introduction to management science 9th edition

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Table of Contents
Introduction to Management Science, Ninth Edition ............................................................................................... 1
Table of Contents ................................................................................................................................................................................. 2
Copyright ..................................................................................................................................................................................................... 8
Preface ....................................................................................................................................................................................................... 10
Learning Features ............................................................................................................................................................................ 11
Microsoft Project .............................................................................................................................................................................. 15
Instructors' and Students' Supplements ................................................................................................................................. 17
Acknowledgments ........................................................................................................................................................................... 19
Chapter 1. Management Science ....................................................................................................................................... 20
The Management Science Approach to Problem Solving ............................................................................................. 22
Model Building: Break-Even Analysis ..................................................................................................................................... 28
Computer Solution .......................................................................................................................................................................... 34
Management Science Modeling Techniques ....................................................................................................................... 38
Business Usage of Management Science Techniques .................................................................................................... 41
Management Science Models in Decision Support Systems ....................................................................................... 43
Summary ............................................................................................................................................................................................. 46
References ......................................................................................................................................................................................... 47
Problems ............................................................................................................................................................................................. 48
Case Problem ................................................................................................................................................................................... 53
Case Problem ................................................................................................................................................................................... 54
Case Problem ................................................................................................................................................................................... 55
Chapter 2. Linear Programming: Model Formulation and Graphical Solution .............................. 56
Model Formulation .......................................................................................................................................................................... 57
A Maximization Model Example ............................................................................................................................................... 58
Graphical Solutions of Linear Programming Models ....................................................................................................... 62
A Minimization Model Example ................................................................................................................................................. 78
Irregular Types of Linear Programming Problems ............................................................................................................ 86
Characteristics of Linear Programming Problems ............................................................................................................ 90
Summary ............................................................................................................................................................................................. 92
References ......................................................................................................................................................................................... 93

Example Problem Solutions ....................................................................................................................................................... 94
Problems ............................................................................................................................................................................................. 98
Case Problem ................................................................................................................................................................................ 108
Case Problem ................................................................................................................................................................................ 109
Case Problem ................................................................................................................................................................................. 110
Chapter 3. Linear Programming: Computer Solution and Sensitivity Analysis ........................... 111
Computer Solution ........................................................................................................................................................................ 112
Sensitivity Analysis ...................................................................................................................................................................... 120
Summary .......................................................................................................................................................................................... 135
References ...................................................................................................................................................................................... 136
Example Problem Solution ...................................................................................................................................................... 137
Problems .......................................................................................................................................................................................... 140
Case Problem ................................................................................................................................................................................ 155
Case Problem ................................................................................................................................................................................ 157
Case Problem ................................................................................................................................................................................ 158
Chapter 4. Linear Programming: Modeling Examples ................................................................................... 160
A Product Mix Example ............................................................................................................................................................. 161
A Diet Example .............................................................................................................................................................................. 166
An Investment Example ............................................................................................................................................................ 170
A Marketing Example ................................................................................................................................................................. 177

A Transportation Example ........................................................................................................................................................ 181
A Blend Example .......................................................................................................................................................................... 185
A Multiperiod Scheduling Example ....................................................................................................................................... 190
A Data Envelopment Analysis Example ............................................................................................................................. 195
Summary .......................................................................................................................................................................................... 200
References ...................................................................................................................................................................................... 201
Example Problem Solution ...................................................................................................................................................... 202
Problems .......................................................................................................................................................................................... 205

308
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317
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322
References ...................................................................................................................................................................................... 323
Example Problem Solution ...................................................................................................................................................... 324
Problems .......................................................................................................................................................................................... 326
Case Problem ................................................................................................................................................................................ 355
Case Problem ................................................................................................................................................................................ 356
Case Problem ................................................................................................................................................................................ 358
Case Problem ................................................................................................................................................................................ 360
Case Problem ................................................................................................................................................................................ 362
Case Problem ................................................................................................................................................................................ 364
Chapter 7. Network Flow Models .................................................................................................................................... 367
Network Components ................................................................................................................................................................. 368
The Shortest Route Problem ................................................................................................................................................... 370
The Minimal Spanning Tree Problem .................................................................................................................................. 379
The Maximal Flow Problem ..................................................................................................................................................... 384
Summary .......................................................................................................................................................................................... 392
References ...................................................................................................................................................................................... 393
Example Problem Solution ...................................................................................................................................................... 394
Problems .......................................................................................................................................................................................... 397
Case Problem ................................................................................................................................................................................ 413
Case Problem ................................................................................................................................................................................ 415
..........................................
The Transportation Model .........................................................................................................................................................
Computer Solution of a Transportation Problem ............................................................................................................
The Transshipment Model ........................................................................................................................................................
The Assignment Model ..............................................................................................................................................................

Computer Solution of an Assignment Problem ...............................................................................................................
Summary ..........................................................................................................................................................................................

