205 - Quantitative Techniques [Unit 1: Introduction] [BBA II, Rajasthan University]

QUANTITATIVE TECHNIQUES
UNIT 1

QUANTITATIVE TECHNIQUES
UNIT 1: SYLLABUS (THEORY)
Quantitative Techniques: Introduction
(as per University of Rajasthan)
Statistical & Operations Research Techniques
Scope & Application of Quantitative Techniques
Scientific Approach in Decision Making
Limitation of these Techniques

Quantitative Techniques defined as those techniques which provide the

decision maker with a systematic and powerful means of analysis and help,

based on quantitative data, in exploring policies for achieving pre-

determined goals.
Quantitative techniques are those statistical and programming techniques:

which support the decision making process especially related to industry and

business.
MEANING
QUANTITATIVE TECHNIQUE - UNIT 1: INTRODUCTION
OF QUANTITATIVE TECHNIQUES

ROLE
It enables proper deployment of resources.
It offers solutions for various business

problems.
It provides a tool for scientific analysis.
It supports in minimising waiting and

servicing costs.
It helps the management to decide when to
buy and what is the procedure of buying.
It helps in reducing the total processing

time necessary for performing a set of jobs.

STATISTICAL RESEARCH
Statistical Techniques are those techniques which are used to

conduct statistical analysis on a certain phenomenon.
This include all statistical steps i.e from collection of data till

analysis and interpretation of collected data.

Operations Research (O.R) is an analytical method of problem-solving

and decision-making that is useful in the management of

organizations.
In operations research, problems are broken down into basic

components and then solved in defined steps by mathematical

analysis.
According to H.M Wagner
"Operations Research(O.R) is a scientific approach to problem solving

for executive management."
OPERATIONS RESEARCH

CHARACTERISTICS
OF OPERATIONS RESEARCH IN QUANTITATIVE TECHNIQUES
O.R. often requires a computer to solve the complex

mathematical model or to perform a large number of

computations that ae involved. Use of digital

computer has become an integral part of the

operations research approach to decision making.
USE OF INFORMATION TECHNOLOGY (I.T)
O.R provides the managers a quantitative base for

decision making. OR attempts to provide a systematic

and rational approach for quantitative solution to the

various managerial problems.
QUANTITATE SOLUTION
study of the OR is incomplete without a study of

human factors. In deriving quantitative solution we do

not consider human factors, which doubtlessly plays a

great role in the problems.
TAKING HUMAN FACTORS
O.R. is performed by a team of scientists whose

individual members have been drawn from different

scientific and engineering disciplines.
For example, one may find a mathematician,

statistician, physicist, psychologist, economist and an

engineer working together on an O.R problem.
USE OF INFORMATION TECHNOLOGY (I.T)

TECHNIQUES
It refers to finding the optimum solution for supply of

uncertain demand in stores.
Its goal is to achieve economic balance between the

cost of providing services and cost associated with

the wait received for that service.
QUEUING THEORY / WAITING LINE
Simplex Method is also a mathematical technique in

which limited resources are divided into two or more

than two competitive programmes in such a way that

an optimum solution is obtained.
SIMPLEX METHOD
It is used by business to take decisions and improving

decision under the conditions of risk, uncertainty and

uncertainty. It helps decision maker to analyse and

interpret a set of complex situations with many

different possible consequences.
DECISION THEORY
It is a technique which is used to find solution of
decision making by designing, constructing and

manipulating a model of real system.
This technique is used in analysing a number of

complex problems where analytical methods are

difficult or unknown.
SIMULATION

TECHNIQUES
Sequencing System is used by industries to reduce

the cost and production time.
By applying Sequencing System, the production

programme can be made effective and applied in a

systematic way.
SEQUENCING SYSTEM
Allocation Model is used for the purpose of decision-

