Decision Making Example:

●​ Engineering managers tasked to provide

leadership to attain organization’s objectives A company is contracted to do 20 storey building in 3
●​ We must learn the intricacies of decision years. The actual situation is that the company hasnt
making started the construction yet. The problem is how to
●​ Decision making skills is very crucial to the complete the 20 storey building project in 3 years.
success
●​ Good decision = provide right environment for Analyze the environment
the success The objective of the environment analysis is the
identification of constraints, which may be spelled out
as either internal or external limitations
Decision Making as a Management ●​ Internal - within company control​ ​
Responsibility 1. Limited funds​ ​ ​ ​
●​ Decisions must be made in various levels in 2. Limited training​ ​ ​ ​
the workplace 3. Limited manpower​ ​ ​ ​
●​ Managers create wrong decisions at times, ●​ External - beyond company’s control
but a wise manager will correct it immediately 1. Limited market​ ​ ​ ​
as they are identified 2. Regulations​​ ​
●​ Bigger issue is the manager that dont want or 3. Fuel Prices
cannot make a decision
●​ The higher the management level is, the
bigger and the more complicated decision
making becomes

What is Decision Making?

The process of identifying and choosing alternative
courses of action in a manner appropriate to the
demands of the situation. Engineering manager must
adapt a certain procedure designed to determine the
best option available to solve certain problems.

Decision Making Process

1.​ Diagnose the problem
2.​ Analyze environment
3.​ Articulate problem or opportunity
4.​ Develop viable alternatives
5.​ Evaluate alternatives
6.​ Make a choice
7.​ Implement decision
8.​ Evaluate and adapt decision results

Diagnose the problem

9.​ If a manager wants to make an intelligent
decision, he must identify the problem.
10.​Identification of the problem is tantamount to
having the problem half-solved.
11.​What is the problem? Problem exists when
there is a difference between an actual
situation and a desired situation
Develop Alternatives Approaches in Problem Solving
1.​ Prepare list of alternatives 1.​ Qualitative evaluation - using intuition and
2.​ Determine the viability of each solution subjective judgement
3.​ Shortlisting
Used when the problem is a) simple, b)
Evaluate Alternatives familiar, c) cost is not great, d) immediate
Each alternative must be analyzed and evaluated in decision is needed
terms of its value, cost, and risk characteristics
2.​ Quantitative evaluation - evaluation of
(likelihood & severity).
alternatives using any technique in a group
classified as rational and analytical
Make a Choice
Alternatives can be ranked from best to worst on the Quantitative models for decision
basis of factors like benefit, cost, or risk.
making
Implement Decision 1.​ Inventory models
Implementation is carrying out the decision so that 2.​ Queuing theory
the objectives sought will be achieved. A plan must 3.​ Network models
be devised. 4.​ Forecasting
5.​ Regression analysis
6.​ Simulation
Evaluate and adapt decision results
7.​ Linear programming
Use control and feedback mechanism to ensure
8.​ Sampling theory
results and to provide information for future decisions

Feedback - process which requires checking at each Inventory Models

stage of the process to assure that the alternatives 1.​ Economic order quantity model - used to
generated, the criteria used in evaluation, and the calculate the number of items that should be
solution selected for implementation are in keeping ordered at one time to minimize the total
with the goals and objectives yearly cost of placing orders and carrying the
items in inventory
Control - actions made to ensure that activities 2.​ Production order quantity model - economic
performed match the desired activities or goals set. order quantity technique applied to production
orders
3.​ Back order inventory model - used for
planned shortages
4.​ Quantity discount model - used to minimized
the total cost when quantity discounts are
offered by suppliers.
 Forecasting
Collection of past and current information to make
Queuing Theory predictions about the future
How to determine the number of service units that
will minimize both customer waiting time and cost of Regression Analysis
service.
Forecasting method that examines the association
Applicable where waiting lines are common situation between two or more variables from previous periods
(eg. car service centers, ships and barges for loading to predict the future event.
and unloading, bank services).
●​ Simple regression - one independent variable
●​ Multiple regression - two or more
independent variables

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

Most prominent network models:

Simulations
1.​ PERT - Program Evaluation Review Model constructed to represent reality on which
Technique - schedule, monitor, control large conclusions about real-life problems can be used.
and complex projects by employing three Uses mathematical model of the system under
time estimates (optimistic, expected, and considerations.
pessimistic) for each activity
2.​ CPM - Critical Path Method - using only one
time factor per activity
Linear Programming
Used to produce an optimum solution within the
bounds imposed by constraints upon the decision.
Very useful tool when supply and demand limitations
at plants, warehouse or market areas are
constraints.

Sampling Theory
Samples of populations are statistically determined
to be used for a number of process, such as quality
control and marketing research.

Sampling, in effect, saves time and money.