The basic contention of this approach is the premise that if managerial and organizational operations and decisions are based on a logical process, then these may be expressed in terms of mathematical symbols and relationships. According to Lindsay, these techniques assist the management for improving the quality of their decisions by:
a) Increasing the number of alternatives that can be considered.
b) Assisting in faster decision making based upon objective analysis of available information.
c) Helping management in evaluating the risks and results of different courses of action.
d) Helping to bring into optimum balance the many diverse elements of a modern enterprise.
The quantitative techniques generally involve the following five steps.
1. The system whose behaviour must be explained to solve the problem is observed systematically.
2. A mathematical model is constructed with variables of such observed system reflecting the important factors in the situation to be analyzed.
3. The decision rules are established and some standards are set for the purpose of comparing the relative merits of possible courses of actions.
4. The values of the relevant variables in the system are determined and substituted in the mathematical model.
5. The mathematical calculations are executed so as to find a course of action that will maximize the objective function or the goal utility.
These quantitative techniques are increasingly being used by management. The advent and increased use of sophisticated electronic computers has significantly facilitated the use of this approach. Some of the areas where these techniques are extensively used are as follows:
The linear programming techniques have been used in calculating as to how best to allocate scarce resources among competing uses. An example would be how to use a fixed advertising budget to different types of media in order to get the best results.
This technique has been successfully used in planning for the optimum number of service stations in order to minimize the service cost as well as the customer’s waiting time. Examples are the number of tellers in the bank, the number of toll booths at a toll station on a highway or the number of gasoline pumps at a gas station.
Mathematical models have been built for establishing the optimal inventory levels of raw materials and finished goods and how much to order at a time and when to place such an order.
This involves building a model which simulates the actual problem under study and many solutions to the problem under different values of decision variables are obtained by using a computer and the best solution is selected.
These problems involve maintenance of equipment and replacement of parts. For example, should we replace all the light bulbs in the factory at the same time in a cyclic manner or should we replace them as their fuses blow out?
Similarly, as a preventive control, should we see a doctor every six months for a checkup or only when we get sick? There are certain costs involved in each of these choices and the quantitative techniques are used to formulate optimal policies.
The game theory techniques have been extensively and successfully used in military planning and decision making by evaluating the possible actions of the “enemy” and then formulating best responses to these possible actions. In the business world, the problems of competition must be anticipated and responsive moves planned.
The quantitative approach to management has provided the manager with some important tools in solving problems, especially where the managerial process can be rationalized and quantified. However, the involvement of the human factor which is not quantitative must be fully appreciated and emphasized in all managerial processes and decisions.