416
418
Chapter 8. Project Management ...................................................................................................................................... 420
The Elements of Project Management ............................................................................................................................... 421
CPM/PERT ...................................................................................................................................................................................... 429
Probabilistic Activity Times ...................................................................................................................................................... 438
Microsoft Project ........................................................................................................................................................................... 446
Project Crashing and TimeCost Trade-off ......................................................................................................................... 452
Formulating the CPM/PERT Network as a Linear Programming Model .............................................................. 458
Summary .......................................................................................................................................................................................... 465
References ...................................................................................................................................................................................... 466
Example Problem Solution ...................................................................................................................................................... 467
Problems .......................................................................................................................................................................................... 470
Case Problem ................................................................................................................................................................................ 489
Case Problem ................................................................................................................................................................................ 492
Chapter 9. Multicriteria Decision Making .................................................................................................................. 494
Goal Programming ...................................................................................................................................................................... 495
Graphical Interpretation of Goal Programming ............................................................................................................... 500
Computer Solution of Goal Programming Problems with QM for Windows and Excel ................................. 505
The Analytical Hierarchy Process ......................................................................................................................................... 512
Scoring Models .............................................................................................................................................................................. 526
Summary .......................................................................................................................................................................................... 528
References ...................................................................................................................................................................................... 529
Example Problems Solutions .................................................................................................................................................. 530
Problems .......................................................................................................................................................................................... 534
Case Problem ................................................................................................................................................................................ 565

Case Problem ................................................................................................................................................................................ 567
Case Problem ................................................................................................................................................................................ 569
Chapter 10. Nonlinear Programming ............................................................................................................................ 571
Nonlinear Profit Analysis ........................................................................................................................................................... 572
Constrained Optimization ......................................................................................................................................................... 576
Solution of Nonlinear Programming Problems with Excel ......................................................................................... 579
A Nonlinear Programming Model with Multiple Constraints ...................................................................................... 583
Nonlinear Model Examples ...................................................................................................................................................... 586
Summary .......................................................................................................................................................................................... 592
References ...................................................................................................................................................................................... 593
Example Problem Solution ...................................................................................................................................................... 594
Problems .......................................................................................................................................................................................... 595
Case Problem ................................................................................................................................................................................ 601
Case Problem ................................................................................................................................................................................ 602
Chapter 11. Probability and Statistics .......................................................................................................................... 603
Types of Probability ..................................................................................................................................................................... 604
Fundamentals of Probability .................................................................................................................................................... 607
Statistical Independence and Dependence ....................................................................................................................... 612
Expected Value ............................................................................................................................................................................. 621
The Normal Distribution ............................................................................................................................................................. 624
Summary .......................................................................................................................................................................................... 637
References ...................................................................................................................................................................................... 638
Example Problem Solution ...................................................................................................................................................... 639
Problems .......................................................................................................................................................................................... 641
Case Problem ................................................................................................................................................................................ 650
Chapter 12. Decision Analysis ........................................................................................................................................... 652
Components of Decision Making ........................................................................................................................................... 653
Decision Making Without Probabilities ............................................................................................................................... 655
Case Problem ................................................................................................................................................................................
Case Problem ................................................................................................................................................................................

Decision Making with Probabilities ....................................................................................................................................... 664
Decision Analysis with Additional Information .................................................................................................................. 679
Utility .................................................................................................................................................................................................. 688
Summary .......................................................................................................................................................................................... 690
References ...................................................................................................................................................................................... 691
Example Problem Solution ...................................................................................................................................................... 692
Problems .......................................................................................................................................................................................... 697
Case Problem ................................................................................................................................................................................ 718
Case Problem ................................................................................................................................................................................ 720
Case Problem ................................................................................................................................................................................ 721
Case Problem ................................................................................................................................................................................ 723

Chapter 13. Queuing Analysis

...........................................................................................................................................

725

Elements of Waiting Line Analysis ........................................................................................................................................ 726
The Single-Server Waiting Line System ............................................................................................................................ 727
Undefined and Constant Service Times ............................................................................................................................. 739
Finite Queue Length .................................................................................................................................................................... 742
Finite Calling Population ........................................................................................................................................................... 746
The Multiple-Server Waiting Line .......................................................................................................................................... 749
Additional Types of Queuing Systems ................................................................................................................................ 754
Summary .......................................................................................................................................................................................... 756
References ...................................................................................................................................................................................... 757
Example Problem Solution ...................................................................................................................................................... 758

Problems .......................................................................................................................................................................................... 760
Case Problems .............................................................................................................................................................................. 769
Case Problem ................................................................................................................................................................................ 770

Chapter 14. Simulation

............................................................................................................................................................

772

The Monte Carlo Process ......................................................................................................................................................... 773
Computer Simulation with Excel Spreadsheets .............................................................................................................. 781
Simulation of a Queuing System ........................................................................................................................................... 787
Continuous Probability Distributions .................................................................................................................................... 792
Statistical Analysis of Simulation Results .......................................................................................................................... 798
Crystal Ball ...................................................................................................................................................................................... 800
Verification of the Simulation Model .................................................................................................................................... 808
Areas of Simulation Application ............................................................................................................................................. 809
Summary .......................................................................................................................................................................................... 812
References ...................................................................................................................................................................................... 814
Example Problem Solution ...................................................................................................................................................... 815
Problems .......................................................................................................................................................................................... 818
Case Problem ................................................................................................................................................................................ 836
Case Problem ................................................................................................................................................................................ 838

Chapter 15. Forecasting

.........................................................................................................................................................

