2. QUANTITATIVE TECHNIQUES
UNIT 1: SYLLABUS (THEORY)
Quantitative Techniques: Introduction
(as per University of Rajasthan)
Statistical & Operations Research Techniques
Scope & Application of Quantitative Techniques
Scientific Approach in Decision Making
Limitation of these Techniques
3. Quantitative Techniques defined as those techniques which provide the
decision maker with a systematic and powerful means of analysis and help,
based on quantitative data, in exploring policies for achieving pre-
determined goals.
Quantitative techniques are those statistical and programming techniques:
which support the decision making process especially related to industry and
business.
MEANING
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4. ROLE
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It enables proper deployment of resources.
It offers solutions for various business
problems.
It provides a tool for scientific analysis.
It enables proper deployment of resources.
It enables proper deployment of resources.
It supports in minimising waiting and
servicing costs.
It helps the management to decide when to
buy and what is the procedure of buying.
It helps in reducing the total processing
time necessary for performing a set of jobs.
5. STATISTICAL RESEARCH
Statistical Techniques are those techniques which are used to
conduct statistical analysis on a certain phenomenon.
This include all statistical steps i.e from collection of data till
analysis and interpretation of collected data.
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6. Operations Research (O.R) is an analytical method of problem-solving
and decision-making that is useful in the management of
organizations.
In operations research, problems are broken down into basic
components and then solved in defined steps by mathematical
analysis.
According to H.M Wagner
"Operations Research(O.R) is a scientific approach to problem solving
for executive management."
OPERATIONS RESEARCH
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7. CHARACTERISTICS
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O.R. often requires a computer to solve the complex
mathematical model or to perform a large number of
computations that ae involved. Use of digital
computer has become an integral part of the
operations research approach to decision making.
USE OF INFORMATION TECHNOLOGY (I.T)
O.R provides the managers a quantitative base for
decision making. OR attempts to provide a systematic
and rational approach for quantitative solution to the
various managerial problems.
QUANTITATE SOLUTION
study of the OR is incomplete without a study of
human factors. In deriving quantitative solution we do
not consider human factors, which doubtlessly plays a
great role in the problems.
TAKING HUMAN FACTORS
O.R. is performed by a team of scientists whose
individual members have been drawn from different
scientific and engineering disciplines.
For example, one may find a mathematician,
statistician, physicist, psychologist, economist and an
engineer working together on an O.R problem.
USE OF INFORMATION TECHNOLOGY (I.T)
8. TECHNIQUES
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It refers to finding the optimum solution for supply of
uncertain demand in stores.
Its goal is to achieve economic balance between the
cost of providing services and cost associated with
the wait received for that service.
QUEUING THEORY / WAITING LINE
Simplex Method is also a mathematical technique in
which limited resources are divided into two or more
than two competitive programmes in such a way that
an optimum solution is obtained.
SIMPLEX METHOD
It is used by business to take decisions and improving
decision under the conditions of risk, uncertainty and
uncertainty. It helps decision maker to analyse and
interpret a set of complex situations with many
different possible consequences.
DECISION THEORY
It is a technique which is used to find solution of
decision making by designing, constructing and
manipulating a model of real system.
This technique is used in analysing a number of
complex problems where analytical methods are
difficult or unknown.
SIMULATION
9. TECHNIQUES
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Sequencing System is used by industries to reduce
the cost and production time.
By applying Sequencing System, the production
programme can be made effective and applied in a
systematic way.
SEQUENCING SYSTEM
Allocation Model is used for the purpose of decision-
making. With the help of allocation model, decision
regarding the satisfaction of unlimited requirements
of business with the limited resources available can be
taken. It reduces the risk and provides optimum
solutions of objectives
ALLOCATION MODEL
Competition Model is used where two or more than
two uniform industries encounter similar type of
competition.
This model is used by industries to improve the
management and workers relationship to make it
more efficient.
