Quantitative Models for Decision Making

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Quantitative Models for Decision Making

• ECE573 Data Structures and Algorithms
• Electrical and Computer Engineering Dept.
• Rutgers University
• http//www.cs.rutgers.edu/vchinni/dsa/

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General Business/Finance Problems
Finance Interest rates, APR, Mortgage
pricing, Stock pricing, Bond pricing,
Derivatives, Insurance, Risk Analysis,
Portfolio Analysis Operations Management
Inventory Management, Production and Logistics
planning Marketing Pricing,
Statastics/Sampling
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Models for Industry

• Finance
• Asset/liability management
• Portfolio selection
• Option valuation
• Risk management
• Retail and Services
• Logistics
• Staff scheduling
• Floor pricing
• Outlet staffing
• Management consulting
• Business unit valuation
• Corporate restructuring
• Strategic planning

• Manufacturing
• Production Planning
• Global sourcing Distribution
• Energy
• Exploration and Development
• Refinery Operation and Distribution
• Transportation
• Airline Yield management
• Airline equipment and crew scheduling
• Truck routing

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PROBLEM SET

• (1) S.T. Powers Perfume Problem
• (2) Fabulous Nut Company
• (3) Pricing Out the Super Mix
• (4) GlobChem Production/Transportation Problem
• (5) Foresight Co. Production Planning Problem
• (6) Foreign Currency Trading
• (7) Cambridge Software Corporation

Rules Must attempt min of 4 problems. One
problem from the group of (problem 4, 5, 7) must
be attempted.
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(1) S.T. Powers Perfume Problem

• S.T. sells two products cologne and perfume
• Cologne sells for 3 per ounce each ounce
  requires
• 2 grams of fragrance
• 6 grams of intensifier
• Perfume sells for 8 per ounce. The recipe for
  one ounce of perfume is
• 4 grams of fragrance
• 2 grams of intensifier
• 1 gram of stabilizer
• S.T. has limited supplies. In particular, she
  has
• 1600 grams of fragrance
• 1800 grams of intensifier
• 350 grams of stabilizer
• She would like to use these ingredients
  immediately, before they spoil. What should she
  do to maximize the revenue earned from her
  supplies?

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(2) Fabulous Nut Company
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(3) Pricing Out the Super Mix

• Each pound of Super Mix requires
• 0.5 pounds of almonds
• 0.1 pounds each of filberts, Brazil nuts, pecans
• 0.2 pounds of walnuts
• The Fabulous Nut Company plans to price Super Mix
  to earn a contribution of 2.50 per pound
• How will the addition of Super Mix to the product
  line affect the quantities that should be
  produced?

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• Something hidden go and find it
• Go and look behind the Ranges
• Something lost behind the Ranges
• Lost and waiting for you. Go!
• Rudyard Kipling

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(4) GlobChem Production/Transportation Problem

• A US based multinational produces a specialty
  chemical in four dedicated plants, located in
  Newark Los Angeles, Rotterdam, and Kaula Lumpur
• The rpoduct is marketed worldwide, and the
  company has just instituted a regional sales
  organziation with sales offices / distribution
  centers based in Newark Rotterdam Sao Paulo
  and Tokyo.

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Prices and Costs Vary by Region and Plant
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GlobChems Problem Statement

• GlobChem wants to determine its annual production
  and distribution schedule in order to maximize
  profits while observing the limits on each
  plants capacity and the maximum sales possible
  in each region. In determining this production
  and distribution schedule, consider the locations
  and capacities of the plans to be fixed.

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(5) Foresight Co. Production Planning Problem
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(6) Foreign Currency Trading
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(6) Foreign Currency Trading- Contd
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(7) Cambridge Software Corporation