840

Forecasting Components .......................................................................................................................................................... 841
Time Series Methods .................................................................................................................................................................. 844
Forecast Accuracy ........................................................................................................................................................................ 861
Time Series Forecasting Using Excel ................................................................................................................................. 867
Time Series Forecasting Using QM for Windows .......................................................................................................... 870
Regression Methods .................................................................................................................................................................... 872
Summary .......................................................................................................................................................................................... 884
References ...................................................................................................................................................................................... 885
Example Problem Solutions .................................................................................................................................................... 886
Problems .......................................................................................................................................................................................... 889
Case Problem ................................................................................................................................................................................ 914
Case Problem ................................................................................................................................................................................ 915
Case Problem ................................................................................................................................................................................ 917

Chapter 16. Inventory Management

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957
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Example Problem Solutions .................................................................................................................................................... 961
Problems .......................................................................................................................................................................................... 963
Case Problem ................................................................................................................................................................................ 972
Case Problem ................................................................................................................................................................................ 973
Case Problem ................................................................................................................................................................................ 975
Case Problem ................................................................................................................................................................................ 976
Appendix A. Normal and Chi-Square Tables .......................................................................................................... 978
Appendix B. Setting Up and Editing a Spreadsheet ........................................................................................ 980
Titles and Headings ..................................................................................................................................................................... 981
Borders .............................................................................................................................................................................................. 982
Column Centering ........................................................................................................................................................................ 983
Deleting and Inserting Rows and Columns ....................................................................................................................... 984
Decimal Places .............................................................................................................................................................................. 985
Increasing or Decreasing the Spreadsheet Area ............................................................................................................ 986
Expanding or Reducing Column and Row Widths ......................................................................................................... 987
Inserting an Equation or a Formula into a Cell ................................................................................................................ 988
Printing a Spreadsheet ............................................................................................................................................................... 989
Appendix C. The Poisson and Exponential Distributions ............................................................................ 990
The Poisson Distribution ........................................................................................................................................................... 991
The Exponential Distribution ................................................................................................................................................... 992
Solutions to Selected Odd-Numbered Problems ................................................................................................. 993
Chapter 1 ......................................................................................................................................................................................... 994
Chapter 2 ......................................................................................................................................................................................... 995
Chapter 3 ......................................................................................................................................................................................... 997
Chapter 4 ......................................................................................................................................................................................... 999
Chapter 5 ...................................................................................................................................................................................... 1003
Chapter 6 ...................................................................................................................................................................................... 1005

Chapter 7 ...................................................................................................................................................................................... 1007
Chapter 8 ...................................................................................................................................................................................... 1009
Chapter 9 ...................................................................................................................................................................................... 1010
Chapter 10 .................................................................................................................................................................................... 1012
Chapter 11 .................................................................................................................................................................................... 1013
Chapter 12 .................................................................................................................................................................................... 1014
Chapter 13 .................................................................................................................................................................................... 1015
Chapter 14 .................................................................................................................................................................................... 1017
Chapter 15 .................................................................................................................................................................................... 1018
Chapter 16 .................................................................................................................................................................................... 1020
Glossary .............................................................................................................................................................................................. 1021
A ................................................................................................................................................................................................................ 1022
..............................................................................................................................
Elements of Inventory Management ....................................................................................................................................
Inventory Control Systems .......................................................................................................................................................
Economic Order Quantity Models .........................................................................................................................................
The Basic EOQ Model ...............................................................................................................................................................
The EOQ Model with Noninstantaneous Receipt ...........................................................................................................
The EOQ Model with Shortages ............................................................................................................................................
EOQ Analysis with QM for Windows ...................................................................................................................................
EOQ Analysis with Excel and Excel QM ............................................................................................................................
Quantity Discounts .......................................................................................................................................................................
Reorder Point .................................................................................................................................................................................
Determining Safety Stock By Using Service Levels .....................................................................................................
Order Quantity for a Periodic Inventory System .............................................................................................................
Summary ..........................................................................................................................................................................................
References ......................................................................................................................................................................................

B ................................................................................................................................................................................................................ 1024

C ................................................................................................................................................................................................................ 1026
D ................................................................................................................................................................................................................ 1029
E ................................................................................................................................................................................................................ 1032
F ................................................................................................................................................................................................................ 1035
G ............................................................................................................................................................................................................... 1037
H ................................................................................................................................................................................................................ 1038
I .................................................................................................................................................................................................................. 1039
J ................................................................................................................................................................................................................. 1041
L ................................................................................................................................................................................................................. 1042
M ............................................................................................................................................................................................................... 1043
N ................................................................................................................................................................................................................ 1046
O ............................................................................................................................................................................................................... 1047
P ................................................................................................................................................................................................................ 1049
Q ............................................................................................................................................................................................................... 1052
R ................................................................................................................................................................................................................ 1053
S ................................................................................................................................................................................................................ 1055
T ................................................................................................................................................................................................................ 1060
U ................................................................................................................................................................................................................ 1061
V ................................................................................................................................................................................................................ 1062
W .............................................................................................................................................................................................................. 1063
Z ................................................................................................................................................................................................................ 1064
Photo Credits .................................................................................................................................................................................. 1065
Module A. The Simplex Solution Method ................................................................................................................. 1066
Converting the Model into Standard Form ..................................................................................................................... 1067
The Simplex Method ................................................................................................................................................................ 1072
Summary of the Simplex Method ...................................................................................................................................... 1086
Simplex Solution of a Minimization Problem ................................................................................................................ 1087
A Mixed Constraint Problem ................................................................................................................................................. 1093
Irregular Types of Linear Programming Problems ...................................................................................................... 1097
The Dual ........................................................................................................................................................................................ 1106

