Quantitative Approach to Management: Definition & Methods

Quantitative Approach to Management: Definition & Methods
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Lesson Transcript
Instructor: Carol Woods

Carol has taught college Finance, Accounting, Management and Business courses and has a MBA in Finance.

After World War II, analytical methods developed by the military during the war effort began to be used in business decision making. In this lesson, we'll walk through the quantitative approach to management and discuss when and how it is used today.

What Is the Quantitative Approach to Management?

The quantitative approach to management incorporates many analytical and numeric techniques into management methods. The goal is to have specific formulas that information can be plugged into to provide the best answer to common management questions.

What Specific Methods Are Used?

In this lesson, Joe will give examples of quantitative techniques in action. Joe is a factory manager who wants to be more analytical in his review of operations. There are three main areas generally considered part of quantitative management.

First is management science, also called operations research. This area applies mathematical models and statistical techniques to management decision-making. Some examples of management science include:

  • Determining the critical path in a production line; this is the set of steps where any delays will lead to delays in the entire production process
  • Determining the percentage of items produced that have quality errors and the types of errors that are present

Joe will implement management science in his operations review process by applying statistical concepts, like error percentage, into his quality measurement process. He'll ask that each item produced be examined and any defects noted. Then he'll have a staffer produce a statistical review of the percentage of problems and of the likelihood of different problems occurring. Once he knows the common issues, he'll be able to revisit production methods and (hopefully) reduce their occurrence.

The next main area is operations management, which applies management science methods to improve the timing of delivery and streamline production processes. Some examples of operations research include:

  • Forecasting inventory and raw material needs for future periods
  • Determining the best location for a distribution center to minimize shipping times to all potential purchasers

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