty and
Risk
Certainty Models
Uncertainty
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Influence Diagrams
(Posted on the Course Website)
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Influence Diagrams:
Relationships
CERTAINTY
Amount in
CDs
Interest
Collected
UNCERTAINTY
Price
Sales
The shape of
the arrow
indicates the
type of
relationship
RANDOM (risk) variable: Place a tilde (~) above the variables name
~
Demand
Sales
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Income
Units Sold
Profit
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Expenses
Fixed Cost
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F P(1 i ) n
i (1 i ) n
A P
n
(
1
i
)
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Decision trees
Graphical representation of
relationships
Multiple criteria approach
Demonstrates complex
relationships
Cumbersome, if many
exists
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2011 Pearson Education,
Inc. Publishing as Prentice Hall
-23
Decision Tables
Investment example
Solid growth
Stagnation
Inflation
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2011 Pearson Education, Inc. Publishing as Prentice Hall
-24
Investment Example:
Possible Situations
1. If solid growth in the economy, bonds yield
12%; stocks 15%; time deposits 6.5%
2. If stagnation, bonds yield 6%; stocks 3%;
time deposits 6.5%
3. If inflation, bonds yield 3%; stocks lose 2%;
time deposits yield 6.5%
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Investment Example:
Decision Table
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Investment Example:
Treating Uncertainty
Optimistic approach
Pessimistic approach
Treating Risk:
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Multiple goals
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In d
n
de
n
pe
Decision
Variables
a
ari
V
t
Uncontrollable
Variables
Dependent Variables
Mathematical
Relationships
Intermediate
Variables
Result
Variables
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Optimization
via Mathematical Programming
Mathematical Programming
A family of tools designed to help solve
managerial problems in which the decision
maker must allocate scarce resources
among competing activities to optimize a
measurable goal
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LP Problem Characteristics
1.Limited quantity of economic resources
2.Resources are used in the production of
products or services
3.Two or more ways (solutions, programs)
to use the resources
4.Each activity (product or service) yields
a return in terms of the goal
5.Allocation is usually restricted by
constraints
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1. Identify the
Decision variables
Objective function
Objective function coefficients
Constraints
Capacities / Demands
Line
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LP Example
The Product-Mix Linear Programming Model
MBI Corporation
Decision: How many computers to build next month?
Two types of mainframe computers: CC7 and CC8
Constraints: Labor limits, Materials limit, Marketing
lower limits
CC7
CC8
Rel Limit
Labor (days)
300500<= 200,000 /mo
Materials ($)
10,000 15,000 <= 8,000,000 /mo
Units
1
>= 100
Units
1 >= 200
Profit ($) 8,000 12,000 Max
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LP Solution
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LP Solution
Decision Variables:
X1: unit of CC-7
X2: unit of CC-8
Objective Function:
Maximize Z (profit)
Z=8000X1+12000X2
Subject To
300X1 + 500X2 200K
10000X1 + 15000X2 8000K
X1 100
X2 200
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Sensitivity
What-if
Goal seeking
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Heuristic Programming
Quantitative
Qualitative (in ES)
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What is it?
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Limitations of Heuristics
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Tabu search
Genetic algorithms
Simulated annealing
Analogy to Thermodynamics
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Simulation
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Major Characteristics of
Simulation
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Advantages of Simulation
The theory is fairly straightforward
Great deal of time compression
Experiment with different alternatives
The model reflects managers
perspective
Can handle wide variety of problem
types
Can include the real complexities of
problems
Produces important performance
Copyright
2011 Pearson Education, Inc. Publishing as Prentice Hall
measures
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Limitations of Simulation
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Simulation Methodology
Define problem
5. Conduct experiments
Construct simulation model
6. Evaluate results
Test and validate model
7. Implement solution
Design experiments
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Simulation Types
Visual simulation
Object-oriented simulation
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Relations MBMS
Object-oriented MBMS
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Questions / Comments
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