Introduction
to quantitative approach
The quantitative
approach evolved from mathematical and statistical solution developed for
military problems during World War II. After the war was over, many of these
techniques used for military problems were applied to businesses. For example,
one group of military officers, nicknamed the Whiz Kids, joined Ford Motor
Company in the mid-1940s and immediately began using statistical methods and
quantitative models to improve decision making.
It involves
applying statistics, optimization models, information models, computer
simulations, and other quantitative techniques to management activities. Linear
programming, for instance, is a technique that managers use to improve resource
allocation decisions. Work scheduling can be more efficient as a result of
critical-path scheduling analysis. The economic order quantity model helps
managers determine optimum inventory levels.
Characteristics of quantitative
approach
The salient
features of the Quantitative theory are as under:-
Process of Management consists of a series of
decision-making. The need therefore is for securing the best inputs for the
most appropriate decisions.
The theory postulates at the development of a prototype
decision situation, by presenting the variables in the form of a mathematical
model. The model consist of a set of functional equations setting out the
quantitative inter-relationship of the variables.
Best solutions to the model are secured, where the model
is correctly formulated and equations are properly solved.
Organization goals seek to achieve specific and
measurable economic goals
These goals can be reached optimal decisions are needed
to be made through scientific formal reasoning backed by quantification
The decision making models formulated should be evaluated
in the light of criteria like cost reduction, return on investment, meeting
time schedule etc.
The level of making quality decisions in diverse
situations decides the quality of management and its efficacy.
Framework of quantitative approach
(a) Management
Science
Management science theory is an
approach to management that focuses on the use of rigorous quantitative
techniques to help managers make maximum use of organizational resources to
produce goods and services. In essence, management science theory is an
extension of scientific management, which, as developed by Taylor, also took a
quantitative approach to measuring the worker-task mix to raise efficiency. There
are many branches of management science, and once again, IT, which is having a
significant impact on all kinds of management practices, is affecting the tools
managers use to make decisions.
Operations
& production management: OPM focuses on the operation and control of
the production process that transforms resources into finished goods and
services. It has its roots in scientific management but became an identifiable
area of management study after World War II. It uses many of the tools of
management science.
Operations management emphasizes productivity
and quality of both manufacturing and service organizations. W. Edwards Deming
exerted a tremendous influence in shaping modern ideas about improving
productivity and quality. Major areas of study within operations management
include capacity planning, facilities location, facilities layout, materials
requirement planning, scheduling, purchasing and inventory control, quality
control, computer integrated manufacturing, just-in-time inventory systems, and
flexible manufacturing systems.
Quantitative
management: Quantitative management utilizes
mathematical techniques—such as linear and nonlinear programming, modeling,
simulation, queuing theory, and chaos theory—to help managers decide, for
example, how much inventory to hold at different times of the year, where to
locate a new factory, and how best to invest an organization’s financial
capital. IT offers managers new and improved ways of handling information so
that they can make more accurate assessments of the situation and better
decisions.
Total
Quality Management: Total quality management (TQM) is a
philosophy or approach to management that focuses on managing the entire
organization to deliver quality goods and services to customers. This approach
to management was implemented in Japan after World War II and was a major
factor in their economic renaissance. TQM has at least four major elements.
Employee involvement is essential in preventing quality problems before they occur.
A customer focus means that the organization must attempt to determine customer
needs and wants and deliver products and services that address them.
Benchmarking means that the organization is always seeking out other
organizations that perform a function or process more effectively and using
them as a standard, or benchmark, to judge their own performance. The
organization will also attempt to adapt or improve the processes used by other
companies. Finally, a philosophy of continuous improvement means that the
organization is committed to incremental changes and improvements over time in
all areas of the organization. TQM has been implemented by many companies
worldwide and appears to have fostered performance improvements in many
organizations. Perhaps the best-known proponent of this school of management
was W. Edwards Deming.
(b) Management
Information System – MIS
Management
information systems (MIS) help managers design systems that provide information
about events occurring inside the organization as well as in its external
environment—information that is vital for effective decision making. Once
again, IT gives managers access to more and better information and allows more
managers at all levels to participate in the decision making process.
All these
subfields of management science, enhanced by sophisticated IT, provide tools
and techniques that managers can use to help improve the quality of their
decision making and increase efficiency and effectiveness.
MIS focuses on
providing needed information to managers in a useful format and at the proper
time. Decision support systems (DSS) attempt to integrate decision models,
data, and the decision maker into a system that supports better management
decisions.
Contributors
of various theories of quantitative approach
|
Theory
|
Contributors
|
Area of
application
|
|
Decision Theory
|
R.M. Thrall, C.I. Bernard, H.A. Simon, N. Weiner
|
Determination of objectives of firm, assessment of
group conflicts and interaction, organization analysis
|
|
Inventory Control
|
F.W. Harris, T. Harris, J.F. Magee
|
Economic lot size and inventory control
|
|
Game Theory
|
J. Von Newman, Shubik
|
Timing and pricing in a competitive market, military
strategy
|
|
Queuing Theory
|
A. K. Erlang, L.C. Edie, P.M. Morse, M.G. Kendall
|
Inventory control, traffic control, radio
communication, telephone trunking system
|
|
Linear Programming
|
W. Leontiff, G.B. Dantzig, P.A. Samuelson
|
Assignment of equipment and personnel, scheduling,
input-output analysis, product mix
|
|
Sampling Theory
|
E. Deming, H.F. Dodge
|
Quality control, Simplified accounting and auditing,
consumer surveys and product preferences in marketing research
|
|
Probability Theory
|
R.A. Fisher, T.C. Fry, W. Feller
|
Almost all areas of application
|
|
Statistical Decision Theory
|
A. Wald, E.C. Molina, W. Shewhart
|
Estimation of model parameters in probabilistic models
|
|
Symbolic Logic
|
G. Boole, B. Russell, A. N. Whitehead
|
Circuit design, legal inference
|