making. With the help of allocation model, decision

regarding the satisfaction of unlimited requirements

of business with the limited resources available can be

taken. It reduces the risk and provides optimum

solutions of objectives
ALLOCATION MODEL
Competition Model is used where two or more than

two uniform industries encounter similar type of

competition.
This model is used by industries to improve the

management and workers relationship to make it

more efficient.
COMPETITION MODEL



SIMULATION

TECHNIQUES
Markov Process is designed to find the solution of

decision-making problems.
It is a managerial tool used to estimate production by

examining and predicting the customer behaviour i.e

their loyalty towards one brand and habit of switching

to other brands.
MARKOV PROCESS/ANALYSIS
Inventory system is followed for proper storing of

inventory to maintain the flow of supply and demand

of product. It helps the management to ascertain

when to buy and how much to buy an item of

inventory so that carrying cost, ordering cost and

outage of stock can be minimum.
INVENTORY SYSTEM
Competition Model is used where two or more than

two uniform industries encounter similar type of

competition.
This model is used by industries to improve the

management and workers relationship to make it

more efficient.
COMPETITION MODEL



SIMULATION

TECHNIQUES
It enables the management of manufacturing or

business concern to make optimum use of available

resources.
Linear means straight like while Programming refers

to exploration of various alternatives towards solution

of problem.
LINEAR PROGRAMMING
The game theory enables a person in taking decisions

when two or more intelligent and rational opponents

are involved in conflict or competition.
It was developed during world war to by John Von

Neumann.
Efforts are made to determine a rival's most profitable

counter strategy and to formulate the appropriate

defensive measure rather than drawing conclusions

from past behaviour of opponent.
GAME THEORY

The following are the scope of quantitative techniques in different

areas :
- Scope of Quantitative Techniques in Industry
- Scope of Quantitative Techniques in Developing Economies
- Scope of Quantitative Techniques in Agriculture Industry
- Scope of Quantitative Techniques in Organisation
- Scope of Quantitative Techniques in Business and Society
SCOPE

Industrial management deals with a series of problems, starting right from

the purchase of raw materials till the dispatch of final products. The

management is ultimately interested in overall understanding of the

alternative methods, of optimising profits.
Many industries have gained immensely by applying Operations Research in

various tasks.
For example: operations research can be used in the fields of manufacturing

and production, blending and product mix, inventory management, for

forecasting demand, sale and purchase, for repair and maintenance jobs, for

scheduling and sequencing planning, and also for scheduling and control of

projects.
SCOPE IN INDUSTRY
IN QUANTITATIVE TECHNIQUES

The scope in Developing Economies focuses on planning to achieve

maximum growth per capital income in minimum time; considering the

goals and restrictions of the country.
Poverty and hunger are the core problems faced by many countries.
Therefore, people like statisticians, economists, technicians,

administrators, politicians and agriculture experts can work in

conjunction, to solve this problem with an Operations Research
approach in Quantitative Techniques.
SCOPE IN DEVELOPING ECONOMIES

Population explosion has led to scarcity of food. Optimum allocation of

land for various crops in accordance with climatic conditions is a

challenge for many countries.
Also, each developing country is facing the problem of optimal

distribution of water from several water bodies. These areas of concern

hold a great scope for Scientific Research
SCOPE IN AGRICULTURE INDUSTRY

Operational productivity of organisations have improved by using

quantitative techniques.
Techniques of Operations Research, can be applied to minimise cost,

and maximise benefit for decisions.
For example:
A departmental store faces problem like employing additional staff or

purchasing an additional asset for business like a business vehicle, etc.
SCOPE IN ORGANISATION

Businesses and society can directly be benefited from Operations

Research.
For example: hospitals, clinics etc. Operations research methods can be

applied directly to solve administrative problems such as minimising the

waiting time of outdoor patients.
Similarly, the business of transport can also be benefited by applying

simulation methods. Such methods, can help to regulate train arrivals

and their running timings.
Queuing theory, can be applied to minimise congestion and passengers

waiting time.
Industries such as petroleum, paper, chemical, metal processing, aircraft,

rubber, mining and textile have been extremely benefited by its use.
SCOPE IN BUSINESS AND SOCIETY

