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Engineering

Management
DECISIONMAKING
Decision Making as a Management
Responsibility
What is Decision Making?
The Decision Making Process
Approaches in Solving Problems
Quantitative Models for DecisionMaking

Decision-Making as a
Management
Responsibility
Decision Making is a responsibility
of the engineer manager.
The bigger issue is the manager
who cannot or do want to make
decisions.
Managers must strive to choose a
decision option as correctly as
possible

What is Decision Making


Decision Making Defined : The
process of identifying and choosing
alternative courses of action in a
manner appropriate to the
demands of the situation.

What is Decision Making?


Decision Making Explained:The
definition indicates that the
engineer manager must adapt a
certain procedure designed to
determine the best option
available to solve certain
problems.

The Decision-Making
Process
Diagnose the problem best
diagnosis; series of questions
Analyze the environment points
and ends of the problem
Articulate problem opportunity
view problem as an opportunity for
improvement

Cont. The Decision-Making


Process
Develop viable alternatives cause
and effect analysis
Evaluate alternatives SWOT
analysis in the developed
alternatives
Make a choice
Implement Decision
Evaluate and adapt decision results

Decision-Making Process:
Expound
What is a Problem?
A problem exist when there is a
difference between an actual
situation and a desired situation.
Analyze the Environment
Identify the constraints in both
external and Internal Environments.

Cont. Decision-Making
Process:Expound
Examples of Internal
Limitations: Limited funds
available for the purchases of
equipment,
Limited training on the part of
employees and
Ill-designed facilities

Cont. Decision-Making
Process:Expound
Examples of External
Limitations: Patents are
controlled by other organizations.
Limited market for the companys
products and services
Strict enforcement of local zoning
regulations

Cont. Decision-Making
Process:Expound
Components of the Environment
Internal Environment refers to
organizational activities within a firm
that surrounds decision-making
External Environment refers to
variables that are outside the
organization and not typically within the
short-run control of top management.

Cont. Decision-Making
Process:Expound
Develop Viable Alternatives
The best among the alternative
solutions must be considered by
management. This is made
possible by using a procedure with
the following steps:

Cont. Decision-Making
Process:Expound
Develop Viable Alternatives
- Prepare a list of alternative
solution
- Determine the viability of each
solutions.
- Revise the list by striking out
those which are not viable

Cont. Decision-Making
Process:Expound
Evaluate Alternatives
After determining the viability of
the alternatives and a revised list
has been made, an evaluation of
the remaining alternatives is
necessary. This is important
because the next step involves
making a choice.

Cont. Decision-Making
Process:Expound
Evaluate Alternatives
- How the alternatives will be
evaluated will depend on the nature
of the problem, the objectives of the
firm and the nature of alternatives
presented.
- The value of the alternatives refers
to benefits that can be expected.

Cont. Decision-Making
Process:Expound
Make a Choice
- Choice making refers to the
process of selecting among
alternatives representing potential
solutions to a problem.
- Rank alternatives from best to
worst on the basis of some factors
like benefit, cost or risk.

Cont. Decision-Making
Process:Expound
Implement Decision
- Implementation refers to carrying
out the decision so that the
objectives sought will be achieved
- To make implementation
effective, a plan must be devised.

Cont. Decision-Making
Process:Expound
Evaluate and Adapt Decision
Results
- Feed back refers to the process which
requires checking at each stage of the
process to assure that the alternatives
generated, the criteria used in
evaluation, and the solution selected for
implementation are in keeping with the
goals and objectives originally specified.

Approaches in Solving
Problems
Qualitative Evaluation refers
to evaluation of alternatives using
intuition and subjective judgment.
Quantitative Evaluation refers
to the evaluation of alternatives
using any technique in a group
classified as rational and analytical.

Approaches in Solving
Problems
When to use Qualitative
Evaluation?
- The problem is simple
- The problem is familiar
- The cost involved are not great
- Immediate decisions are needed

Approaches in Solving
Problems
Quantitative Techniques which may
be useful in decision-making are as
follows:
- Inventory Models
- Simulation
- Queuing Theory - Network models
- Forecasting - Regression Analysis
- Linear Programming
- Sampling Theory
- Statistical Decision Theory

Quantitative Models for


Decision-Making
Inventory Models
Queuing Theory
Network models
Forecasting
Regression Analysis
Simulation
Linear Programming
Sampling Theory
Statistical Decision Theory
Cont..Decision-Making
Approaches in Solving Problems

Quantitative Models for


Decision-Making
Inventory Models

Inventory models are used in making a decision regarding


inventories.

Economic Order Quantity Model (EOQ) used to calculate the number of items
that should be ordered at one time to
minimize the total yearly cost of placing
orders and carrying the items in inventory
Production Order Inventory Models - This
is an economic order quantity technique
applied to production orders

Cont.. Quantitative Models


for Decision-Making
Inventory Models

Back Order Inventory Model - This is an


inventory model used for planned storage
Quantity Discount Model - An inventory
model used to minimize the total cost
when quantity discounts are offered by
suppliers

Queuing Theory
used to determine the number of service units that will minimize
both customer waiting time and cost service

Cont.. Quantitative Models


for Decision-Making
Queuing Theory

Applicable to companies where waiting


lines are common situation (fast-food
chains)

Network Models
Models where large complex task are broken into smaller
segments that can be managed independently

Program Evaluation Review Technique


(PERT) - enables the engineer managers
to schedule, monitor, and control large
and complex projects by time estimates

Cont.. Quantitative Models


for Decision-Making
Network Models

Critical Path Method (CPM) - net work


technique using only one time factor per
activity that enables engineer managers
to schedule, monitor and control large
complex projects

Forecasting
Defined as the collection of past and current information to make
predictions about the future

Moving Average, Nave Approach,


Exponential Smoothing, Weighted
Moving Average

Cont.. Quantitative Models


for Decision-Making
Regression Analysis

forecasting method that examines the


association between two or more
variables
uses data from previous periods to
predict future events

Cont.. Quantitative Models


for Decision-Making
Simulation

model constructed to represent reality,


on which conclusions about real-life
problems can be used.
Does not guarantee an optimum
solution, but it can evaluate the
alternatives fed into the process by the
decision-maker

Cont.. Quantitative Models


for Decision-Making
Linear Programming

quantitative technique that is used to


produce an optimum solution within the
bounds imposed by constraints upon
the decision
very useful decision-making tool when
supply and demand limitations at
plants, warehouse, or market areas are
constraints upon the system.

Cont.. Quantitative Models


for Decision-Making
Sampling Theory

samples of populations are statistically


determined to be used for a number of
process, such as quality control and
marketing research

Statistical Decision -Theory

refers to the rational way to


conceptualize, analyze and solve
problems in situations involving limited,
or partial information about decision
environment