COMPETITION MODEL
It is a technique which is used to find solution of
decision making by designing, constructing and
manipulating a model of real system.
This technique is used in analysing a number of
complex problems where analytical methods are
difficult or unknown.
SIMULATION
10. TECHNIQUES
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Markov Process is designed to find the solution of
decision-making problems.
It is a managerial tool used to estimate production by
examining and predicting the customer behaviour i.e
their loyalty towards one brand and habit of switching
to other brands.
MARKOV PROCESS/ANALYSIS
Inventory system is followed for proper storing of
inventory to maintain the flow of supply and demand
of product. It helps the management to ascertain
when to buy and how much to buy an item of
inventory so that carrying cost, ordering cost and
outage of stock can be minimum.
INVENTORY SYSTEM
Competition Model is used where two or more than
two uniform industries encounter similar type of
competition.
This model is used by industries to improve the
management and workers relationship to make it
more efficient.
COMPETITION MODEL
It is a technique which is used to find solution of
decision making by designing, constructing and
manipulating a model of real system.
This technique is used in analysing a number of
complex problems where analytical methods are
difficult or unknown.
SIMULATION
11. TECHNIQUES
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It enables the management of manufacturing or
business concern to make optimum use of available
resources.
Linear means straight like while Programming refers
to exploration of various alternatives towards solution
of problem.
LINEAR PROGRAMMING
The game theory enables a person in taking decisions
when two or more intelligent and rational opponents
are involved in conflict or competition.
It was developed during world war to by John Von
Neumann.
Efforts are made to determine a rival's most profitable
counter strategy and to formulate the appropriate
defensive measure rather than drawing conclusions
from past behaviour of opponent.
GAME THEORY
12. The following are the scope of quantitative techniques in different
areas :
- Scope of Quantitative Techniques in Industry
- Scope of Quantitative Techniques in Developing Economies
- Scope of Quantitative Techniques in Agriculture Industry
- Scope of Quantitative Techniques in Organisation
- Scope of Quantitative Techniques in Business and Society
SCOPE
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13. Industrial management deals with a series of problems, starting right from
the purchase of raw materials till the dispatch of final products. The
management is ultimately interested in overall understanding of the
alternative methods, of optimising profits.
Many industries have gained immensely by applying Operations Research in
various tasks.
For example: operations research can be used in the fields of manufacturing
and production, blending and product mix, inventory management, for
forecasting demand, sale and purchase, for repair and maintenance jobs, for
scheduling and sequencing planning, and also for scheduling and control of
projects.
SCOPE IN INDUSTRY
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14. The scope in Developing Economies focuses on planning to achieve
maximum growth per capital income in minimum time; considering the
goals and restrictions of the country.
Poverty and hunger are the core problems faced by many countries.
Therefore, people like statisticians, economists, technicians,
administrators, politicians and agriculture experts can work in
conjunction, to solve this problem with an Operations Research
approach in Quantitative Techniques.
SCOPE IN DEVELOPING ECONOMIES
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15. Population explosion has led to scarcity of food. Optimum allocation of
land for various crops in accordance with climatic conditions is a
challenge for many countries.
Also, each developing country is facing the problem of optimal
distribution of water from several water bodies. These areas of concern
hold a great scope for Scientific Research
SCOPE IN AGRICULTURE INDUSTRY
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16. Operational productivity of organisations have improved by using
quantitative techniques.
Techniques of Operations Research, can be applied to minimise cost,
and maximise benefit for decisions.
For example:
A departmental store faces problem like employing additional staff or
purchasing an additional asset for business like a business vehicle, etc.
SCOPE IN ORGANISATION
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17. Businesses and society can directly be benefited from Operations
Research.
For example: hospitals, clinics etc. Operations research methods can be
applied directly to solve administrative problems such as minimising the
waiting time of outdoor patients.
Similarly, the business of transport can also be benefited by applying
simulation methods. Such methods, can help to regulate train arrivals
and their running timings.