Sensitivity Analysis .................................................................................................................................................................... 1112
Problems ....................................................................................................................................................................................... 1123
Module B. Transportation and Assignment Solution Methods ................................................................ 1144
Solution of the Transportation Model ................................................................................................................................ 1145
Solution of the Assignment Model ...................................................................................................................................... 1170
Problems ....................................................................................................................................................................................... 1175
Module C. Integer Programming: The Branch and Bound Method .................................................... 1197
The Branch and Bound Method ........................................................................................................................................... 1198
Problems ....................................................................................................................................................................................... 1209
Module D. Nonlinear Programming Solution Techniques .......................................................................... 1212
The Substitution Method ........................................................................................................................................................ 1213
The Method of Lagrange Multipliers ................................................................................................................................. 1216
Problems ....................................................................................................................................................................................... 1219
Module E. Game Theory ....................................................................................................................................................... 1222
Game Theory .............................................................................................................................................................................. 1223
Types of Game Situations ..................................................................................................................................................... 1224
A Pure Strategy .......................................................................................................................................................................... 1226
A Mixed Strategy ....................................................................................................................................................................... 1230
Problems ....................................................................................................................................................................................... 1235
Module F. Markov Analysis .................................................................................................................................................. 1238
The Characteristics of Markov Analysis .......................................................................................................................... 1239
The Transition Matrix ............................................................................................................................................................... 1243
Steady-State Probabilities ..................................................................................................................................................... 1247

1252
1254
1258
1259
1268

1269
Have You Thought About Customizing This Book? ........................................................................................ 1270
The Prentice Hall Just-In-Time Program in Decision Science .............................................................................. 1271
You Can Customize Your Textbook With Chapters From Any Of The Following Prentice Hall Titles .. 1272
Site License Agreement and Limited Warranty .................................................................................................. 1274
Index ...................................................................................................................................................................................................... 1276
SYMBOL ....................................................................................................................................................................................... 1277
A ........................................................................................................................................................................................................ 1278
B ........................................................................................................................................................................................................ 1279
C ....................................................................................................................................................................................................... 1280
D ....................................................................................................................................................................................................... 1282
E ........................................................................................................................................................................................................ 1283
F ........................................................................................................................................................................................................ 1285
G ....................................................................................................................................................................................................... 1286
H ....................................................................................................................................................................................................... 1287
I ......................................................................................................................................................................................................... 1288
J ........................................................................................................................................................................................................ 1290
K ........................................................................................................................................................................................................ 1291
L ........................................................................................................................................................................................................ 1292
M ....................................................................................................................................................................................................... 1294
N ....................................................................................................................................................................................................... 1296
O ....................................................................................................................................................................................................... 1297
P ........................................................................................................................................................................................................ 1298
Q ....................................................................................................................................................................................................... 1300
R ....................................................................................................................................................................................................... 1301
S ........................................................................................................................................................................................................ 1302
T ........................................................................................................................................................................................................ 1304
U ....................................................................................................................................................................................................... 1306
V ........................................................................................................................................................................................................ 1307
W ...................................................................................................................................................................................................... 1308

Y ........................................................................................................................................................................................................ 1309
Z ........................................................................................................................................................................................................ 1310
Additional Examples of Markov Analysis ........................................................................................................................
Special Types of Transition Matrices ................................................................................................................................
Excel Solution of the Debt Example .................................................................................................................................
Problems .......................................................................................................................................................................................
Case Problem .............................................................................................................................................................................
Case Problem .............................................................................................................................................................................

Introduction to Management Science, Ninth Edition

Introduction to Management Science, Ninth Edition

Introduction to Management Science, Ninth Edition
By Bernard W. Taylor III - Virginia Polytechnic Institute and
State University
Publisher: Prentice Hall
Pub Date: February 01, 2006
Print ISBN-10: 0-13-196133-0
Print ISBN-13: 978-0-13-196133-3
Table of eText ISBN-10: 0-13-173796-1
•
Contents eText ISBN-13: 978-0-13-173796-9
Pages: 800
• Index

This text focuses on using simple, straightforward
explanations and examples with step-by-step details of the
modeling and solution techniques to make these

mathematical topics less complex.

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Introduction to Management Science, Ninth Edition

Table of Contents

Introduction to Management Science, Ninth Edition
By Bernard W. Taylor III - Virginia Polytechnic Institute and
State University
Publisher: Prentice Hall
Pub Date: February 01, 2006
Print ISBN-10: 0-13-196133-0
Print ISBN-13: 978-0-13-196133-3
Table of eText ISBN-10: 0-13-173796-1
•
Contents eText ISBN-13: 978-0-13-173796-9
Pages: 800
• Index

Copyright
Preface
Learning Features
Microsoft Project
Instructors' and Students' Supplements
Acknowledgments
Chapter 1. Management Science
The Management Science Approach to Problem Solving

Model Building: Break-Even Analysis
Computer Solution
Management Science Modeling Techniques
Business Usage of Management Science Techniques
Management Science Models in Decision Support Systems
Summary
References
Problems
Case Problem
Case Problem
Case Problem
Chapter 2. Linear Programming: Model Formulation and Graphical Solution
Model Formulation
A Maximization Model Example
Graphical Solutions of Linear Programming Models
A Minimization Model Example
Irregular Types of Linear Programming Problems
Characteristics of Linear Programming Problems
Summary
References
Example Problem Solutions
Problems
Case Problem
Case Problem
Case Problem
Chapter 3. Linear Programming: Computer Solution and Sensitivity Analysis
Computer Solution
Sensitivity Analysis
Summary
References

