Mathematical Modeling in

business decisions
Presentation at

Unair MM
July 2013
Januar Budiman Ph. D.

Introduction
Quality of a Decision making process and hence the decisions can
be enhanced by mathematical models and daily available
computational tools
The use of Mathematical Model as tools in decision making all over
the world
The Mind set behind Mathematical Modeling and how it works
Application of Mathematical Models in the Business Environment

Linear Programming
Goal Programming
Simulation
Markov
Queueing, etc

Discussions

Mathematical Models in this

world
Mathematical Modeling:
Operation Research
Management Science

Applied since world war II by the US army

Was a domain for Big organizations
Physical Resources as well as human resources

Application is gradually propagated to less formal and

smaller organization

Mind Set Behind Mathematical Modeling

in Bussiness

Definition of Model :
A tool used by man kind to Understand, Predict and
Communicate the behavior of an object of interest
Physical Model, Visual Model, Semantic Model,
Mathematical Model
Various levels of Complexity, accuracy and data

Mind Set Behind Mathematical Modeling in

Bussiness
The Decision Making Process
Purely Intuitive
Analytical (Qualitiative & Quantitative)

The role of Models in our lifes (examples)

Choosing a house
Communicating our situation
Financial models
Structural Analysis

Mathematical Models
Wide Range : Simple => Complex
Cheapest to develop
Flexible yet more abstract
Need more understanding and Thought

Mind Set Behind Mathematical Modeling in

Business

Problems observed in the implementation

of models in decision making
Frequently taught as a sequence of procedures to
be performed to do things (improper perception of users)
Unavailabilty of Data and Computational tools (in
the past ) to solve the model
Decisions are frequently dominated by policies
which is made based on historical evidence or
habits in the past
Inappropriate attitude toward Risk

Mind Set Behind Mathematical Modeling in

Bussiness

The current situation

Availabilty of Data
Availabilty of various computational model
Exponential increase in increase of
computational resources with an exponential
decrease in cost for those resources
Capabilties and awareness and attitude in
taking advantage of those resources

Mind Set Behind Mathematical Modeling in

Bussiness
Precomputer Era

Historical

Observation
Analysis
Intuition

Decision

Mind Set Behind Mathematical

Modeling in Business
Information Era

Data Base
Historical Records

Logic , Commonsense, Intuition

&
Simple Mathematics

Decision

Mind Set Behind Mathematical

Modeling in Business
Knowledge Base Era

Mathematical Models
for the Business Env.

Data Base
Historical Records

Optimization
Simulation
Statistics, etc

Various possibilities,
organized & sorted
Intuition

Decision