Quantitative analysis is the scientific approach to managerial decision making. This field of study has several different names, including quantitative analysis, management science, and operations research. These terms are used interchangeably in this book. Also, many of the quantitative analysis methods presented in this book are used extensively in business analytics.

Whim, emotions, and guesswork are not part of the quantitative analysis approach. The approach starts with data. Like raw material for a factory, these data are manipulated or processed into information that is valuable to people making decisions. This processing and manipulating of raw data into meaningful information is the heart of quantitative analysis. Computers have been instrumental in the increasing use of quantitative analysis.

In solving a problem, managers must consider both qualitative and quantitative factors. For example, we might consider several different investment alternatives, including certificates of deposit at a bank, investments in the stock market, and an investment in real estate. We can use quantitative analysis to determine how much our investment will be worth in the future when deposited at a bank at a given interest rate for a certain number of years. Quantitative analysis can also be used in computing financial ratios from the balance sheets for several companies whose stock we are considering. Some real estate companies have developed computer programs that use quantitative analysis to analyze cash flows and rates of return for investment property.

In addition to quantitative analysis, qualitative factors should be considered. The weather, state and federal legislation, new technological breakthroughs, the outcome of an election, and so on may all be factors that are difficult to quantify.

Because of the importance of qualitative factors, the role of quantitative analysis in the decision-making process can vary. When there is a lack of qualitative factors and when the problem, model, and input data remain the same, the results of quantitative analysis can automate the decision-making process. For example, some companies use quantitative inventory models to determine automatically when to order additional new materials. In most cases, however, quantitative analysis will be an aid to the decision-making process. The results of quantitative analysis will be combined with other (qualitative) information in making decisions.

Quantitative analysis has been particularly important in many areas of management. The field of production management, which evolved into production/operations management (POM) as society became more service oriented, uses quantitative analysis extensively. While POM focuses on the internal operations of a company, the field of supply chain management takes a more complete view of the business and considers the entire process of obtaining materials from suppliers, using the materials to develop products, and distributing these products to the final consumers. Supply chain management makes extensive use of many management science models. Another area of management that could not exist without the quantitative analysis methods presented in this book, and perhaps the hottest discipline in business today, is business analytics.