Example Problem Solution
Problems
Case Problem
Case Problem
Case Problem
Chapter 4. Linear Programming: Modeling Examples
A Product Mix Example

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Introduction to Management Science, Ninth Edition

A Diet Example
An Investment Example
A Marketing Example

A Transportation Example
A Blend Example
A Multiperiod Scheduling Example
A Data Envelopment Analysis Example
Summary
References
Example Problem Solution
Problems
Case Problem
Case Problem
Case Problems
Case Problem
Case Problems
Chapter 5. Integer Programming
Integer Programming Models
Integer Programming Graphical Solution
Computer Solution of Integer Programming Problems with Excel and QM for
Windows
01 Integer Programming Modeling Examples
Summary
References
Example Problem Solution
Problems
Case Problem
Case Problems
Case Problem
Case Problems
Case Problem
Chapter 6. Transportation, Transshipment, and Assignment Problems
The Transportation Model

Computer Solution of a Transportation Problem
The Transshipment Model
The Assignment Model
Computer Solution of an Assignment Problem
Summary
References
Example Problem Solution
Problems
Case Problem
Case Problem
Case Problem
Case Problem
Case Problem
Case Problem
Chapter 7. Network Flow Models
Network Components
The Shortest Route Problem
The Minimal Spanning Tree Problem
The Maximal Flow Problem
Summary
References
Example Problem Solution
Problems
Case Problem
Case Problem
Case Problem

Table of Contents

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Introduction to Management Science, Ninth Edition

Case Problem
Chapter 8. Project Management
The Elements of Project Management
CPM/PERT
Probabilistic Activity Times
Microsoft Project
Project Crashing and TimeCost Trade-off
Formulating the CPM/PERT Network as a Linear Programming Model
Summary
References
Example Problem Solution
Problems
Case Problem
Case Problem
Chapter 9. Multicriteria Decision Making
Goal Programming
Graphical Interpretation of Goal Programming
Computer Solution of Goal Programming Problems with QM for Windows and
Excel
The Analytical Hierarchy Process
Scoring Models
Summary
References
Example Problems Solutions
Problems
Case Problem

Case Problem
Case Problem
Chapter 10. Nonlinear Programming
Nonlinear Profit Analysis
Constrained Optimization
Solution of Nonlinear Programming Problems with Excel
A Nonlinear Programming Model with Multiple Constraints
Nonlinear Model Examples
Summary
References
Example Problem Solution
Problems
Case Problem
Case Problem
Chapter 11. Probability and Statistics
Types of Probability
Fundamentals of Probability
Statistical Independence and Dependence
Expected Value
The Normal Distribution
Summary
References
Example Problem Solution
Problems
Case Problem
Chapter 12. Decision Analysis
Components of Decision Making
Decision Making Without Probabilities
Decision Making with Probabilities
Decision Analysis with Additional Information

Utility
Summary
References

Table of Contents

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Introduction to Management Science, Ninth Edition

Example Problem Solution
Problems
Case Problem
Case Problem
Case Problem
Case Problem
Chapter 13. Queuing Analysis
Elements of Waiting Line Analysis
The Single-Server Waiting Line System
Undefined and Constant Service Times
Finite Queue Length
Finite Calling Population
The Multiple-Server Waiting Line
Additional Types of Queuing Systems
Summary
References
Example Problem Solution
Problems
Case Problems

Case Problem
Chapter 14. Simulation
The Monte Carlo Process
Computer Simulation with Excel Spreadsheets
Simulation of a Queuing System
Continuous Probability Distributions
Statistical Analysis of Simulation Results
Crystal Ball
Verification of the Simulation Model
Areas of Simulation Application
Summary
References
Example Problem Solution
Problems
Case Problem
Case Problem
Chapter 15. Forecasting
Forecasting Components
Time Series Methods
Forecast Accuracy
Time Series Forecasting Using Excel
Time Series Forecasting Using QM for Windows
Regression Methods
Summary
References
Example Problem Solutions
Problems
Case Problem
Case Problem
Case Problem

Chapter 16. Inventory Management
Elements of Inventory Management
Inventory Control Systems
Economic Order Quantity Models
The Basic EOQ Model
The EOQ Model with Noninstantaneous Receipt
The EOQ Model with Shortages
EOQ Analysis with QM for Windows
EOQ Analysis with Excel and Excel QM
Quantity Discounts

Table of Contents

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Introduction to Management Science, Ninth Edition

Reorder Point
Determining Safety Stock By Using Service Levels
Order Quantity for a Periodic Inventory System
Summary
References
Example Problem Solutions
Problems
Case Problem
Case Problem
Case Problem
Case Problem

Appendix A. Normal and Chi-Square Tables
Appendix B. Setting Up and Editing a Spreadsheet
Titles and Headings
Borders
Column Centering
Deleting and Inserting Rows and Columns
Decimal Places
Increasing or Decreasing the Spreadsheet Area
Expanding or Reducing Column and Row Widths
Inserting an Equation or a Formula into a Cell
Printing a Spreadsheet
Appendix C. The Poisson and Exponential Distributions
The Poisson Distribution
The Exponential Distribution
Solutions to Selected Odd-Numbered Problems
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14
Chapter 15

Chapter 16
Glossary
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E
F
G
H
I
J
L
M
N
O
P
Q

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Introduction to Management Science, Ninth Edition

