Showing papers in "Decision Sciences in 1986"

A joint economic-lot-size model for purchaser and vendor

Abstract: In a typical purchasing situation, the issues of price, lot sizing, etc, usually are settled through negotiations between the purchaser and the vendor Depending on the existing balance of power, the end result of such a bargaining process may be a near-optimal or optimal ordering policy for one of the parties (placing the other in a position of significant disadvantage) or, sometimes, inoptimal policies for both parties This paper develops a joint economic-lot-size model for a special case where a vendor produces to order for a purchaser on a lot-for-lot basis under deterministic conditions The focus of this model is the joint total relevant cost It is shown that a jointly optimal ordering policy, together with an appropriate price adjustment, can be beneficial economically for both parties or, at the least, does not place either at a disadvantage

Organizational context, user involvement, and the usefulness of information systems*

Abstract: This study investigates organizational factors related to user involvement in information system development and perceived system usefulness Using a sample of 118 usermanagers in 34 companies, the results show that user involvement in design and implementation is related positively to users' perceptions of system usefulness However, organizational factors were not found to be related significantly to user involvement, as had been originally hypothesized Rather, organizational factors either had a direct relationship with perceived usefulness or moderated the relationship between involvement and usefulness Two factors reflecting an MIS department's maturity (size and age) were found to reduce users' perceptions of system usefulness Also, users at higher levels and those making more structured decisions found their systems more useful, although the user's level was found to moderate perceptions of system usefulness during the design stage Three other organizational factors (level of MIS manager, MIS department scope, and decentralization of authority) also were found to have moderating effects

Impact of participation in the budgetary process on managerial attitudes and performance: universalistic and contingency perspectives*

Abstract: Data from responsibility-center managers reveal that greater budgetary participation contributes to managerial performance and attitudes in high-environmental-uncertainty situations but hampers performance and attitudes in low-uncertainty situations. Higher budgetary participation reduces managers' propensity to create slack in high- (but not in low-) uncertainty conditions.

Evaluating alternative linear programming models to solve the two-group discriminant problem

Abstract: The two-group discriminant problem has applications in many areas, for example, differentiating between good credit risks and poor ones, between promising new firms and those likely to fail, or between patients with strong prospects for recovery and those highly at risk. To expand our tools for dealing with such problems, we propose a class of nonpara-metric discriminant procedures based on linear programming (LP). Although these procedures have attracted considerable attention recently, only a limited number of computational studies have examined the relative merits of alternative formulations. In this paper we provide a detailed study of three contrasting formulations for the two-group problem. The experimental design provides a variety of test conditions involving both normal and nonnormal populations. Our results establish the LP model which seeks to minimize the sum of deviations beyond the two-group boundary as a promising alternative to more conventional linear discriminant techniques.

An empirical assessment of computer-assisted decision analysis*

Abstract: Decision analysis tools often are used in semistructured and ill-structured situations. While some researchers have argued that computerized decision analysis programs may improve decision quality in such situations, research support for this assertion is weak. In this laboratory study, business students used a computerized decision-analysis program with short strategic-management cases to prepare decision reports. Independent raters' perceptions of aided and unaided decision performance were contrasted, attitudes of students toward the program were assessed, individual differences were correlated with attitudes, and the program's impact on students' perceptions of their decision processes and performance was examined. Student attitudes toward the computerized aid were favorable, and individual differences in reactions generally were as predicted. However, the program did not improve the independent ratings of students' decision reports and recommendations. These findings suggest that computerized decision aids should be adopted cautiously. If such aids result in positive user affect and heightened decision confidence without corresponding improvements in decision quality, they may be dysfunctional. Rigorous research methodologies which incorporate independent evaluations of analyses and decisions are recommended for use in future research on computerized decision-analysis programs.

