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All review sessions will be held in Room 141 Uris from 1:20 pm to 2:40 pm.

Final review session December 10^th in Room 328 Uris from 1:00 pm.

 
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Course Description

This course provides an introduction to computer-based models for decision making. The emphasis is on models that are widely used in diverse industries and functional areas, including finance, accounting, operations, and marketing. Applications will include production planning, supply chain management, foreign exchange and commodity trading, asset-liability management, portfolio optimization, corporate risk management, and yield management, among others.

The aim of the course is to help students become intelligent consumers of these methods. To this end, the course will cover the basic elements of modeling --- how to formulate a model and how to use and interpret the information a model produces. The course will attempt to instill a critical viewpoint towards decision models, recognizing that they are powerful but limited tools.

The applicability and usage of computer-based models have increased dramatically in recent years, due to the extraordinary improvements in computer, information and communication technologies, including not just hardware but also model-solution techniques and user interfaces. Twenty years ago working with a model meant using an expensive mainframe computer, learning a complex programming language, and struggling to compile data by hand; the entire process was clearly marked "experts only." The rise of personal computers, friendly interfaces (such as spreadsheets), and large data bases has made modeling far more accessible to managers. Information has come to be recognized as a critical resource, and models play a key role in deploying this resource, in organizing and structuring information so that it can be used productively.
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Winston and Albright, 1997, Practical Management Science: Spreadsheet Modeling and Applications, Duxbury Press, Belmont, CA. (W&A)

Crystal Ball: Forecasting & Risk Analysis for Spreadsheet Users (an add-in for Excel for creating simulations in a spreadsheet).

The textbook is available at the Columbia Bookstore. A readings book will also be handed out the first day of class, it contains a disk and copies of the manual for the Crystal Ball Software. The text is also on reserve in the business school library.
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We will use spreadsheets fairly extensively throughout the course. In the lectures we will refer to the Excel spreadsheet package for Windows 95. This spreadsheet has extensive optimization capabilities built in. Crystal Ball is an add-in for Excel which makes it much easier to run simulations in a spreadsheet.
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The readings book has a set of practice problems. Many of these practice problems were based on past midterm and final examination questions. Some spreadsheets (in Excel .XLS format) related to these problems can be downloaded. The TA will go over the solutions to selected problems during the Friday review sessions or during office hours. Additional practice problems can be found throughout the W&A text.
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Exam

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The course grade will be based on a weighted average of the homeworks, main case, and the final exam. The weights will be 20% for the homeworks, 20% for the main case, 20% for the midterm,and 40% for the final. All sections of the course will be graded on a common scale.
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Notebook PCs