R
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T

U
V
W
Z
Photo Credits
Module A. The Simplex Solution Method
Converting the Model into Standard Form
The Simplex Method
Summary of the Simplex Method
Simplex Solution of a Minimization Problem
A Mixed Constraint Problem
Irregular Types of Linear Programming Problems
The Dual
Sensitivity Analysis
Problems
Module B. Transportation and Assignment Solution Methods
Solution of the Transportation Model
Solution of the Assignment Model
Problems
Module C. Integer Programming: The Branch and Bound Method
The Branch and Bound Method
Problems
Module D. Nonlinear Programming Solution Techniques
The Substitution Method
The Method of Lagrange Multipliers
Problems
Module E. Game Theory
Game Theory
Types of Game Situations
A Pure Strategy

A Mixed Strategy
Problems
Module F. Markov Analysis
The Characteristics of Markov Analysis
The Transition Matrix
Steady-State Probabilities
Additional Examples of Markov Analysis
Special Types of Transition Matrices
Excel Solution of the Debt Example
Problems
Case Problem
Case Problem
Have You Thought About Customizing This Book?
The Prentice Hall Just-In-Time Program in Decision Science
You Can Customize Your Textbook With Chapters From Any Of The Following
Prentice Hall Titles
Site License Agreement and Limited Warranty
Index

Table of Contents

792
792
792
793
793
793
793
793
803

A-1
A-2
A-5
A-16
A-16
A-21
A-23
A-30
A-34
A-43
B-1
B-2
B-22
B-25
C-1
C-2
C-11
D-1
D-2
D-4
D-7
E-1
E-2
E-2
E-3
E-6
E-10
F-1
F-2
F-5

F-8
F-12
F-13
F-16
F-17
F-26
F-26
InsideFrontCover
InsideFrontCover
InsideFrontCover
InsidebackCover

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Introduction to Management Science, Ninth Edition

Copyright

Copyright
[Page ii]
Library of Congress Cataloging-in-Publication Data
Taylor, Bernard W.
Introduction to management science / Bernard W. Taylor III.9th ed.
p. cm.
Includes bibliographical references and index.
ISBN 0-13-196133-0
1. Management science.
I. Title.
T56T38 2007

658dc22
2005056551
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Copyright

Typeface: 10/12 Minion
Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this
textbook appear on appropriate page within text and on page 803.
Microsoft® and Windows® are registered trademarks of the Microsoft Corporation in the U.S.A. and other
countries. Screen shots and icons reprinted with permission from the Microsoft Corporation. This book is
not sponsored or endorsed by or affiliated with the Microsoft Corporation.
Copyright © 2007, 2004, 2002, 1999, 1996 by Pearson Education, Inc., Upper Saddle River, New
Jersey, 07458. Pearson Prentice Hall. All rights reserved. Printed in the United States of America. This
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10 9 8 7 6 5 4 3 2 1
[Page iii]

Dedication
To Diane, Kathleen, and Lindsey
To the memory of my grandfather, Bernard W. Taylor, Sr.

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Introduction to Management Science, Ninth Edition

Preface

[Page xiii]

Preface
The objective of management science is to solve the decision-making problems that confront and
confound managers in both the public and the private sector by developing mathematical models of those
problems. These models have traditionally been solved with various mathematical techniques, all of
which lend themselves to specific types of problems. Thus, management science as a field of study has
always been inherently mathematical in nature, and as a result sometimes complex and rigorous. When I
began writing the first edition of this book in 1979, my main goal was to make these mathematical topics
seem less complex and thus more palatable to undergraduate business students. To achieve this goal I
started out by trying to provide simple, straightforward explanations of often difficult mathematical topics. I
tried to use lots of examples that demonstrated in detail the fundamental mathematical steps of the
modeling and solution techniques. Although in the last two and a half decades the emphasis in
management science has shifted away from strictly mathematical to mostly computer solutions, my
objective has not changed. I have provided clear, concise explanations of the techniques used in
management science to model problems, and provided lots of examples of how to solve these models on
the computer, while still including some of the fundamental mathematics of the techniques.
The stuff of management science can seem abstract, and students sometimes have trouble perceiving
the usefulness of quantitative courses in general. I remember when I was a student I could not foresee
how I would use such mathematical topics (in addition to a lot of the other things I learned in college) in
any job after graduation. Part of the problem is that the examples used in books often do not seem
realistic. Unfortunately, examples must be made simple to facilitate the learning process. Larger, more

complex examples reflecting actual applications would be too complex to help the student learn the
modeling technique. The modeling techniques presented in this text are, in fact, used extensively in the
business world and their use is increasing rapidly because of computer and information technology.
Therefore, the chances of students using the modeling techniques that they learn from this text in a future
job are very great indeed.
Even if these techniques are not used on the job, the logical approach to problem solving embodied in
management science is valuable for all types of jobs in all types of organizations. Management science
consists of more than just a collection of mathematical modeling techniques; it embodies a philosophy of
approaching a problem in a logical manner, as does any science. Thus, this text not only teaches specific
techniques but also provides a very useful method for approaching problems.
My primary objective throughout all revisions of this text is readability. The modeling techniques
presented in each chapter are explained with straightforward examples that avoid lengthy written
explanations. These examples are organized in a logical step-by-step fashion that the student can
subsequently apply to the Problems at the end of each chapter. I have tried to avoid complex
mathematical notation and formulas wherever possible. These various factors will, I hope, help make the
material more interesting and less intimidating to students.