Applications and Implementation DECISION SUPPORT SYSTEMS: AN EMPIRICAL ASSESSMENT FOR DECISION MAKING

Abstract: A laboratory experiment examined the effects of applying decision support system (DSS) technology to decision making in ill-structured problem environments under varying information conditions. Marketing executives participated in the experiment which investigated the effects of DSS availability, DSS training, and data availability on dependent variables that included: (1) the number of alternatives considered by a subject during decision making, (2) the period of time spent by a subject to complete the decision-making process, (3) the subject's perceived confidence in the decisions he or she had made, (4) the amount of data considered by a subject's during decision making, (5) the individual subject's decision processing, and (6) the subject's performance overall. Our results indicate that all three factors significantly affect the number of alternatives considered by subjects during the decision-making process. We therefore suggest that DSS training be coordinated with decision training in order to realize the potential of DSSs as described in the DSS literature.

The structure of executive information systems: an exploratory analysis

Abstract: This paper reports on a study which attempted to identify the structure of executive information systems and evaluate their relationship to decision making. The study centered on answering the question: “Where and how do senior executives get their decision-making information?” The data, provided by five senior executives, were gathered by a variety of means which included personal interviews, questionnaires, and logs of the executives' incoming-information transactions for a two-week period. Our findings support beliefs that senior executives receive much information from the environment, that informal systems play a role equal to that of formal systems, and that computers do not provide much information directly to an executive. The study also found that internal information is important and that preferred sources and media vary with different decision roles. The authors suggest that the scope of MIS and DSS be broadened to match those information networks managers actually rely on in daily practice.

An empirical examination of the biasing effects of framing on business decisions

Abstract: This paper presents results of three studies testing whether decision bias due to framing, found in consumer purchase contexts, also would occur in a business setting. In the first study, business-student subjects displayed framing-induced decision bias just as subjects had in an earlier study by Tversky and Kahneman [12]. When the consumer problem was recast into a business decision in the second study, student subjects trained to handle the problem still revealed bias, although to a lesser extent. In the third study, experienced business managers revealed the same pattern of decision bias as the student subjects. Implications of this bias for business decision makers are discussed.

Notes and Communications RESOLVING CERTAIN DIFFICULTIES AND IMPROVING THE CLASSIFICATION POWER OF LP DISCRIMINANT ANALYSIS FORMULATIONS

Abstract: In certain settings, difficulties arise that limit the effectiveness of LP formulations for the discriminant problem. Explanations and possible remedies have been offered, but these have had only limited success. We provide a simple way to overcome these problems based on an appropriate use and interpretation of normalizations. In addition, we demonstrate a normalization that is invariant under all translations of the problem data, providing a stability property not shared by previous approaches. Finally, we discuss the possibility of using more general models to improve discrimination.

Computerized information systems supporting multicriteria decision making

Abstract: This paper addresses two issues critical to the success of decision support systems in multiattribute/multicriteria decision-making contexts. A relationship is established between normative (prescriptive) work in the area of multicriteria decision making and behavioral (descriptive) decision research involving choice strategies. A conceptual system architecture based on the state-space approach to problem solving is presented. This architecture will enable decision makers to incorporate both prescriptive and descriptive strategies in the course of computer-aided multiple alternative/attribute problem resolution.

Education DEVELOPMENT AND VALIDATION OF A TOOL FOR ASSIGNING STUDENTS TO GROUPS FOR CLASS PROJECTS

Abstract: Group project work is an integral part of many university courses. Assigning students to project groups can be difficult because of the students' diverse backgrounds. Many instructors therefore decide not to assign group projects. This paper develops and validates an instrument that assigns both experienced and inexperienced students to different project groups, thereby creating a balanced, fair environment. The instrument is checked for reliability and validity and then is used to assign students to different project groups. Based on group performance, the end-of-the-semester results also are provided. Path analysis is used to test a causal model. Conclusions and implications for future research are presented.

