MSG Team's other articles

11540 The Misconceptions about Poverty

Many governments all over the world have made attempts to abolish poverty. However, most of them have not succeeded. The theme of eradicating poverty has been common to both socialists as well as capitalists. However, no one seems to have been able to solve the problem. It is likely that the problem itself has been […]

9043 Introduction to E-Procurement – Tools, Application and its Benefits

Introduction In layman’s term, e-procurement is nothing but electronic data transfer to support operational, tactical and strategic procurement. E-procurement has been existence for long time in one form or the other earlier it was done through electronic data interchange. In today’s environment, most of the e-procurement is done through the Internet. Traditionally, procurement of supplies […]

10019 Inventory Management and Just In Time (JIT)

Introduction Supply-chain management plays a pivotal role in ensuring goods, and services are delivered on time to customers. Within supply-chain management, inventory management plays a central role. Inventory involves various cost, investment, space management, etc. Also there are chances that stored inventory may get damaged or get stolen adding to extra cost to the company. […]

9468 The Globalization of Supply Chains and its Implications for Trade and Commerce

Globalization of Supply Chains and its Implications We have discussed how the globalization of the world economy has made the globe more integrated and interconnected. While this has both positive and negative effects on the way global trade and commerce takes place, there is one critical aspect that needs our attention. That is to do […]

11818 What Are Mobile Wallets?

Mobile wallets have become the latest startup sensation. Companies like PayTm have the first mover advantage in this space. However, other companies like MobiKwik, Phone Pe, M-Pesa etc. are quickly moving into this space. It is surprising that an area of business which did not even exist a few years ago is now on the […]

Search with tags

  • No tags available.

Introduction

Decision making is crucial for survival of business. Businesses have to make decision considering the limited amount of information. Decision making problems are divided into two types deterministic and probabilistic.

Deterministic model of problem solving depends on the relationship between uncontrollable factors and continuing process of optimizing system performance. A model is developed in under assumption related to existing business condition. If the variables under assumption do not truly reflect the current business conditions, the model developed also will not reflect the reality.

Mathematical optimization utilizes mathematical equation to determine the business decision. The business decision derive is in a numerical form.

A business model for decision making is constructed by analyst based on inputs of a decision maker. A business model is developed over a period of time using a progressive approach method.

Optimization Modeling Process

Optimization model is developed in three steps, 1st step is describing the problem, 2nd step is elaborating the solution and 3rd step is controlling the problem.

The optimized problem of the 1st step can be classified into linear and non-linear depending upon on nature of variables. Optimization problem has three following aspects:

  • An objective function to maximize or minimize.
  • A set of variables which affect the value of the objective function.
  • A set of uncontrollable factors referred as parameters.

The solution of optimized problem satisfying all parameters and constraints is referred as feasible solution. The objective of an optimization process is to value of variables, which minimize or maximize objective giving out an optimal solution.

Linear Programming

Linear programming is a mathematical procedure of determining linear allocation of business variables. For constructing linear program following factors are essential:

  • The objective function needs to be linear.
  • The objective must be to either maximize or minimize a linear function.
  • The constraints in the program should also be linear.

In formulating a linear program certain variables are integer in nature, such as function with integer variable is known as integer programming.

Decision Tree

In a certain decision-making process, probability plays an important role. On the decision model based upon probability is decision trees.

Scenario modeling

Business environment is always unpredictable and can throw up unusual situation more than often. Thus, organizations find themselves in the middle of dynamic environment. Here model and methods like sensitivity analysis, stability analysis, what-if analysis, scenario modeling, etc. is utilized.

Therefore, model under used uncertainties are as follows:

  • Scenario Analysis: this model assumes a different scenario a business may find itself with certain value of parameters.
  • Worst Case Analysis: this model assumes an extreme case scenario in computing different variables.
  • Monte-Carlo Model: this model assumes uncertainty through statistical distribution.

Theory of Constraints

Theory of constraints is a management concept which helps organization deal with situation, which hampers its growth and march towards higher level of performance. Theory of constraint encourages an organization to deal one constraint at a time and consist of following steps:

  • Identifying constraints of the existing system.
  • Identifying was to potential extract more out of system constraints.
  • Exploiting constraints to its fullest potential should be made priority.
  • As the company overcomes 1st constraint, it should look forward to working upon other constraints.

Article Written by

MSG Team

An insightful writer passionate about sharing expertise, trends, and tips, dedicated to inspiring and informing readers through engaging and thoughtful content.

Leave a reply

Your email address will not be published. Required fields are marked *

Related Articles

Capacity Planning – Meaning, Classification and its Goals

MSG Team

What is Aggregate Planning? – Importance and its Strategies

MSG Team

Operational Transparency

MSG Team