Lecture 9 Notes - Space IOE 202: lecture 9 outline...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Space IOE 202: lecture 9 outline ° Announcements ° So far in this course. .. ° E f ects of uncertainty on decision making ° Incorporating uncertainty into models ° Simulation models for decision-making under uncertainty IOE 202: Operations Modeling, Fall 2009 Page 1 Space E f ects of uncertainty on decision making In the course so far, we have considered decision problems in which the data was known with certainty, or at least, we ignored randomness if it was present. This may not be the case in many situations in practice. For example: ° In inventory models, demand and lead time are rarely known with certainty ° In sta ng problems, demand for services is not known with certainty at the time when sta ng decisions need to be made. ° When considering investments, assumed returns were entirely predictable. We all know that is not true! It is common for decision-makers to “assume away” randomness, often by replacing the random quantity by its average, or expected value. Unfortunately, assuming away randomness like this can lead to poor decisions being made. IOE 202: Operations Modeling, Fall 2009 Page 2
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Space Example: entering a new market ° Your company is introducing a new product. As marketing manager, you are trying to estimate the proft that will result From the product introduction. Proft depends on sales (in units), price per unit, unit cost (cost per unit oF production, marketing and sales), and fxed costs (overheads etc). ° ±ixed costs are calculated at $30,000, and unit cost — at $7.50 ea. ° ±rom the marketing department, you get the estimate oF expected sales (roughly 80000 units) and selling price (which is expected to be $9 per unit). IOE 202: Operations Modeling, Fall 2009 Page 3 Space Estimating profts From new product introduction ° General Formula For computing proft ° Estimate oF total proft based on the estimated expected sales and selling price IOE 202: Operations Modeling, Fall 2009 Page 4
Background image of page 2
Space Average inputs vs. average outputs However, this single fgure does not give the Full picture! ±urther analysis oF marketing data identifes the Following distinct possible scenarios: ° “Typical” Market: Sales oF roughly 80,000 units at $9 ea.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 8

Lecture 9 Notes - Space IOE 202: lecture 9 outline...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online