Notebook PCs will be used in this course. It is recommended that students bring their notebook PCs to the Friday review sessions for software-related questions. Students should bring their notebook PCs to class on Lecture 8. Also, notebook computers will be needed for the midterm and final exam.
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	Date	Topic	For next class	Download
Lecture 1	Tue 10/26	Course overview Introduction to decision models; scale and complexity  Linear programming formulation  Demonstration of the spreadsheet optimization method	Formulate and solve the "Shelby Shelving" case (in the readings book or on pp.68--69 in the W&A text).  Prepare to discuss the case in class, but do not write up a formal solution.  Readings:  "An Introduction to Spreadsheet Optimization Using Excel" in the readings book. Also read Chapter 1, Chapter 2.1--2.4, 2.6, 2.8, and Chapter 4.1, 4.2 in the W&A text. Optional readings: "OR Brews Success for San Miguel" and "Logistics Steps Onto Retail Battlefield" in the readings book. Try Optimization Practice Problems #1 and #3 (in the readings book).	Lecture 1 Notes  bland0.xls  bland.xls
Lecture 2	Thr 10/28	Two Formulation Examples Shelby Shelving case	Read and think about the case "Petromor: The Morombian State Oil Company."  (Prepare to discuss the case in class, but do not write up a formal solution.) Read Chapter 4.4 in the W&A text. Optional reading: "Graphical Analysis" in the readings book. Load the SolverTable macros into your Excel. (You need to have Solver installed before attempting to load SolverTable. They are separate programs.) Instructions are here.	Lecture 2 Notes  trans0.xls  trans.xls  media0.xls  media.xls  shelby0.xls  shelby.xls  petromor.doc
Lecture 3	Thr 11/04	Sensitivity analysis (on Shelby) Bidding / Assignment models	Read Chapter 2.9 and 3.7 in the W&A text.  Try Optimization Practice Problems #2 and #5 (in the readings book).	Lecture 3 Notes petromor0.xls  petromor.xls  shelby-ST.xls
Lecture 4	Tue 11/09	Multiperiod planning Cash Flow Matching LP, Project funding example	Read Chapter 5.1 and 5.5 in the W&A text. Read and think about the "Foreign Currency Trading" case, p.146 in the W&A text. (You are not expected to solve this case before the next class.) Optional reading: "Improving Gasoline Blending at Texaco" in the readings book.	Lecture 4 Notes nsc0.xls nsc.xls  projfund0.xls   projfund.xls   projfund-with-ST.xls
Lecture 5	Thr 11/11	Foreign Currency Trading Integer Programming: plant location example	Read Chapter 6.11 in the W&A text.  Optional readings: "Exploring the New Efficient Frontier'' and "Asset Allocation in a Downside-Risk Framework" in the readings book.  Try Optimization Practice Problems #7, #8 and #9 (in the readings book).	Lecture 5 Notes fx0.xls   fx.xls   plant0.xls  plant.xls  plant_if.xls    survey.xls  jobs.xls
Lecture 6	Tue 11/16	Portfolio Optimization -- I	Solve the "GMS Stock Hedging" case, pp.330--331 in the W&A text.  (Prepare to discuss the case in class, but do not write up a formal solution.)  Read Chapter 6, pp.310--313 and Chapter 7.3 in the W&A text.	Lecture 6 Notes invest0.xls invest.xls invest-ST.xls ten-stocks.xls ten-stocks0.xls
	Thr 11/18	Midterm
Lecture 7	Tue 11/23	Portfolio Optimization -- II GMS Stock Hedging Introduction to Retailer Simulation	Read the case "Retailer: A Retail Pricing Simulation Exercise" on pp.529--534 in the W&A text.  Download the Retailer files.  (Please put all of the Retailer-related files into the same directory on your computer.)  Please remember to bring your notebook computer to the next class.  Optional readings: "His Goal: No Room at the Inns," "Computers as Price Setters Complicate Travelers' Lives," "Making Supply Meet Demand in an Uncertain World," and "Yield Management at American Airlines" in the readings book. Try Optimization Practice Problems #11, #13 and #14 (in the readings book).	Lecture 7 Notes gold.xls  gold0.xls  retail.xls  retail-zip-file
Lecture 8	Thr 11/30	Retailer case Retailer analysis	Read Chapter 12, pp.581--594 in the W&A text. Install Crystal Ball on your computer.	Lecture 8 Notes  ret_lp0.xls  ret_lp.xls
Lecture 9	Thr 12/02	Introduction to simulation Introduction to Crystal Ball Risk management simulation example	Optional reading: Chapter 12.5--12.12 and Chapter 13 in the W&A text. Try Simulation Practice Problems #1 and #2 (in the readings book).	Lecture 9 Notes asianoil0.xls   asianoil.xls   MoneyCo.xls  generator.xls
Lecture 10	Tue 12/07	Ski Jacket case	Read "Identifying, Measuring, and Hedging Currency Risk at Merck," "Merck's 1995 Annual Report," and "Managing Risk" in the readings book.  At this point we have covered enough material on simulation for you to begin the "Morombian Airlines" case.  Even though the case isn't due until Friday the 13th, it is a good idea to start this case now! .	Lecture 10 Notes ski0.xls  ski.xls  ski2.xls
Lecture 11	Thr 12/09	Risk Management at Merck Using Simulation for Foreign Currency Risk Management Introduction to Value at Risk Bond Applications Course review and wrap-up	Try Simulation Practice Problem #3 (in the readings book).	Lecture 11 Notes merck_u0.xls  merck_u.xls  merck0.xls merck.xls  Lecture 12 Notes putnam.xls  putnam0.xls  premier.xls  premier0.xls
Final Exam	12/14 2pm-6pm, Open Book, Open Notes, Bring your computer!			SampleQuestions.doc

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• Optimization Practice Problems

•   Simulation Practice Problems