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Introduction to Management Science, Ninth Edition

Learning Features

[Page xiii (continued)]

Learning Features
This ninth edition of Introduction to Management Science includes many features that are designed to
help sustain and accelerate the student's learning of the material. Some of these features remain from the
previous editions while others are new to this edition. Several of the strictly mathematical topicslike the

simplex and transportation solution methodsare on the accompanying CD-ROM. This frees up text space
for additional modeling examples in several of the chapters, allowing more emphasis on computer
solutions with Excel spreadsheets, and added additional homework problems. In the following sections,
we will summarize these and other learning features that appear in the text.
Text Organization
An important objective is to have a well-organized text that flows smoothly and follows a logical
progression of topics, placing the different management science modeling techniques in their proper
perspective. The first 10 chapters group together those chapters related to mathematical programming
that can be solved using Excel spreadsheets, including linear, integer, nonlinear, and goal programming
as well as network techniques.
Within these mathematical programming chapters the traditional simplex procedure for solving linear
programming problems mathematically is located on the CD-ROM that accompanies this text. It can still
be covered by the student on the computer as part of linear programming or it can be excluded, without
leaving a "hole" in the presentation of this topic. The integer programming mathematical branch and
bound solution method is also on the CD-ROM. In Chapter 6, on the transportation and assignment
problems, the strictly mathematical solution approaches, including the northwest corner, VAM, and
steppingstone methods, are also on the accompanying CD-ROM. Since transportation and assignment
problems are specific types of network problems, the two chapters that cover network flow models and
project networks that can be solved with linear programming, as well as traditional model-specific solution
techniques and software, follow Chapter 6 on transportation and assignment problems. In addition, in
Chapter 10, on nonlinear programming, the traditional mathematical solution techniques, including the
substitution method and the method of Lagrange multipliers, are on the CD-ROM.
[Page xiv]
Chapters 11 through 14 include topics generally thought of as being probabilistic, including probability
and statistics, decision analysis, queuing, and simulation. A module on Markov analysis is on the
accompanying CD-ROM. Also, a module on game theory, is on the CD-ROM. Forecasting in Chapters 15
and inventory in Chapter 16 are both unique topics related to operations management.
New Topics and Sections in This Edition
In an effort to keep the book current and abreast of contemporary trends in management science, and
especially the increased emphasis on model development and solution with Excel spreadsheets, several

chapters have been altered to include new sections. Specifically, Chapter 8, on project management, has
been completely rewritten to focus on activity-on-node networks and Microsoft Project. Also included are
new sections Project Planning, The Project Team, Scope Statement, Work Breakdown Structure,
Responsibility Assignment Matrix, Project Scheduling, and Project Control.
Excel Spreadsheets
This new edition continues to emphasize Excel spreadsheet solutions of problems. Spreadsheet solutions
are demonstrated in all the chapters in the text (except for Chapter 2, on linear programming modeling
and graphical solution), for virtually every management science modeling technique presented. These
spreadsheet solutions are presented in optional subsections, allowing the instructor to decide whether to
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Learning Features

cover them. The text includes over 175 Excel spreadsheet screens, most of which include reference
callout boxes that describe the solution steps within the spreadsheet. Files that include all the Excel
spreadsheet model solutions for the examples in the text are included on the accompanying CD-ROM,
and can be easily downloaded by the student to determine how the spreadsheet was set up and the
solution derived, and to use as templates to work homework problems. In addition, Appendix B at the end
of the text provides a tutorial on how to set up and edit spreadsheets for problem solution. Following is an
example of one of the Excel spreadsheet files (from Chapter 3) that is available on the CD-ROM
accompanying the text.
[View full size image]

Spreadsheet "Add-Ins"
Several spreadsheet add-in packages are provided on the CD-ROM that is packaged with every copy of
this text, as follows:
Excel QM

For some management science topics, the Excel formulas that are required for solution are lengthy and
complex and, thus, are very tedious and time-consuming to type into a spreadsheet. In several of these
instances in the book, including Chapter 6 on transportation and assignment problems, Chapter 12 on
decision analysis, Chapter 13 on queuing, Chapter 15 on forecasting, and Chapter 16 on inventory
control, a spreadsheet "add-in" called Excel QM is demonstrated. These add-ins provide a generic
spreadsheet set-up with easy-to-use dialog boxes and all of the formulas already typed in for specific
problem types. Unlike other "black box" software, these add-ins allow users to see the formulas used in
each cell. The input, results, and the graphics are easily seen and can be easily changed, making this
software ideal for classroom demonstrations and student explorations. Following is an example of an
Excel QM file (from Chapter 13) that is on the CD-ROM that accompanies the text.
[View full size image]

[Page xv]
Premium Solver for Education
This is an upgraded version of the standard Solver that comes with Excel.
TreePlan
Another spreadsheet add-in program that is demonstrated in the text is TreePlan, a program that will set
up a generic spreadsheet for the solution of decision-tree problems in Chapter 12 on decision analysis.
This is also provided on the accompanying CD-ROM. Following is an example of one of the TreePlan
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Introduction to Management Science, Ninth Edition

Learning Features

files (from Chapter 12) that is on the text CD-ROM.
[View full size image]

Crystal Ball

Still another spreadsheet add-in program that is included on the accompanying CD-ROM and
demonstrated in the book is Crystal Ball . Crystal Ball is demonstrated in Chapter 14 on simulation and
shows how to perform simulation analysis for certain types of risk analysis and forecasting problems.
Following is an example of one of the Crystal Ball files (from Chapter 14) that is on the text CD-ROM.
[View full size image]

