Which business functions are more likely to use optimization

Which business functions are more likely to use optimization models than others and why?

Solution

The essence of all businesslike decisions, whether made for an organization, or an individual, is finding a course of action that leaves you with the largest profit. Many organizations have long sought after, or professed to seek, better ways to carry out the daily tasks. Business functions that incorporate two distinct issues will likely use decision analysis models. When there is limited information and when there is a large degree of uncertainty, decision analysis models will likely be used. However, if there is limited information, the analyst doesn\'t have as much knowledge from what is available regarding the decision in order to make the ultimately best decision, for the company. Therefore, with the changing economic climate, decisions are riskier these days. Many companies don\'t have the money to risk losing, as they may have a decade ago

An optimization model is a type of mathematical model that attempts to optimize (maximize or minimize) an objective function without violating resource constraints; also known as mathematical programming.

Optimization models include linear programming (lp), integer programming, and zero - one programming.

Optimization models are used to find an optimal solution. The linear programming models are mathematical representations of constrained optimization problems. These models share certain common characteristics. Knowing these characteristics enables personnel to recognize problems that can be solved using linear programming. For example, suppose that a firm that assembles computers and computer equipment is about to start production of two new types of computers. Each type will need assembly time, inspection time, and storage space. The amounts of each of these resources that can be devoted to the production of the computers is limited. The manager of the firm would like to determine the quantity of each computer to produce in order to maximize the profit generated by their sale.

Business functions that incorporate two distinct issues will likely use decision analysis models. When there is limited information and when there is a large degree of uncertainty, decision analysis models will likely be used. However, if there is limited information, the analyst doesn\'t have as much knowledge from what is available regarding the decision in order to make the ultimately best decision, for the company. Therefore, with the changing economic climate, decisions are riskier these days. Many companies don\'t have the money to risk losing, as they may have a decade ago. When there is a greater risk involved with the economic climate, particularly dealing with the value of money, models will likely be of great benefit to the analyzer