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Management science report

  1. 1. Rennes International School of Business ESC RENNESExecutive Master of Business Administration EMBA COHORT 1 (2003 - 2004) Management Science Conducted by: Dr. Sabry Shaabana Decision-Making Processes & Tools By Magdy A. Sattar October, 2003 Cairo, Egypt 1
  2. 2. TABLE OF CONTENTSExecutive Summary IIIntroduction & Objective 1Part 1- Menatel Presentation 1 1-1-What Is Menatel 1 1-2-Business Nature 1 1-3-Structure & Organization 1 1-4-Delta Branch 2 1-4-1- Environment 2 1-4-2- Objectives 2 1-4-3- Organization 2 1-4-4- Identified Situations 2Part 2- First Situation 3Part 3- Second Situation 5Part 4- Third Situation 9Part 5- Fourth Situation 10 5-1- Shortest Route 10 5-2- Minimal Spanning Tree 12Part 6- Conclusions & Recommendations 14Reference 15 1
  3. 3. EXECUTEVE SUMMARYThis report is about how management science is enhancing managers – me included-abilities to make better decisions. First I will present my company Menatel and inaddition my business unit. Second, through some of the situations I faced as examplesof problems from my business unit, in which using management science toolsenhanced my decision-making process skills.First situation is relocation bad revenue payphones decision in which I used Excel’sGoal Seek Tool to determine the breakeven points through which I can decide whichpayphone is to be relocated.Second situation is planning, scheduling, and controlling the branch activitiesdecisions in which I used (PERT/CPM) Tool to have the optimal solution for the useof the available recourses.The third situation is assignment situation in which I enhanced my professionalexperience with my technical staff with the quantitative analysis of their effectivenessin the assigned tasks in order to decide, who is most effective and where.Situation number four I am to obtain and maintain high service quality through use ofresources available, I used management science quantitative analysis to decide themost economical routes for branch vehicles through which we can save time, money,and achieve target.In these situations tools of management science proved to be strong support to mydecision making process. IIEMBA CairoRennes International School of Business
  4. 4. INTRODUCTION & OBJECTIVEThe purpose of this report is to identify situations for Delta Branch, in whichmanagement science methods or models are used , in addition to analyze one of thesesituations deep enough to make suggestions for improvement. The focus of this reportis on the decision- making process and the role of management science in thisprocess.1. MENATEL PRESENTATION 1.1 WHAT IS MENATELMenatel is a joint stock company under investment low number 8/1997 registered in1998 under number 314030. Menatel is granted a ten years; renewable license, toinstall, operate, and manage a telecommunication network of at least 30,000 publicpayphone. Menatel is determined to achieve this target by the end of 2004. Egyptianshares are 51% and foreign shares are 49%. France Telecom (FCR) “providingMenatel with the know-how technology and management” holds the main foreignshares, which is 44 %. The main Egyptian company with 18% share is the NationalBank of Egypt (NBE). 1.2 BUSINESS NATUREMenatel is in the prepaid cards business, Menatel products are calls (minutes), localcalls, national calls, mobile calls, and international calls. Menatel is selling itsproducts through a payphone network that covers all Egypt and managed by apayphone management system. These calls category are Menatel profit contribution. 1.3 STRUCTURE AND ORGANIZATIONWith a centralized management style Menatel structured into five main divisionsheaded by corresponding Director and five Branches allocated all over Egypt, to formsimple flat functional organizational structure. Technical division activities aremanaging all technical issues related to Menatel payphones (installations,maintenance, and the payphones management system), coordination with allsubcontractors, and managing the Branches. Commercial division activities areadvertising, cards direct and indirect distribution, customer hot line, payphonelocations determination, and sites owner management. Financial and administrativedivision activities are preparing financial statements, business plan, budgets, andpayroll sheets, recruitment, training, and cash and contracts management. Businessdevelopment division activities are handling assignments and projects to improveMenatel performance, and to define and build major business indicators. Logisticdivision activities are managing security, premises, vehicles, transportation, andwarehouse, in addition to manage purchases and custom clearance. For the fivebranches there, activities are the same as all Menatel division activities through thematrix and centralize Menatel organization as per the branch assigned area. 1