Queuing theory, can be applied to minimise congestion and passengers
waiting time.
Industries such as petroleum, paper, chemical, metal processing, aircraft,
rubber, mining and textile have been extremely benefited by its use.
SCOPE IN BUSINESS AND SOCIETY
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18. Applications of quantitative techniques in managerial decision-making
are as follows:
- Finance, Budgeting and Investment
- Marketing
- Physical Distribution
- Purchasing, Procurement and Exploration
- Personnel
- Production
- Research and Development
APPLICATION
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19. A scientific approach improves precision — it reduces the odds of pursuing
projects with false positive returns and increases the odds of pursuing projects
with false negative returns.
Entrepreneurs who behave like scientists perform better, are more likely to
pivot to a different idea, and are not more likely to drop out than the control
group in the early stages of the startup.
In order to evaluate the alternatives, certain quantitative techniques have been
developed which facilitate in making objective decisions, those are:
- Marginal Analysis
- Co-effectiveness Analysis
- Operations Research
- Linear Programming
SCIENTIFIC APPROACH IN DECISION MAKING
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20. SCIENTIFIC APPROACH IN DECISION MAKING
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This technique is also known as ‘marginal costing’. In
this technique the additional revenues from additional
costs are compared.
The profits are considered maximum at the point
where marginal revenues and marginal costs are
equal.
This technique can also be used in comparing factors
other than costs and revenues.
MARGINAL ANALYSIS
This is a scientific method of analysis of decision
problems to provide the needed quantitative
information in making these decisions.
The important purpose of this is to provide the
managers with scientific basis for solving
organisational problems involving the interaction of
components of the organisation.
This seeks to replace the process by an analytic,
objective and quantitative basis based on information
supplied by the system in operation and possibly
without disturbing the operation.
OPERATIONS RESEARCH
21. SCIENTIFIC APPROACH IN DECISION MAKING
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This analysis may be used for choosing among
alternatives to identify a preferred choice when
objectives are far less specific than those expressed
by such clear quantities as sales, costs or profits.
Koontz, O’Donnell and Weihrich have written that
“Cost models may be developed do show cost
estimates for each alternative and its effectiveness.
Social objective may be to reduce pollution of air and
water which lacks precision. Further, he has
emphasised for synthesising model i.e., combining
these results, may be made to show the relationships
of costs and effectiveness for each alternative.”
CO-EFFECTIVE ANALYSIS
It is a technique applicable in areas like production
planning, transportation, warehouse location and
utilisation of production and warehousing facilities at
an overall minimum cost.
It is based on the assumption that there exists a linear
relationship between variables and that the limits of
variations can be ascertained.
MARGINAL ANALYSIS
22. LIMITATION
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Quantative Techniques is an costly affair.
An organisation needs to invest time, money and
effort into Quantitate Techniques such as Operations
Research to make it effective.
Professionals need to be hired to conduct constant
research. For better research outcomes, these
professionals must constantly review the rapidly
changing business scenarios.
COSTLY EXERCISE
Quantitative techniques can lead to misleading
results, not least if you use them incorrectly.
If, for example, you count the number of children
sitting an exam rather than the percentage of those
passing it or if you focus only on the past three
months when the yield was high and ignore the 21
months before where the yield was extremely low
CAN HAVE MISLEADING RESULTS
23. LIMITATION
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Quantitative Techniques Approach is mathematical in
nature.
It tries to find out an optimal solution to a problem, by
taking all the factors into consideration.
The need of computers become unavoidable because
these factors are enormous and it requires huge
calculations to express them in quantity and to
establish relationships among them.
DEPENDENCE ON COMPUTERS
Quantitate Techniques are not good at capturing
feelings of human and its behaviour.
There are lots of complexities of human relations and
behaviour which must be taken into account while
implementing Quantitate Technique's decisions, as it
is a very delicate task and often it fails to generate
accurate results.
WEAK ANALYSIS ON HUMAN BEHAVIOUR
