American International University-Bangladesh Faculty of Business Administration Department of Operations Management MBA Program, Summer 2011

Course Title: Decision Models Credit Hours: 3 (Three) Prerequisite: OMT 6003 Faculty: Office: Hasan Maksud Chowdhury Assistant Professor 7th floor, Campus # 1

Course Code: OMT 6012 Nature of the Course: Major

Course Description:

This course introduces the basic principles and techniques of applied mathematical modeling for managerial decision making. Students learn to use some of the more important analytic methods (e.g., spreadsheet modeling, optimization, Monte Carlo simulation) to recognize their assumptions and limitations and to employ them in decision making. Students learn to develop mathematical models that can be used to improve decision making within an organization; sharpen their ability to structure problems and to perform logical analyses; translate descriptions of decision problems into formal models and investigate those models in an organized fashion; identify settings in which models can be used effectively, and apply modeling concepts in practical situations and strengthen their computer skills, focusing on how to use the computer to support decision making. The emphasis is on model formulation and interpretation of results, not on mathematical theory. This course is aimed at MBA students with little prior exposure to modeling and quantitative analysis, but it is appropriate for all students who wish to strengthen their quantitative skills. The emphasis is on models that are widely used in diverse industries and functional areas, including finance, operations, and marketing. Course Objectives: By the end of the course, students would be able to develop models to evaluate business alternatives or problem related to making decision. After successful completion of the course, students are expected to have a better understanding of:

Develop mathematical models that can be used to improve decision making within an organization. Sharpen their ability to structure problems and to perform logical analyses. Practice translating descriptions of decision problems into formal models, and investigate those models in an organized fashion. Identify settings in which models can be used effectively and apply modeling concepts in practical situations. Strengthen their computer skills, focusing on how to use the computer to support decision making.

The emphasis will be on model formulation and interpretation of results, not on mathematical theory. This course is aimed at Stern students with little prior exposure to modeling and quantitative analysis, but it is appropriate for all students who wish to strengthen their quantitative skills. The emphasis is on models that are widely used in diverse industries and functional areas, including finance, operations, and marketing. Managerial Applications One strength of this course is its cross-functional range of applications: Finance

Financial Planning Models Dynamic Financial Models Fixed Cost Models Capital Budgeting Basic Portfolio Optimization Portfolio Optimization (Scenario Approach) Minimal Cash Balance Model Pricing European Call Options Portfolios with Stocks and Options Risk Hedging with Put Options Pricing Asian Options Retirement Investing

Marketing

Customer Loyalty models Market Share models Dynamic Market Shares with Two Dominant Brands Demand Sensitivity to Price Product Mix optimization models Supply Chain Models Marketing Mix optimization models Pricing Models Cluster Analysis Advertising Scheduling Advertising Exposure to Men vs. Women New Product Marketing Correlated Revenues

Operations

Economic Ordering with Quantity Discounts Multi-period Production Planning Supply Chain Models Aggregate Production Planning Project Scheduling with CPM Project Scheduling with PERT Shortest Path Models Facility Location Problems Set-Covering Models

Component Redundancy (Reliability)

Topics to be covered Topics Introduction to Decision Models: Specific Objectives Time Frame Define the term Decision Models, 1 wk identify the scope of the course and the area where the subject matters can be used. Discussion of tools and techniques that can be used to evaluate alternatives. Linear programming (LP) 3 wk - Graphical And simplex method - Primal and duality - Sensitivity analysis Non Linear programming (NLP) Integer Programming (IP) - Application of LP, NLP and IP in modeling problems of different organization to optimize the decision making variables. Sensitivity Analysis 1 wk
Marketing and Finance examples Call Center LP Multi-period Models Project Funding Example Transportation Models Network Flow Models Assignment Model Traveling Salesman Model Portfolio Optimization Parametric Approach Array Functions Scenario Approach Monte Carlo Simulation Preventive Machine Maintenance Net Present Value Operations Simulation Models Reliability Analysis Inventory Management Project Management: PERT Finance Simulation Models Hypothesis Testing with/for Simulation

Suggested Activities Class discussions

Teaching Strategies Power point presentation and class discussions Power point presentation and class discussions

Optimization of decision of organization

Class discussions

Case study of decision models

Class discussions

Power point presentation and class discussions

Mid-Term Problems modeling related to optimization

1 wk 2 wk Class discussions Power point presentation and class discussions

Simulation of process or alternative to take decision

3 wk

Class discussions

Power point presentation and class discussions

Final Exam

1 wk

Textbook 1. Turban & Meredith, An Introduction to Management Science, 6th edition

References

1. Practical Management Science, 3rd edition, by Wayne Winston and Chris Albright 2. The Art of Modeling with Spreadsheets: Management Science, Spreadsheet
Engineering, and Modeling Craft by Steve Powell and Ken Baker

Evaluation: Students will be evaluated using the following scheme: SL No. 1. 2. 3. 4. Items Term Exam Class participation & attendance Class Quizzes Assignment Total Points 40% 10% 20% 30% 100%

Mid-term will carry 40% and Final exam will carry 60%. Grading Criteria: According to AIUBs grading policy.