  5. 5. 1.4 DELTA BRANCH 1.4.1 ENVIROMENTThe green triangle occupying the north of Egypt’s map we call Nile Delta, as itoccupies the landscape in which the two branches of the Nile (Damiatte and Rasheed)flows with all their sub-branches. This landscape occupies 16411Km.*, divided into 6governorates, 31 Cities, 45 Towns and 3000 Villages and small villages, shaping apercentage of 30% urban and 70%rural. Delta population is 20 Million their mainsource of income is agriculture and some small industries related to it. There is a highpercentage of illiteracy among Delta population especially females, which isconsidered a great obstacle on the way of social and economical development. 1.4.2 OBJECTIVESDelta branch objective is to install, operate, and manage a telecommunication networkof 4200 public payphones by the end of 2004 all over the assigned area, most of thisarea is rural inhibited by more than 20,000,000 people, 33 % of them inhibit urban,and the remaining inhibits rural. 1.4.3 ORGANISATIONIn a centralized management environment, the branch manager in the matrix heads thebranch organization with functional managers in the head office. The branch manageris responsible to manage the branch team to meet the objectives planned by MenatelManaging Director in accordance with company strategy and guidelines given by thefunctional directors. The branch team is organized in a simple flat structurecorresponding to the nature of the activities, which are technical activities(production, maintenance, and Payphone Management System “PMS”), commercialand customer service activities, financial and administrative activities, and finallypublic relations and logistic activities. As for the sales team, they are supervised by alocal sales supervisor who is reporting technically to Menatel cards distributionmanager and administratively to the branch manager in matrix organization. 1.4.4 IDENTIFIED SITUATIONSIdentified situations for Delta Branch are:1- Monitoring the daily revenue of the payphones installed in Delta.2- Planning, scheduling, and controlling the branch activities.3- Choosing the right people for the right activities.4- Improving the payphones quality service. 2EMBA CairoRennes International School of Business
  6. 6. 2. FIREST SITUATIONOne of the obstacles facing the business community in Egypt these days is shading itsclimate with uncertainty and its decisions with caution. The devaluation of theEgyptian pound came at a time when people were already feeling the squeeze of adepressed economy. That is why it is important in this environment to monitor closelypayphones revenue. In delta, I faced the problem of low revenue payphones and Ihave to decide why this payphone is low revenue? How to identify low revenuepayphone? When to move or close low revenue payphone? Moreover, where to movethis low revenue payphone? The calls type being the contribution to Menatel profitequation are the core of the revenue monitoring process, knowing the breakeven pointfor each can help me taking the most profitable decisions in terms of where, when,how, and why installing or removing a low revenue payphone. Management sciencetools help me answering all these questions.Determining the Breakeven Point Using Excel’s Goal Seek ToolLocal National 1Fixed cost 2500 Fixed cost 2500Variable Cost Per Unit 0.036 Variable Cost Per Unit 0.054Selling Price Per Unit 0.12 Selling Price Per Unit 0.18Models ModelsProduction Volume 29761.9 Production Volume 19841.27Total Cost 3571.429 Total Cost 3571.429Total Revenue 3571.429 Total Re 3571.429Total Profit ( loss) 0 Total Profit ( loss) 0 41.22% 27.48% 3EMBA CairoRennes International School of Business
  7. 7. National 2 MobileFixed cost 2500 Fixed cost 2500Variable Cost Per Unit 0.117 Variable Cost Per Unit 0.3Selling Price Per Unit 0.39 Selling Price Per Unit 0.6Models ModelsProduction Volume 9157.509 Production Volume 8333.333Total Cost 3571.429 Total Cost 5000Total Revenue 3571.429 Total Revenue 5000Total Profit ( loss) 0 Total Profit ( loss) 0 12.68% 11.54%International 1 International 2Fixed cost 2500 Fixed cost 2500Variable Cost Per Unit 2.9 Variable Cost Per Unit 3.36Selling Price Per Unit 4.13 Selling Price Per Unit 4.8Models ModelsProduction Volume 2032.52 Production Volume 1736.111Total Cost 8394.309 Total Cost 8333.333Total Revenue 8394.309 Total Revenue 8333.333Total Profit ( loss) 0 Total Profit ( loss) 0 2.81% 2.40% 4EMBA CairoRennes International School of Business
