Management Science

Management Science can be broadly defined as a mixed-bag of advanced quantitative techniques whose application can increase profits by optimizing the cost efficiency of fundamental business operations. One could make a solid argument that management science came into its own in 1949 by applying a technique known as Linear Programming to ensure that during the Berlin Airlift every available inch of limited cargo space of each plane that landed in Berlin was filled to capacity with the most essential supplies for the inhabitants of that beleaguered city. In the ensuing 70 years a number of Management Science techniques such as Network Analysis, Monte Carlo Simulation, and Genetic Algorithms, have been developed to help business owners increase their cost efficiency and, therefore, their profits.

What follows is a very simple example of applying Management Science to help determine the optimal use of resources to insure the highest profit possible when constructiong a product.

Swen Swenson, owner of Swenson Saunas, sells two models of premium personal saunas, the Viking and the Eric the Red. Each Viking sold generates a profit of $3500 and each Eric the Red a profit of $3000. Production specs are as follows:

• Both models use 1 unit of the same commercially available standard steam generator(all hardware included).
  
  
• The Viking requires 9 hours of labor and 12 units of redwood
  
  
• The Eric the Red requires 6 hours of labor and 16 units of redwood.

Swen is starting a new production year with the following available resources:

• 200 steam generators.
  
  
• 1566 hours of labor
  
  
• 2880 units of redwood.
  
  

Swen would like to know how many of each model to build in order to generate the highest profit given his resources.

What is Swen's Profit Maximizing Solution?: If he produces 122 Viking units and 78 Eric the Red units, he will insure himself the maximum profit possible, given his present resources. Furthermore, the Management Science techniques used to determine this production criteria guarantee that no other combination of units will produce a higher profit.

Simply put, applying Management Science techniques assures the small business owner that he is taking the most profitable course of action possible when confronted with a critical business decision, whether that decision is as straight forward as deciding the most profitable way to manufacture a bookcase, or something as esoteric as simulating an entire factory in cyber-space to determine its optimal production capacity configuration before spending a dime on its construction.

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