MANAGEMENT SCIENCE 461

Lecture 1a – IntroductionSeptember 9, 2008

Contact Information2

Chris Neuman Phone 442-6426 Email 1: cneuman@ualberta.ca Office: Shadowy and Vague

Office hours: By appointment (after 4:30) Intros…

Website3

https://ulearn.ualberta.ca All class material will be posted

(spreadsheets, lecture slides, etc) Grade info, digital dropbox, course

conferencing

Syllabus Information4

Textbook Classroom Grading

Homeworks 35% Quizzes 25% Project 40%

Homework Policies5

Code of Student Behaviour Peer help is the best way to learn Discussion of HW problems is healthy and

encouraged Just don’t copy each other’s work.

Operations Research6

The Science of Better Quantitative tools used to make better

decisions Broad range of applications, broad range

of tools We are specifically addressing …

Distribution Management7

The process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements.

- Council of Logistics Management

DM Cost Drivers8

Inventory Raw materials, WIP, finished goods

Transportation Carrier selection, shipment size, distance and travel time

Facilities (production and storage) What? When? Where? Why?

Information Availability, price, forecasting demand, shipping options

Planning Levels9

Strategic: long-term, long-range, potentially reshaping the way business is done

Tactical: medium-range, designed to raise competitiveness and customer service levels

Operational: day-to-day; Efficiency at low cost

Examples10

Distribution network configuration Strategic - a new flow of goods throughout the

network Inventory control

Tactical - determine inventory policy to minimize ordering and holding costs

Crossdocking Tactical - warehouses serve as coordinators and as

transshipment points but do not keep stock themselves

Examples11

Integration of inventory and transportation Tactical - determine balance between inventory and

transportation costs

Vehicle fleet management Operational - assign loads to vehicles and determine

vehicle routes

Examples12

Truck routing Operational - determine the minimal length route (time

or distance) to follow Packing problems

Operational - pack items such that the number of bins used is minimized

Trends13

Reality: DM problems are computationally intensive, complex, and multi-faceted

Intuition plays a major role in how we approach DM problems

Tools Descriptive models – what’s happening now? Prescriptive models – what should we do?

Course focus14

The focus in this class is on mathematically well-defined problems that can be solved using algorithmic and heuristic techniques

IS, outsourcing, 3PL and 4PL, strategic partnerships, B2B and many other buzzwords are difficult to quantify and will be addressed lightly (MGTSC 488)

Dayjet

Why Models?17

Reality bites Data overload, but not information overload Reliance on computers: Data is masked Allocation of responsibility (must justify decisions)

Decisions and numbers Many decisions are numbers

How many distribution centers do we need? Capacity of new plant? How many workers assigned to line?

Most decisions depend on numbers Should we introduce a new product? Make or buy?

Why Models? 18

Data + Model = Information Managers who do not understand models

either: Don’t put faith in analysis, lose valuable

information, or Put too much faith in analysis, are swayed by

stacks of computer output

Why Models? 19

Tradeoff analysis Provides a structure for DM Powerful engineering tool, but a key

management skill too (re-engineering) Value of model is its usefulness Modeling is an iterative process

Simple algebraic representation20

min i j cijxij

s.t. j xij < si, i,

i xij > dj, j,

xij > 0, i, j.

What is xij?21

x11 x12 x13 x14

x21 x22 x23 x24

X31 x32 x33 x34

Plant 1 Plant 2 Plant 3 Plant 4

Grove 1

Grove 2

Grove 3

More familiar22

Costs PLANT AIRPORT BushelsGROVE Ocala Orlando Leesburg Jacksonv. St. Peter. AvailableMt. Dora 21 50 40 35 38 275,000 Eustis 35 30 22 42 52 400,000 Clermont 55 20 25 70 45 300,000 W. Garden 43 25 37 58 31 500,000 Capacity 200,000 600,000 225,000 350,000

Shipments PLANT AIRPORT TotalGROVE Ocala Orlando Leesburg Jacksonv. St. Peter. ShipmentsMt. Dora 200000 0 0 75000 0 275,000 Eustis 0 175000 225000 0 0 400,000 Clermont 0 300000 0 0 0 300,000 W. Garden 0 125000 0 0 375000 500,000 Total 200,000 600,000 225,000 75,000 375,000 37775000

Total cost

Solver settings23

A Note on Spreadsheets24

The good things Lift the algebraic curtain Powerful what-if tools Can analyze, optimize, simulate, build DSS, etc. 40 million users One in every office

A Note on Spreadsheets25

The bad things What is a formula, what is data? What feeds into what? Scalability: add a product Dimensionality: add products? Time?

Excel is a powerful tool…but not the answer to every problem