The escalation of commitment in sequential decision making: situational and personal moderators and limiting conditions*

Abstract: Two laboratory studies manipulated variables in order to observe their effect on the escalation of individuals' commitment to earlier investment decisions. The experimental results indicated that escalation of commitment to a failing course of action is not a general phenomenon. Information pertinent to the future prospects of reinvestment and to decision alternatives provided main effects. Neither study showed a main effect for initial success vs. failure. Decision-maker gender consistently influenced decisions in both studies through interactions with success/failure feedback and through the communicated attributions of “powerful others” regarding the causes of previous decision outcomes. Implications for theory and research are discussed.

Comparison of consensus methods for priority ranking problems

Abstract: Various consensus methods proposed for ranking problems yield controversial rankings and/or tied rankings which are vulnerable to considerable dispute. These include Borda-Kendall (BK) and minimum-variance (MV) methods. This paper compares three continuous (ratio-scale) consensus scoring methods with BK and MV ranking methods. One method, termed GM, is an eigenvector scaling of the geometric-mean consensus matrix. GM allows for (1) paired-comparison voting inputs (as opposed to all-at-once ranking), (2) pick-the-winner preference voting, and (3) ratio-scale preference voting. GM is relatively simple to calculate on small computers or calculators, and merging of “close” candidates into tied rankings can be achieved by using an e-threshold tie rule discussed in this paper. The GM method thus can be used for paired-comparison voting to calculate both a ratio-scaled consensus index (based on a consensus eigenvector) and a ranking of candidates that allows for ties between “close” candidates. Eigenvalue analysis is used as a means of evaluating voter inconsistencies.

On two‐source factor purchasing

Abstract: Two-source purchasing at differing factor-unit costs is a common real-world phenomenon. So too are uncertainty and risk aversion which, as this paper demonstrates, provides one explanation for why firms on occasion purchase from high-cost sellers.

Applications and Implementation A SIMULATION STUDY OF THE RELATIVE EFFECTIVENESS OF ALTERNATIVE ANALYTICAL REVIEW PROCEDURES

Abstract: This paper evaluates the effectiveness of various analytical review (AR) procedures in detecting material errors in account balances. The study tested nine nonstatistical AR procedures based on common heuristic and ratio analyses and four AR procedures based on regression analysis. Simulated account balances were seeded with various magnitudes of errors and each AR procedure was used to detect the errors. It was found that the regression approaches tended to have fewer Type I and Type II errors than other AR procedures.

A comparison of learning curve analysis and moving average ratio analysis for detailed operational planning

Abstract: This study tests the use of learning curve analysis for production planning at the detailed component level under various conditions, represented by factors of product turnover rate, learning rate, variance levels, and planning horizon length. It also presents an alternative to learning curve analysis that considers aggregation of cost data across time. This alternative is periodic revision of standard cost data using moving average forecasts to reflect productivity trends. Results of this study indicate that in most circumstances a moving average analysis can provide better estimates of short-term, detailed component operations costs than either a learning curve analysis or a standard analysis.

Education CREATIVE THINKING AND INNOVATIVE EDUCATION IN THE DECISION SCIENCES

Abstract: Creative problem solving is seldom addressed directly in the decision sciences literature. The first half of this paper reviews current thinking about creativity and its educational importance. The remainder addresses creative problem-solving processes and, in particular, the process developed by Parnes, Noller and Biondi [24] and Osborn [23]. This process has been integrated into an OR/MS problem-solving course which is described. Conclusions and implications for decision sciences education and practice in general are discussed.

Concepts, Theory, and Techniques DISTRIBUTED COMPUTER SYSTEM DESIGN: A MULTICRITERIA DECISION‐MAKING METHODOLOGY*

Abstract: The design of distributed computer systems (DCSs) requires compromise among several conflicting objectives. For instance, high system availability conflicts with low cost which in turn conflicts with quick response time. This paper presents an approach, based on multi-criteria decision-making techniques, to arrive at a good design in this multiobjective environment. An interactive procedure is developed to support the decision making of system designers. Starting from an initial solution, the procedure presents a sequence of non-dominated vectors to designers, allowing them to explore systematically alternative possibilities on the path to a final design. The model user has control over trade-offs among different design objectives. This paper focuses on the details of the mathematical model used to provide decision support. Accordingly, a formulation of DCS design as a multicriteria decision problem is developed. The exchange search heuristic used to generate nondominated solutions also is presented. We argue that multicriteria models provide a more realistic formulation of the DCS design problem than the single-criterion models used widely in the literature. While obtaining a clear definition of design objectives (single or multiple) is an important activity, by explicitly acknowledging the trade-offs among multiple objectives in the design process, our methodology is more likely to produce a better overall design than methods addressing a single criterion in isolation.

