TTC Video – Mathematical Decision Making: Predictive Models and Optimization

TTC Video – Mathematical Decision Making: Predictive Models and Optimization

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Description

Not so long ago, executives faced with complex problems made decisions based on experience, intuition, and no small measure of luck. But now there’s a better way. In recent decades, mathematics and computer science have perfected formerly top-secret techniques for predicting the best possible outcomes when faced with conflicting options. This field goes by different names—analytics, operations research, linear and nonlinear programming, management science—but its purpose is simple: to apply quantitative methods to help business managers, public servants, investors, scientific researchers, and problem solvers of all kinds make better decisions.

Consider the following applications of this powerful set of tools:

Pricing: Costco rose to become one of the top-ranked retailers in the world by combining membership fees with the economy of selling in bulk. A mathematical technique—called genetic algorithms—shows the advantages of this strategy as well as the optimum prices to charge.
Scheduling: Using nonlinear programming, many airlines employ scheduling software that can find the most favorable solution to unexpected disruptions—from weather to mechanical problems to crew availability—saving millions of dollars in operating costs.
Bidding: Simulation models can take a lot of guesswork out of competitive bidding for a project. By running repeated simulations against competitors, a bidder can come up with a proposal that has a good chance of winning the job, while still making a profit.
Queuing: Any process that reflects the behavior of waiting lines is known as queuing. Markov analysis shows how a small increase in input to a system can have a major impact on waiting times. The method also reveals surprising solutions for making long waits vanish.

These same techniques can be applied to retirement planning, stock portfolio analysis, budget forecasting, health care allocation, public relations, marketing and advertising, and many other tasks for enterprises large and small. The applications are truly endless!