Management Science And Spreadsheet Modeling: A Practical Approach 1 (6)

DISC 334: MANAGEMENT SCIENCE AND SPREADSHEET MODELING:

A PRACTICAL APPROACH

Course Instructor

Name: Dr. Kamran Ali Chatha

Contact Details: 148-A, SDSB, Tel. 35608094, Email: kamranali@lums.edu.pk, Office Hours: By
Appointment

Course Description

Course Code: DISC 334 Total No. of Sessions: 28 (100 minutes each)
Quarter: Spring-2011 Suitability: Undergraduate 3rd, 4th Year

Major objectives of this course are:

(1) To impart skills in students to decide when to use quantitative techniques for analyzing and solving real
world managerial problems which are faced daily in finance, operations, engineering, and marketing
functions of organizations and disciplines such as economics, law, social and behavioral sciences etc;
(2) To understand some of the concepts, methods and techniques of management science (decision science)
especially those that include quantitative aspects;
(3) To learn the art and science of using spreadsheet for modeling and analyzing decisions and as a tool to
implement quantitative techniques;
Management Science (especially Decision Science) is a branch of science that focuses on utilizing quantitative
techniques for the purpose for making sound managerial decisions under various forms of constraints
(economic, temporal and behavioral) in real world problems. These problems may arise in organizations’
functional settings that include but are not limited to finance, operations, engineering, and marketing functions.
These problems may also appear in various other disciplines such as economics, social and behavioral
sciences. These problems may even be interdisciplinary in nature in which case function or discipline specific
techniques when applied to solving such problems may not result into practical solutions. In such scenarios the
techniques developed within the discipline of management science provide such frameworks and concepts that
render practical solutions to such problems.
There are numerous examples in various disciplines where decision science concepts are needed. For example
in software engineering (e.g. decision about choosing one technology or process over the other), legal
decisions (e.g., understanding the effects of economic pressures on attributions of responsibility), risk
assessments (e.g., assessing risks of nuclear power or missile tests), marketing (e.g. launching specific product
in a market) and managerial decision making (e.g., correcting biases in the assessment of risk). There are
hundreds of examples in many other disciplines where decision science concepts and frameworks could
equally be applicable.
Management science (especially decision science) rely heavily on decision theory which is concerned with
identifying the values of different alternatives, uncertainties involved, their utilities, and other issues relevant
to a given decision, its rationality, and the resulting optimal decision. In order to exercise these concepts
decision theory borrows some of the concepts from probability theory.
In order to achieve aforementioned objectives two major steps have been taken while designing the course: (1)
a number of real world case studies in order to better comprehend applicability of quantitative techniques in
real world problems. Extended class room discussions on case study analyses will be instrumental in
understanding key issues pertaining to application, managerial concerns, and assumptions around the technique
while focusing on the real world problem, (2) a number of lab sessions have been included in order to develop
practical skills of configuring and using spreadsheets for decision analysis.

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Pre-Requisite

It is expected that participants possess basic knowledge of Probability and/or Statistics in order to be able to
develop better understanding of the course.

Grading

Class Participation : 20%

Quizzes : 10%
Assignments : 20%
Midterm Exam : 20%
Final Exam : 30%

Students will be assessed as per these criteria, however, the instructor has the right of 5% re-assigning of
the criteria.

Assignments

The course includes a number of spreadsheet based assignments. These assignments will be announced in
lab sessions and will be due 11am the next morning.

Recommended Books

Following books are recommended for this course however, students are strongly encouraged to consult
any other resources such as: books, journals, magazines, sharing personal experiences to enhance their
learning.

Books

[AWZ]: Albright, S.C., Winston, W.L., and Zappe, C., 2006, Data Analysis & Decision Making – With
Microsoft Excel, 3e, Thomson, South-Western, ISBN: 0-324-40083-7.
[Clemen]: Clemen, R. T., 1996, Making Hard Decisions: An Introduction to Decision Analysis, Duxbury
Press, ITP Company, ISBN: 0-534-26034-9.
[PB]: Powell, S.G., and Baker, K.R., 2009, Management Science – The Art of Modeling with
Spreadsheets, John Wiley & Sons Inc., ISBN-13: 978-0-470-39376-5.
[ASW] Anderson, Sweeney & Williams, Statistics for Business and Economics.
[Cart] Cartoon Guide to Statistics.

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Detailed Course Outline

S. Session
Topics & Texts
No. Type
INTRODUCTION

1. Class Topic: Introduction

Read: PB-Chapter-2: Modeling in a Problem Solving Framework (Sections – 2.1, 2.2,
2.4)

2. Lab Topic: Modeling with Spreadsheet

Read: PB-Chapter-5: Spreadsheet Engineering

ESSENTIAL STATISTICS AND SPREADSHEET MODELING

3. Class Topic: Review of Probability Concepts

Read:
(1) Cart-Chapter-3: Probability
(2) Cart-Chapter-4: Random Variables
(3) ASW-Chapter-4, Introduction to Probability
Assignment: Solve Exercises – 2, 6, 10, 14, 18, 22, 23, 26, 28, 31, 33, 37, 39, 41, 43, 45,
48, 53, 59

4. Class Topic: Review of Essential Probability Distributions

Read:
(1) Cart-Chapter-5: A Tale of Two Distributions
(3) ASW-Chapter-6, Continuous Probability Distribution pp. 214-246
Assignment: Chapter-6, Solve Exercises – 1, 4, 7, 13, 15, 18, 20, 23, 24, 32, 34, 36, 42,
45, 48, 54, 56

