1 Introduction to Modeling 3
1 Introduction to Modeling 3
1.1 A Waiting Line Example 4
1.2 The Seven-Step Modeling Process 8
1.3 Successful Management Science Applications 14
1.4 Why Study Management Science? 21
1.5 Conclusion 22
References 23
2 Introduction to Linear Programming 25
2 Introduction to Linear Programming 25
2.2 A Brief History of Linear Programming 26
2.1 Introduction 26
2.3 Introduction to LP Modeling 27
2.4 The Linear Assumptions 34
2.5 Graphical Solution Method 36
2.6 Solver Reports and Sensitivity Analysis 39
2.7 Sensitivity Analysis with Graphs 44
2.8 Infeasibility and Unboundedness 46
2.9 A Multiperiod Production Problem 47
2.10 A Decision Support System 55
2.11 Conclusion 57
Review Problems 58
Appendix:What s Best! for Lotus 62
Case Study:Shelby Shelving 68
References 69
3 Linear Programming Formularions 71
3 Linear Programming Formulations 71
3.1 Introduction 72
3.2 Static Workforce Scheduling 72
3.3 Blending Problems 78
3.4 Production Process Models 88
3.5 Aggregate Planning Models 97
3.6 Dynamic Workforce Planning Models 110
3.7 A Dynamic Financial Model 115
3.8 Data Envelopment Analysis(DEA) 122
3.9 Conclusion 129
Review Problems 129
Case Study:Lakefteld Corporation s Oil Trading Desk 142
Case Study:Foreign Currency Trading 146
References 147
4 Network Models 149
4 Network Models 149
4.1 Introduction 150
4.2 The Transportation Model 150
4.3 A Dynamic Inventory Model 153
4.4 The Assignment Model 161
4.5 The Critical Path Model(CPM) 166
4.6 The Minimum Cost Network Flow Model 178
4.7 The Maximum Flow Model 187
4.8 The Shortest Path Model 192
4.9 Conclusion 198
Review Problems 199
Case Study:Optimized Motor Carrier Selection at Westvaco 208
References 211
5 Integer Programming Models 213
5 Integer Programming Models 213
5.1 Introduction 214
5.2 Capital Budgeting Models 214
5.3 The Fixed-Charge Model 224
5.4 The Lockbox Problem 235
5.5 The Warehouse Location Problem 240
5.6 Set Covering Problems 247
5.7 Either-Or Constraints 251
5.8 Conclusion 256
Review Problems 257
Case Study:Giant Motor Company I 263
References 265
6 Nonlinear Programming Models 267
6.1 Introduction 268
6.2 Basic Ideas of Nonlinear Optimizatin 268
6.3 Managerial Economics Applications 273
6.4 Salesforce Allocation 280
6 Nonlinear Programming Models 287
6.5 Facility Location Models 287
6.6 Improving Product Quality 291
6.7 Estimating the Beta of a Stock 295
6.8 Rating Sports Teams 303
6.9 Finding Implied Stock Volatilities 306
6.10 Portfolio Optimization 310
6.11 Portfolio Optimization:The Scenario Approach 317
6.12 Portfolio Optimization with Transaction Costs 323
6.13 Conclusion 327
Review Problems 327
Case Study:GMS Stock Hedging 330
Case Study:Durham Asset Management 332
References 334
7 Multiple-Objective Decision Making 337
7 Multiple-Objective Decision Making 337
7.1 Introduction 338
7.2 Goal Programming 338
7.3 Pareto Optimality and Trade-off Curves 353
7.4 The Analytic Hierarchy Process 363
7.5 Conclusion 376
Review Problems 377
Case Study:Play Time Toy Company 384
References 388
8 Decision Making Under Uncertainty 391
8 Decision Making Under Uncertainty 391
8.1 Introduction 392
8.2 Elements of a Decision Analysis 394
8.3 Assessing Probabilities(Optional) 406
8.4 Decision Analysis Examples 411
8.5 Bayes Rule 430
8.6 Incorporating Attitudes Toward Risk 441
8.7 Conclusion 449
Review Problems 450
Case Study:Giant Motor Companyll 454
References 455
9 Determinisric Inventory Models 457
9 Deterministic Inventory Mode?s 457
9.1 Introduction 458
9.2 Categories of Inventory Models 459
9.3 Costs Involved in Inventory Models 460
9.4 The Basic EOQ Model 462
9.5 EOQ Models with Quantity Discounts 472
9.6 EOQ Model with Shortages Allowed 479
9.7 Reducing the Setup Cost 483
9.8 Synchronizing Orders for Several Products 487
9.9 Conclusion 491
Review Problems 492
Case Study:Subway Token Hoarding 494
References 495
10 Probabilistic Inventory Models 497
10 Probabilistic Inventory Models 497
10.1 Introduction 498
10.2 The Newsvendor Model 499
10.3 Analysis of (R,Q)Policies 511
10.4 Conclusion 524
Review Problems 524
Case Study:Retail Pricing Using Retailer 529
References 534
11 Queueing Models 537
11 Queveing Models 537
11.1 Introduction 538
11.2 Elements of Queueing Models 539
11.3 Short-Run Versus Steady-State Behavior 541
11.4 The Exponential Distribution 542
11.5 Important Queueing Relationships 547
11.6 The Basic Single-Server Model 550
11.7 A Multiple-Server Model 555
11.8 Variations of the Basic Models 564
11.9 The Erlang Loss Model 572
11.10 Conclusion 574
Review Problems 575
Case Study:The Catalog Company Problem 578
References 579
12 Simulation 581
12 Simulation 581
12.1 Introduction 582
12.2 Actual Applications of Simulation 583
12.3 Random Numbers 585
12.4 Introduction to Spreadsheet Simulation 589
12.5 Generating Other Distributions 600
12.6 Simulation and Bidding 603
12.7 Deming s Funnel Experiment 607
12.8 Simulating the Length of a Project 616
12.9 Investing in the Stock Market 623
12.10 Simulating Cash Flows 630
12.11 Queueing Simulation 636
Review Problems 638
12.12 Conclusion 638
Case Study:Ski Jacket Production 644
Case Study:The College Fund Investment Decision 645
Case Study:Ebony Bath Soap 646
Case Study:Bond Investment Strategy 647
References 648
13 Simulation with Add-ins 651
13 Simulation with Add-ins 651
13.1 Introduction 652
13.2 Simulating an Income Statement 658
13.3 The Newsvendor Model with@RISK 662
13.4 Financial Planning Simulations 672
13.5 A Component Redundancy Simulation 679
13.6 Simulating the Game of Craps 685
13.7 A Cash Balance Simulation 692
13.8 Simulating Stock Prices and Options 700
13.9 Simulating Correlated Values 709
13.10 A Market Share Simulation 714
13.11 Conclusion 723
Review Problems 723
References 727
14 Forecasting Models 729
14 Forecasting Models 729
14.1 Introduction 730
14.2 Time Series Notation 730
14.3 Moving-Average Method 732
14.4 Simple Exponential Smoothing 737
14.5 Holt s Method for Trend 742
14.6 Winter s Method for Seasonality 746
14.7 Simple Linear Regression 754
14.8 Fitting Nonlinear Relationships 764
14.9 Multiple Regression 770
14.10 Categorical Independent Variables 777
14.11 Multiplicative Models 781
14.12 Conclusion 785
Review Problems 785
Reference 788
Index 789
Index 789