  8. 8. International 3Fixed cost 2500Variable Cost Per Unit 4.34Selling Price Per Unit 6.2ModelsProduction Volume 1344.086Total Cost 8333.333Total Revenue 8333.333Total Profit ( loss) 0 1.86%For payphones with bad revenue having the same commercial and economicalenvironments, using the calculated breakeven points for all kinds of calls helps me todecide which payphone to remove. For example if I have to decide to remove one oftwo payphones with the same average revenue, knowing the profitability of each isthe base of my choice. The results were improving the average revenue of a total 150relocated payphones by 13 LE. Per day.3. SECOND SITUATIONDELTA BRANCH ACTIVITIES SCHEDULINGPERT/CPMThe most important or practical situation I am facing in the branch is how I manage toplane, schedule, and control the branch activities and resources, using managementscience methods (PERT/CPM for this situation) assist me as Branch Manager to haveanswers for, what is the time required for completing my target? What start and finishdates should be scheduled or set for each activity? Which are the critical activities? Inaddition, how long can non-critical activities be delayed before they become critical?The tables below show how I manage to answer these questions with simplemathematical calculations. 5EMBA CairoRennes International School of Business
  9. 9. Delta Branch Activities Immediate Op. M.Pr Pes. T ExpectedActivity Description Variance Predecessor T (a) T (m) (b) Time (t) A Location Survey - 1 3 5 3 0.4 B Prepare Drawings A 1 1 1 1 Zero C Digging permit B 6 22 32 21 18.7 D Lines Request A 1 1 1 1 Zero E Lines Retain D 10 15 20 15 2.7 F Lines Creation E 1 1 1 1 Zero G Lines Received F 1 2 3 2 0.1 H Civil Work C 1 2 3 2 0.1 I Booth installation E, H 1 1 1 1 Zero J Payphone and cabling I, G 1 2 3 2 0.1 K Payphone In Operation J 1 1 1 1 Zero Total 25 51 71 50 22.1Delta Branch Project Network Prepare Drawing PP Pay Location Digging Civil Booth Installation phone Survey Permit Work Installation and Cabling IO Lines Lines Lines Request Return ReceivedDelta Branch Project Critical Path Lines Creation Slack Critical Activity ES LS EF LF (LS-ES) Path? A 0 0 3 3 0 Yes B 3 3 4 4 0 Yes C 4 4 25 25 0 Yes D 3 10 4 11 7 NO E 4 11 19 26 7 NO F 19 25 20 26 7 NO G 20 26 22 28 6 NO H 25 25 27 27 0 Yes I 27 27 28 28 0 Yes J 28 28 30 30 0 Yes K 30 30 31 31 0 Yes 6EMBA Cairo Rennes International School of Business
  10. 10. Where: ES; Earliest start time for an activity. LS; Latest start time for an activity. EF; Earliest finish time for an activity. LF; Latest finish time for an activity. B 3 4 1 3 4 A 0 3 C 4 25 H 25 27 I 27 28 J 28 30 k 30 31 3 0 3 21 4 25 2 25 27 1 27 28 2 28 30 1 30 31 D 3 4 E 4 19 G 20 22 1 10 11 1 11 26 2 26 28 F 19 20 1 25 26Delta Branch Critical Path is: A, B, C, H, I, J, K.Solving the problem using management science software we obtain the followingresults.PROJECT SCHEDULING WITH PERT/CPM******************************** *** PROJECT ACTIVITY LIST *** IMMEDIATE OPTIMISTIC MOST PROBABLE PESSIMISTIC ACTIVITY PREDECESSORS TIME TIME TIME ------------------------------------------------------------------------- A - 1 3 5 B A 1 1 1 C B 6 22 32 D A 1 1 1 E D 10 15 20 F E 1 1 1 G F 1 2 3 H C 1 2 3 I E, H 1 1 1 J G, I 1 2 3 K J 1 1 1 ----------------------------------------------------------------------------- 7EMBA CairoRennes International School of Business
  11. 11. EXPECTED TIMES AND VARIANCES FOR ACTIVITIES ACTIVITY EXPECTED TIME VARIANCE ------------------------------------------- A 3 0.44 B 1 0.00 C 21 18.78 D 1 0.00 E 15 2.78 F 1 0.00 G 2 0.11 H 2 0.11 I 1 0.00 J 2 0.11 K 1 0.00 ------------------------------------------- *** ACTIVITY SCHEDULE *** EARLIEST LATEST EARLIEST LATEST CRITICAL ACTIVITY START START FINISH FINISH SLACK ACTIVITY ----------------------------------------------------------------------------- A 0 0 3 3 0 YES B 3 3 4 4 0 YES C 4 4 25 25 0 YES D 3 9 4 10 6 E 4 10 19 25 6 F 19 25 20 26 6 G 20 26 22 28 6 H 25 25 27 27 0 YES I 27 27 28 28 0 YES J 28 28 30 30 0 YES K 30 30 31 31 0 YES ---------------------------------------------------------------------------- CRITICAL