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Introduction
Decision making is crucial for survival of business. Businesses
have to make
decision considering the limited amount of information. Decision
making problems
are divided into two types deterministic and probabilistic.
Deterministic model of problem solving depends on the
relationship between
uncontrollable factors and continuing process of optimizing
system performance. A
model is developed in under assumption related to existing
business condition. If
the variables under assumption do not truly reect the current
business conditions
the model developed also will not reect the reality.
!athematical optimization utilizes mathematical e"uation to
determine the
business decision. #he business decision derive is in a
numerical form.
A business model for decision making is constructed by analyst
based on inputs of a
decision maker. A business model is developed over a period of
time using a
progressive approach method.
$ptimization !odeling %rocess
$ptimization model is developed in three steps &st step is
describing the problem
'nd step is elaborating the solution and (rd step is controlling
the problem.
#he optimized problem of the &st step can be classi)ed
into linear and non*linear
depending upon on nature of variables. $ptimization problem has
three following
aspects+
An ob,ective function to maximize or minimize.
A set of variables which a-ect the value of the ob,ective
function.
A set of uncontrollable factors referred as parameters.
#he solution of optimized problem satisfying all
parameters and constraints is
referred as feasible solution. #he ob,ective of an optimization
process is to value of
variables which minimize or maximize ob,ective giving out an
optimal solution.
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inear %rogramming
inear programming is a mathematical procedure of determining
linear allocation of
business variables. /or constructing linear program following
factors are essential+
#he ob,ective function needs to be linear.
#he ob,ective must be to either maximize or minimize a
linear function.
#he constraints in the program should also be linear.
In formulating a linear program certain variables are integer in
nature such as
function with integer variable is known as integer
programming.
Decision #ree
In a certain decision*making process probability plays an
important role. $n the
decision model based upon probability is decision trees.
0cenario modeling
Business environment is always unpredictable and can throw up
unusual situation
more than often. #hus organizations )nd themselves in the middle
of dynamic
environment. 1ere model and methods like sensitivity analysis
stability analysis
what*if analysis scenario modeling etc. is utilized.
#herefore model under used uncertainties are as
follows+
0cenario Analysis+ this model assumes a di-erent scenario a
business may )nd
itself with certain value of parameters.
2orst 3ase Analysis+ this model assumes an extreme case scenario
in computing
di-erent variables.
!onte*3arlo !odel+ this model assumes uncertainty through
statistical distribution.
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#heory of 3onstraints
#heory of constraints is a management concept which helps
organization deal with
situation which hampers its growth and march towards higher
level of performance.
#heory of constraint encourages an organization to deal
one constraint at a time
and consist of following steps+
Identifying constraints of the existing system.
Identifying was to potential extract more out of system
constraints.
4xploiting constraints to its fullest potential should be made
priority.
As the company overcomes &st constraint it should look
forward to working upon
other constraints.
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