5. Lab Topic: Using Spreadsheet for Probability & Probability Distributions

Read (SKIM) & Practice Solved Examples:
(1) AWZ-Chapter-5: Probability and Probability Distribution (Sections – 5.1, 5.2, 5.3,
5.4, 5.5, 5.6)
(2) AWZ-Chapter-6: Normal, Binomial, Poisson, and Exponential Distributions
(Sections – 6.1, 6.2, 6.3, 6.7)
Assignment: TBA in the Lab

6. Class Topic: Sampling-I

Case: Amore Frozen Foods (A)
Read:
(1) Cart-Chapter-6: Sampling
(2) AWZ-Chapter-8: Sampling and Sampling Distributions (Sections 8.1, 8.2, 8.3) –
Skim Theory

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7. Class Topic: Sampling-II

Case: National Resources Defense Fund (A)
Read:
(1) Sampling and Statistical Inference
(2) AWZ-Chapter-8: Sampling and Sampling Distributions (Section 8.4) – Skim Theory

8. Class Topic: Confidence Interval Estimation

Case: PRIDEPak Fertilizer
Read: Cart-Chapter-7: Confidence Interval Estimation

9. Lab Topic: Spreadsheet Modeling for Sampling and Sampling Distributions

Read & Practice Solved Examples:
AWZ-Chapter-8: Sampling and Sampling Distributions, (Examples – 8.1, 8.2, 8.3, 8.5)
Assignment: TBA in the Lab

MODELING DECISIONS & UNCERTAINTY

10. Class Topic: Decision Analysis

Case: Athens Glass Works
Read: Clemen-Chapter-3: Structuring Decisions pp41-63

11. Class Topic: Decision Trees

Case: Freemark Abbey
Read:
(1) Decision Trees for Decision Making
(2) Clemen-Chapter-3: Structuring Decisions pp67-82

12. Class Topic: Sensitivity Analysis

Case: Dhahran Roads (A)
Read:
(1) Cash Flow and Time Value of Money
(2) Clemen-Chapter-5: Sensitivity Analysis pp155-169

13. Lab Topic: Using Spreadsheet for Decision Trees

Read & Solve Problems:
AWZ-Chapter-7: Decision Making under Uncertainty, Section-7.3, (Solve Problems 36
and 37 given at the end of the chapter)
Assignment: TBA in the Lab

14. Class Topic: Decision Making under Uncertainty

Case: George’s T-Shirts

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Read: Clemen-Chapter-4: Making Choices pp101-127

15. Class Topic: Conditional Decisions & Bayesian’s Updating

Case: Integrated Siting Systems, Inc.
Read: None

16. Lab Topic: Spreadsheet Modeling for Decision Making under Uncertainty
Read & Practice Solved Examples:
AWZ-Chapter-7: Decision Making under Uncertainty, Section-7.4, 7.5 (Examples 7.2,
7.3, 7.4)
Assignment: TBA in the Lab

MIDTERM EXAM

REGRESSION & FORECASTING

17. Class Topic: Regression Analysis

Case: Hightower Department Stores: Imported Stuffed Animals
Read: Introduction to Modeling using Least Squares

18. Class Topic: Regression with two independent variables

Case: Edgecomb Metals
Read:
(1) Assumptions behind the Linear Regression Model
(2) Using Dummy Variables to represent Categorical Variables

19. Lab Topic: Using Spreadsheets for Regression (I)

Read & Practice Solved Examples:
AWZ-Chapter-11: Regression Analysis: Estimating Relationships, (Sections – 11.1,
11.2, 11.3, 11.4, 11.5, 11.6 up till page-607, and accompanying Examples)
Assignment: TBA in the Lab

20. Lab Topic: Using Spreadsheets for Regression (I)

Read & Practice Solved Examples:
AWZ-Chapter-12: Regression Analysis: Statistical Inference, (Sections – 12.1, 12.2,
12.3, 12.4, 12.5, 12.8 and accompanying Examples)
Assignment: TBA in the Lab

21. Class Topic: Forecasting with Time Series

Case:
(1) Wachovia Bank and Trust Company N.A. (B)
(2) Wachovia Bank and Trust Company N.A. (B) Supplement

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Read: Time Series Forecasting

SIMULATION MODELING

22. Lab Topic: Simulation Modeling with Spreadsheets

Read: AWZ-Chapter-16: Introduction to Simulation Modeling

23. Lab Topic: Simulation Modeling with Spreadsheets

Read: AWZ-Chapter-17: Simulation Models, Sections – 17.2, 17.3, 17.5 and
accompanying Examples)
Practice Examples: TBA in the Lab

24. Class Topic: Monte Carlo Simulations

Case:
(1) Calambra Olive Oil (A)
(2) Calambra Olive Oil (B)
Read: None

25. Class Topic: Risk Analysis in Monte Carlo Simulations

Case: Sprigg Lane (A)
Read: Analytical Probability Distributions

MODELING PREFERENCES

26. Class Topic: Risk Attitude

Case: Risk Preference Utility Exercises
Read: Risk Preference Utility

27. Class Topic: Multiobjective Decision Making

Case: William Taylor and Associates (A)
Read: Clemen-Chapter-15: Conflicting Objectives I: Fundamental Objectives and the
Additive Utility Function pp530-552

28. Class Topic: Multiattribute Decision Analysis

Case: Whirlpool Research and Engineering (A)
Read:
(1) Whirlpool Research and Engineering (B)
(2) Clemen-Chapter-16: Conflicting Objectives II: Multiattribute Utility Models with
Interactions pp576-586

FINAL EXAM

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