PATH: A-C-H-I-J-K EXPECTED PROJECT COMPLETION TIME = 31 VARIANCE OF PROJECT COMPLETION TIME = 19.44Now it is obvious that with the resource I have I am facing a problem of not achievingmy monthly target on time (Menatel is losing the opportunity of earlier revenue).PERT assist me identifying the weakness of the project. First, the critical path ismainly controlled by Menatel sub-contractor; second the big variance of time foractivities C, and E. To solve this problem, I decided to recruit a public relation officerto be dedicated to follow the digging permit procedures with the contractor. Unlikeother branches, I dedicated one of the three engineers in the branch to superviseproduction activities and to monitor the daily production progress. In addition, I 8EMBA CairoRennes International School of Business
  12. 12. decided to add another contractor to the available one. The result was reducing theexpected time of activity C to 15 days, which affects the expected project completiontime to be 25 days instead of 31. This cost Menatel the salary of the new recruitment(1000 LE) per month, but the benefits is 100 unit of payphones/month to be inoperation six days earlier with average revenue 20 LE per payphone, that is to say2000 LE per month earlier.4. THIRD SITUATIONASSIGNMENT PROBLEMI faced the problem of assigning three supervisor engineers (Ahmad, Sherif, andKhaled) each for one of the three tasks (Payphone management system activities,Maintenance activities, and Production activities). I realized that the efficiency ofeach activity, consequently the branch performance, and the efficiency to achieve theassigned objectives of the branch, depends on the experience, ability, andperformance of each engineer. Since the three activities have the same priority, Idecided to maximize the total tasks efficiency by assigning one engineer to superviseone and only one activity. After five years of experience managing the branch, I knownow which one of the engineers to be assigned to supervise which activity. Usingmanagement science to prove my decision through quantitative analysis (Assignmentmodel) is to guaranty the maximum benefits to the branch and hence the company.The alternative and the estimated engineers’ qualifications are summarized in thetable below as ranked on the base of ten.Engineer Production activities Maintenance activities PMS activitiesSHEREIF 9 7 8AHMAD 8 9 8KHALED 7 8 8 Solving the problem using management science software we obtain the followingresults. ASSIGNMENT PROBLEM ****************** OBJECTIVE: MAXIMIZATION SUMMARY OF UNIT COST OR REVENUE DATA ************************************ TASK AGENT 1 2 3 ------ ------ ------ ------ 1 9 7 8 2 8 9 8 3 7 8 8 9EMBA CairoRennes International School of Business
  13. 13. OPTIMAL ASSIGNMENTS COST/REVENUE ******************* ************ ASSIGN AGENT 1 TO TASK 1 9 ASSIGN AGENT 2 TO TASK 2 9 ASSIGN AGENT 3 TO TASK 3 8 ---------- TOTAL COST/REVENUE 265. FOURTH SITUATION 5. 1 SHORTEST ROUTEOne of the branch manager objectives is to obtain high quality of service of thepayphones in operation in his region. To achieve this objective:First, I faced the challenge of determining the shortest routes and the most economicalones for the maintenance vehicles through Delta road network; I faced a vehiclerouting problem. Management science quantitative analysis solves this and helps metake the proper decision to determine each vehicle route. Each one of the vehicle isassigned to cover eight different cities or more and as an example, I will show howmanagement science software helps in determining the right figures. The table belowdescribes the travel alternatives to and from eight cities covered by one of the twocars assigned to Kalubia Governorate, in which we see that we have seven nodes andnine arcsCities Connected Distance in Km.Banha-Beltan 5Banha-kafer Shoker 20Banha-Tokh 15Beltan-Tokh 5Tokh-kaha 10Tokh-Shebeen El Kanater 10Shebeen El Kanater-Mashtool 10Mashtool-Kafer Shoker 35Solving the problem using management science software we obtain the followingresults for the shortest rout from node 1 to nodes 4, 5, or 6. 10EMBA CairoRennes International School of Business