Concepts, Theory, and Techniques THE LOT-SIZE REORDER-POINT MODEL WITH UPSTREAM-DOWNSTREAM UNCERTAINTY*

Abstract: One assumption in the classical lot-size problem is certainty in the amount requisitioned. In many practical situations, however, the amount received may be a random variable. In this paper, we discuss a lot-size inventory problem in which the quantity received does not necessarily match the quantity requisitioned. We develop explicit and approximate solutions for the back-orders case by assuming that the standard deviation of the amount received is linearly related to the quantity requisitioned.

Notes and Communications REPLANNING FREQUENCIES FOR MASTER PRODUCTION SCHEDULES

Abstract: Updating production plans typically is achieved by rolling the planning horizon forward one period at a time, each time including the latest information in order to determine the best course of action to pursue in the present period. Theoretical planning-horizon studies have identified the conditions by which the production decisions in the current and some specified number of future periods remain optimal given some set of future demands. Motivated by these findings, this study addresses the replanning frequency in a hierarchical production planning problem where no planning-horizon theorems are available. In this problem the aggregate production plan and the master production schedule are linked by a rolling-horizon practice. Empirical experimentation indicates that under certain cost and demand conditions the master production schedule need not be updated every period. If a schedule does not need to be updated for several periods, the schedule for these periods can be frozen to provide stability for planning components at lower levels in the bill of material of the products. The results of this study thus provide some reference for the determination of the frozen portion of the master production schedule.

An alternating least‐squares procedure for estimating missing preference data in product‐concept testing*

Abstract: Product-concept testing is a popular activity in marketing research. Often the number of new product/service concepts under study far exceeds the time available for any single respondent. Respondents therefore may receive only a subset of the concepts comprising the total design. Researchers are interested in making plausible imputations for the missing evaluations of any given respondent. This paper proposes a model and an iterative estimation procedure to impute missing entries for each evaluator. The model and the procedure incorporate (1) the internal structure of the response matrix and (2) an ancillary matrix of (nonmissing) respondent background data; they also (3) allow for individual differences in respondents' uses of the numerical rating scale. The model is applied to both real and synthetic data. Suggestions also are given on how the data imputations may be used in market segmentation and product-line decisions.

A note on holding costs and lot-size errors

Abstract: This note examines the sensitivity of the basic economic-order-quantity inventory model to lot-size errors when holding costs are assumed to be a strictly increasing (though not necessarily linear) function of average inventory. In particular, we show that the penalty associated with ordering either too much or too little is a function not only of the size of the error but of the shape of the holding-cost curve as well. We demonstrate that, under certain conditions, even relatively small lot-size errors can be extremely costly.

Environmental volatility, system adaptation, planning requirements, and information‐processing strategies: an integrative model

Abstract: As noted in the literature, comparatively little research has examined either descriptive or prescriptive modeling of the planning process. A major reason for this lack of research appears to be the difficulty of comparing and testing planning methods within and across actual organizations. The purpose of this paper is to present a prescriptive planning model based on information-processing research and strategies. This model explicitly considers the linkages among the environment, the organization's adaptation to that environment, the type of planning, and information-processing strategies.

