Decision-Making as a Management Responsibility

D E C I S I O N - M A K I N G

Engineering Management

Decision Making as a Management

Responsibility

What is Decision Making?

The Decision Making Process

Approaches in Solving Problems

Quantitative Models for Decision-Making

Decision-Making as a

Management Responsibility

decision making is a responsibility of the

engineer-manager.

The bigger issue is the engineer-manager who

cannot or do want to make decisions.

Managers must strive to choose or make a

decision as correctly as possible


Decision Making Defined:

The process of identifying and choosing

alternative courses of action in a manner

appropriate to the demands of the situation.


Decision Making Explained:

the engineer-manager must adapt a certain

procedure designed to determine the best

option available to solve certain problems.

Decision Making

the selection of a course of action from among alternatives; it is at the core of planning.

A plan cannot be said to exist unless a decision-a commitment of resources, direction, or reputation - has been made.

Engineer-Managers sometime see decision making as their central job because they must constantly choose what is to be done, who is to do it, and when, where, and occasionally even how it will be done.

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

The Decision-Making Process (cont)

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.

Decision-Making Process: Expound (cont)

Examples of Internal Limitations: Limited

funds available for the purchases of equipment,

Limited training on the part of employees and

ill-designed facilities


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.


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:


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


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.


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.


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.


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.


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.


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.


When to use Qualitative Evaluation?

- The problem is simple

- The problem is familiar

- The cost involved are not great

- Immediate decisions are needed


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


Inventory Models

Queuing Theory

Network models

Forecasting

Regression Analysis

Simulation

Linear Programming

Sampling Theory

Statistical Decision Theory


Inventory Models

Help a firm in determining the economic order

quantity (EOQ) and the frequency of order, to

keep the availability of goods and services to the

customers without interruption or delay.

EOQ the size of an order which the total

procurement or purchasing cost and inventory

carrying cost is at the minimum.


Queuing Theory

Mathematical modelling of waiting lines, whether of

people or things. It aims to estimate if the available

resources is sufficient to meet the anticipated

demand over a given period.


Network Models

Breaking down a complex project into its

components (activities, events, durations, etc.) and

plotting them to show their interdependencies and

inter-relationships.


Network Models

Program Evaluation Review Technique (PERT)

o enables the engineer managers to schedule, monitor,

and control large and complex projects by time

estimates

Critical Path Method (CPM)

o the longest-path in the network diagram is the critical

path. It is 'critical' because all activities on it must

be completed in the designated time, otherwise the

whole project will be delayed.


Forecasting

a planning tool that helps management in its attempts to cope with the uncertainty, relying mainly on data from the past and analysis of trends.

starts with certain assumptions based on managements experience, knowledge and judgment.

usual forecasting techniques are moving averages, regression analysis, exponential smoothing, deplhimethod, etc.


Regression Analysis

forecasting method that examines the association

between two or more variables

uses data from previous periods to predict future events


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


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.


Sampling Theory

limited number of observations or samples from a

population on a systematic or random basis, which

(upon statistical manpulation) yields generalization

about the population.



refers to the rational way to conceptualize, analyze

and solve problems in situations involving limited, or

partial information about decision environment

mathematical concepts aimed at helping managers

in formulating rules that may lead to a most

advantageous course of action under the given

circumstances.



Decision theory divides decisions into three classes:

o Decision under certainty

The engineer-manager has too much reliable information

to choose the best alterative

o Decision under uncertainty

The engineer-manager has to dig-up a lot of data to make

sense of what is going on and what it is leading to

o Decision under conflict or risk

The engineer-manager has to anticipate moves and

counter moves of one or more competitors

Decision-Making as a Management Responsibility

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