  14. 14. SHORTEST ROUTE ************** **** NETWORK DESCRIPTION **** 7 NODES AND 8 ARCS ARC START NODE END NODE DISTANCE --- ---------- -------- -------- 1 1 3 15 2 1 2 5 3 1 7 20 4 2 3 5 5 3 4 10 6 3 5 10 7 5 6 10 8 6 7 35 THE SHORTEST ROUTE FROM NODE 1 TO NODE 6 **************************************** START NODE END NODE DISTANCE ---------- -------- -------- 1 2 5 2 3 5 3 5 10 5 6 10 TOTAL DISTANCE 30 THE SHORTEST ROUTE FROM NODE 1 TO NODE 5 **************************************** START NODE END NODE DISTANCE ---------- -------- -------- 1 2 5 2 3 5 3 5 10 TOTAL DISTANCE 20 THE SHORTEST ROUTE FROM NODE 1 TO NODE 4 **************************************** START NODE END NODE DISTANCE ---------- -------- -------- 1 2 5 2 3 5 3 4 10 TOTAL DISTANCE 20 11EMBA CairoRennes International School of Business
  15. 15. As easy as it is to have the needed results as important it is to use this kind ofquantitative analysis to obtain the most effective and proper solutions. 5. 2 MINIMAL SPANNING TREESecond, I have to minimize the average consumed time by the technicians in repairingthe faulty payphones, and for that, I use the minimal spanning tree module of themanagement scientist to find the optimal solution for problem of how a technicianshould cover five cities through nine arcs. The table below describes the travelsalternatives for the technician to cover his assigned area.Cities Connected Distance in Km.Tanta-Samanoud 20Tanta-Kotour 30Tanta- Kafe El Zayat 25Kotour-Mahala 25Kotour-Samanoud 20Samanoud-Mahala 5Ssmsnoud-Mahalet Zeyad 15Mahalet Zeyad-Mahala 10Kafer El Zayat-Mahala 35Solving the problem using management science software we obtain the followingresult MINIMAL SPANNING TREE ********************* **** NETWORK DESCRIPTION **** 6 NODES AND 9 ARCS ARC START NODE END NODE DISTANCE --- ---------- -------- -------- 1 1 2 20 2 1 3 30 3 1 4 25 4 3 4 20 5 3 5 25 6 2 5 40 7 4 5 5 8 4 6 15 9 5 6 15 MINIMAL SPANNING TREE ********************* 12EMBA CairoRennes International School of Business
  16. 16. START NODE END NODE DISTANCE ---------- -------- -------- 1 2 20 1 4 25 4 5 5 4 6 15 4 3 20 TOTAL LENGTH 85The results were good improvement by 2 % in branch total service quality. 13EMBA CairoRennes International School of Business
  17. 17. 6. CONCLUSIONS & RECOMMENDATIONSLooking at previous situations and result, we shall notice the following points:For the first situation, it is obvious that the decision-making process is based on thebest-expected monitory value. This provides individual improvement per payphone,but it does not insure the improvement of the global revenue or what is the effect ofrelocating payphone or moving this payphone to a new location on both the old andthe new location. In addition, I think that this way of analysis will lead to relocate thepayphones in a way that will negatively affect Menatel competitive advantage, whichis the availability of payphones everywhere. For that, my recommendation is to havesome constrains for relocation decision, and my decision strategy is as follows:First, we have to start by analyzing the revenue in a global form and not perpayphone, to determine first why the revenue is not good, this is on monthly basis.Second, to eliminate first all the causes that negatively affect the revenue, if possible,such as maintenance, cleaning, availability of Menatel cards, and if the booth is easyto be noticed and usable or not.Third, to start to redistribute the concentration of payphones per area and not to cancela location, that is to say, we can convert a PD2 to PD1 or remove one or two wallmount booth but not to cancel the location. This should be on monthly target and theeffect of this step should be monitored monthly.Finally, if the revenue is not improved for this location, a decision of removing orcanceling this location can then be taken.For the second situation, it is obvious that management science effectively help toplan, schedule, and control the branch activities in a way that optimizes the branchresources, both qualitative and quantitative analysis are fruitful for this situation.Finally, for the third and fourth situations, the problems I am facing are relativelysimple. As I have experience with similar problems, but even so using managementscience tools for more quantitative analysis increased my decision-makingeffectiveness and put me in a much better position to make the best possibledecisions. 14EMBA CairoRennes International School of Business
  18. 18. References  Annual Report, Menatel, 1999.  The Statistical Year Book 1994 - 2001, Central Agency for Public. Mobilization & Statistics – June 2002.   Introduction to Management Science, Anderson, Sweeney, and Williams- Tenth Edition, West, 2003 15EMBA CairoRennes International School of Business