[Page xvi]
QM for Windows Software Package:
QM for Windows is the computer package that is included on the text CD-ROM and that many students
and instructors will prefer to use with this text. This software is very user-friendly, requiring virtually no
preliminary instruction except for the "help" screens that can be accessed directly from the program. It is
demonstrated throughout the text in conjunction with virtually every management science modeling
technique, except simulation. The text includes 50 QM for Windows screens used to demonstrate
example problems. Thus, for most topics problem solution is demonstrated via both Excel spreadsheets
and QM for Windows. Files that include all the QM for Windows solutions for examples in the text are
included on the accompanying CD-ROM. Following is an example of one of the QM for Windows files
(from Chapter 4) that is on the CD-ROM.
[View full size image]

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Learning Features

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Introduction to Management Science, Ninth Edition

Microsoft Project

[Page xvi (continued)]

Microsoft Project
As we indicated previously when talking about the new features in this edition, Chapter 8 on Project
Management focuses on the popular software package, Microsoft Project , which is available to users of
this text. Following is an example of one of the Microsoft Project files (from Chapter 8) that is available on
the text CD-ROM.
[View full size image]

New Problems and Cases
Previous editions of the text always provided a substantial number of homework questions, problems, and
cases to offer students practice. This edition includes over 720 homework problems, 30 of which are new,
and 52 end-of-chapter cases, 4 of which are new. In addition, four additional spreadsheet modeling cases
are provided on this text's Web page, which can be accessed at />Management Science Applications Boxes
These boxes are located in every chapter in the text. They describe how a company, organization, or
agency uses the particular management science technique being presented and demonstrated in the
chapter to compete in a global environment. There are 50 of these boxes, 16 of which are new,
throughout the text and they encompass a broad range of business and public sector applications, both
foreign and domestic.
Marginal Notes
Notes are included in the margins that serve the same basic function as notes that students themselves
might write in the margin. They highlight certain topics to make it easier for the student to locate them,
they summarize topics and important points, and they provide brief definitions of key terms and concepts.
Examples
The primary means of teaching the various quantitative modeling techniques presented in this text is
through examples. Thus, examples are liberally inserted throughout the text, primarily to demonstrate how
problems are solved with the different quantitative techniques and to make them easier to understand.

These examples are organized in a logical step-by-step solution approach that the student can
subsequently apply to the homework problems.
[Page xvii]
Solved Example Problems
At the end of each chapter, just prior to the homework questions and problems, there is a section with
solved examples to serve as a guide for doing the homework problems. These examples are solved in a
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Microsoft Project

detailed, step-by-step fashion.

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Introduction to Management Science, Ninth Edition

Instructors' and Students' Supplements

[Page xvii (continued)]

Instructors' and Students' Supplements
For the Instructor:
Excel Homework SolutionsIn addition to the printed Instructor's Solutions Manual, almost every endof-chapter homework and case problem in this text has a corresponding Excel solution file for the
instructor. This new edition includes 720 end-of-chapter homework problems and Excel solutions are
provided for all but a few of them. Excel solutions are also provided for 50 of the 52 end-of-chapter
case problems. These solution files can be accessed from the Instructor's Resource CD-ROM, as

shown in the illustration below. These Excel files also include those homework and case problem
solutions using TreePlan (from Chapter 12) and those using Crystal Ball (from Chapters 14). In
addition, Microsoft Project solution files are available for homework problems in Chapter 8. These
solution files are not available on the student CD-ROM that accompanies the text, but instructors can
electronically post these solutions for their students to access or download directly to their
computers.
PowerPoint PresentationsPowerPoint presentations are available for every chapter to enhance
lectures. They feature figures, tables, Excel, and main points from the text. They are available on the
text Web site or on the Instructor's CD-ROM.
Instructor's Solutions ManualThe instructor's Solutions Manual contains detailed solutions for all
end-of-chapter exercises and cases. In addition to a printed solutions manual, these solutions are
provided electronically on the text's Web site and on a separate Instructor's CD-ROM in PDF format.
Test Item FileThe test item file contains a variety of true/false, multiple choice, and problem solving
questions for each chapter.
[View full size image]

[Page xviii]
Instructor's CD-ROMThis separate CD-ROM for instructors only contains the following:
All of the print supplements listed above, in electronic form.
Electronic files for all of the example problem exhibits.
Electronic files (with solutions) for almost all of the end-of-chapter homework problems and
cases. These files include solutions that use Excel, QM for Windows, Crystal Ball and
TreePlan.
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Instructors' and Students' Supplements

All of the files and software programs on the students' CD-ROM.
The TestGen software described below.
Companion Web siteThis Web site, at www.prenhall.com/taylor contains all of the supplements listed
above (Instructor's Solutions Manual, PowerPoint slides, Test Item File) in electronic form and
available for download.
TestGen Software
The print Test Item Files are designed for use with the TestGen test generating software. This
computerized package allows instructors to custom design, save, and generate classroom tests. This
software allows for greater flexibility and ease of use. It provides many options for organizing and
displaying tests, along with a search and sort feature.
For the Student:
Student CD-ROMA CD-ROM is packaged with every copy of this book. This CD-ROM contains the
following software packages: Premium Solver for Education, Crystal Ball Professional
Textbook/Student Edition, TreePlan and Excel QM. Also on the CD-ROM are Excel, Crystal Ball,
TreePlan, QM for Windows, and Microsoft Project files for the examples in the text.

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