Concepts, Theory, and Techniques A JOINT LOT-SIZING RULE FOR FIXED LABOR-COST SITUATIONS

Abstract: Many American firms are implementing just-in-time production in order to minimize inventories, reduce flow time, and maximize resource utilization. These firms recognize that, in the short run, setup costs really are fixed expenses and it is available capacity which is the critical factor in determining production-run quantities. We propose using available capacity to increase the number of setups and reduce lot-size inventories. This results in improved relevant cost performance. Sugimori, Kusunoki, Cho, and Uchikawa [16] in their paper on the Toyota kanban system developed a relationship for lead time but failed to use it for lot sizing. We use this relationship to develop the joint lot-sizing rule. The efficacy of our proposed rule is demonstrated by applying it to lot-size scheduling problems at the John Deere Engine Works [14]. Extensions of the proposed rule to undercapacity situations with material-wastage costs in the setup processes and to multistate production inventory systems also are discussed.

Optimal safety‐stock investment through subjective evaluation of stockout costs

Abstract: This paper solves the problem of setting safety stocks by combining a subjective evaluation of the stockout-cost function with the usual holding-cost function. The technique given in this paper for estimating a decision maker's (DM's) disvalue function for stockouts is robust in terms of the shapes permissible for this function and allows for uncertainty on the part of the DM in expressing his/her trade-offs. The estimation technique could be applied to situations other than the safety-stock problem. We provide an optimization routine for the safety-stock problem which is designed to operate in conjunction with the estimation technique. Safety-stock levels are arrived at iteratively.

Notes and Communications APPLICATIONS OF MANAGEMENT SCIENCE IN BANKING

Abstract: This paper identifies and classifies 164 journal articles on management science in banking according to technique and application area. An analysis provides some interesting insights into historical trends and future prospects for research.

Comparing forecast accuracy for exponential smoothing models of earnings-per-share data for financial decision making

Abstract: This paper relates recent research in predicting accounting earnings per share (EPS) to an experiment comparing the performance of extrapolative forecasting models. The paper points out the usefulness of the results to decision-making processes such as those used in portfolio analysis or financial management. The statistical results of the experiment point to the usefulness of the Holt-Winter (HW) model in predicting EPS for a random sample of firms over a 20-year horizon. For short-term forecasting, the HW model provides relatively accurate forecasts in comparison to other methods used. HW is likely to be a costeffective alternative to more time-consuming and expensive techniques.

Applications and Implementation A MANAGEMENT SYSTEMS ANALYSIS OF THE ARMS TRANSFER PROCESS

Abstract: The decision and information structure of the arms transfer process from major powers (especially the United States) to third-world countries is discussed. System behavior as a result of system structure, political forces, and economic factors is the focus of analysis. A system-dynamics model of transfer structures is developed and discussed. Examples of policy alternatives in arms transfer are illustrated and discussed.

Concepts, Theory, and Techniques INFLATION, MAINTENANCE OF CAPITAL, AND THE IRR MODEL OF CAPITAL BUDGETING*

Abstract: Businesses operating under inflationary conditions need capital-budgeting models that help them judge the adequacy of returns on their investments and also allow them to keep capital intact by considering the erosive effects of inflation. The model proposed in this paper computes a modified internal rate of return (IRR); if cash inflows from a project are divided between earnings and recovery of capital, total recovery equals that amount which the capital-budgeting concept adopted by the business specifies (such as the original investment in constant dollars or its replacement cost). Under this model, a project should be accepted only if this computed rate equals or exceeds a hurdle rate that consists of the inflation-free rate of return plus the effect of inflation on such a return. Other modifications to the IRR model suggested in the literature do not completely satisfy the objective of capital budgeting under inflationary conditions.

Judgment policies used in assessing enterprise‐zone economic success criteria*

Abstract: This paper reports on a study of the issue relationships and priorities used by public officials in making local economic-development policy decisions. Economic success criteria for evaluating distressed areas were compared and were found to vary in importance among officials. Policy bases of expert judges were determined. Their differences, as well as the implications of including this type of knowledge in the decision-making process, are discussed. Recommendations for a more detailed understanding of the public-policy decision process in economic development, through the use of a policy-capture approach, are made.