Applications of quantitative techniques in managerial decision-making

are as follows:
- Finance, Budgeting and Investment
- Marketing
- Physical Distribution
- Purchasing, Procurement and Exploration
- Personnel
- Production
- Research and Development
APPLICATION

A scientific approach improves precision — it reduces the odds of pursuing

projects with false positive returns and increases the odds of pursuing projects

with false negative returns.
Entrepreneurs who behave like scientists perform better, are more likely to

pivot to a different idea, and are not more likely to drop out than the control

group in the early stages of the startup.
In order to evaluate the alternatives, certain quantitative techniques have been

developed which facilitate in making objective decisions, those are:
- Marginal Analysis
- Co-effectiveness Analysis
- Operations Research
- Linear Programming
SCIENTIFIC APPROACH IN DECISION MAKING

This technique is also known as ‘marginal costing’. In

this technique the additional revenues from additional

costs are compared.
The profits are considered maximum at the point

where marginal revenues and marginal costs are

equal.
This technique can also be used in comparing factors

other than costs and revenues.
MARGINAL ANALYSIS
This is a scientific method of analysis of decision

problems to provide the needed quantitative

information in making these decisions.
The important purpose of this is to provide the

managers with scientific basis for solving

organisational problems involving the interaction of

components of the organisation.
This seeks to replace the process by an analytic,

objective and quantitative basis based on information

supplied by the system in operation and possibly

without disturbing the operation.
OPERATIONS RESEARCH

This analysis may be used for choosing among

alternatives to identify a preferred choice when

objectives are far less specific than those expressed

by such clear quantities as sales, costs or profits.
Koontz, O’Donnell and Weihrich have written that

“Cost models may be developed do show cost

estimates for each alternative and its effectiveness.
Social objective may be to reduce pollution of air and

water which lacks precision. Further, he has

emphasised for synthesising model i.e., combining

these results, may be made to show the relationships

of costs and effectiveness for each alternative.”
CO-EFFECTIVE ANALYSIS
It is a technique applicable in areas like production

planning, transportation, warehouse location and

utilisation of production and warehousing facilities at

an overall minimum cost.
It is based on the assumption that there exists a linear

relationship between variables and that the limits of

variations can be ascertained.
MARGINAL ANALYSIS

LIMITATION
Quantative Techniques is an costly affair.
An organisation needs to invest time, money and

effort into Quantitate Techniques such as Operations

Research to make it effective.
Professionals need to be hired to conduct constant

research. For better research outcomes, these

professionals must constantly review the rapidly

changing business scenarios.
COSTLY EXERCISE
Quantitative techniques can lead to misleading

results, not least if you use them incorrectly.
If, for example, you count the number of children

sitting an exam rather than the percentage of those

passing it or if you focus only on the past three

months when the yield was high and ignore the 21

months before where the yield was extremely low
CAN HAVE MISLEADING RESULTS

LIMITATION
Quantitative Techniques Approach is mathematical in

nature.
It tries to find out an optimal solution to a problem, by

taking all the factors into consideration.
The need of computers become unavoidable because

these factors are enormous and it requires huge

calculations to express them in quantity and to

establish relationships among them.
DEPENDENCE ON COMPUTERS
Quantitate Techniques are not good at capturing

feelings of human and its behaviour.
There are lots of complexities of human relations and

behaviour which must be taken into account while

implementing Quantitate Technique's decisions, as it

is a very delicate task and often it fails to generate

accurate results.
WEAK ANALYSIS ON HUMAN BEHAVIOUR

205 - Quantitative Techniques [Unit 1: Introduction] [BBA II, Rajasthan University]

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205 - Quantitative Techniques [Unit 1: Introduction] [BBA II, Rajasthan University]