2 Decision Making

7/17/2019 2 Decision Making

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CHAPTER 2

DECISION MAKING



DECISION-MAKING ASMANAGEMENTRESPONSIBILITY



Decision-making is a responsibility ofthe engineer manager. It is understandable

for managers to make wrong decisions attimes. The wise manager will correct themas soon as they are identied. The biggerissue is the manager who cannot or do notwant to make decisions. Delaneyconcludes that this type of managers aredangerous and “should be removed fromtheir position as soon as possible.”



Exampe

The production manager of a certain companyhas received a written request from a section head

regarding the purchase of an air conditioning unit.lmost simultaneously! another request fromanother section was forwarded to him requiring thepurchase of a forklift. The production manager wasinformed by his superior that he can only buy one ofthe two requested items due to budgetary

constraints.

The production manager must now make adecision. "is choice! however! must be based onsound arguments for he will be held responsible!later on! if he had made the wrong choice.



!"AT IS DECISION-MAKING#



Decision-making may be dened as

“the process of identifying and choosingalternative courses of action in a mannerappropriate to the demands of thesituation.”

Decision#making according to $ickelsand others! “is the heart of all themanagement functions.”



T"E DECISION-MAKING PROCE



%ational decision#making! according to David". "olt! is a process involving the following

steps&'. diagnose problem(. analy)e environment*. articulate problem or opportunity+. develop viable alternatives

,. evaluate alternatives-. make a choice. implement decision/. evaluate and adapt decision results



$% Diagnose P&o'em

n e0pert once said “identication ofthe problem is tantamount to havingthe problem half#solved.”

What is a problem? problem e0istswhen there is a di1erence between anactual situation and a desiredsituation.



Exampe(

The management of a constructioncompany entered into a contract withanother party for the construction of a (,#storey building on a certain site. The actualsituation of the rm is that it has not yetconstructed the building. The desiredsituation is the nished (,#storey building. Inthis case! the actual situation is di1erentfrom the desired situation. The company!therefore! has a problem and that is! theconstruction of the (,#storey building.



)% Ana*+e ,e En.i&onmen,

The ob2ective of environmental analysis is theidentication of constraints! which may bespelled out as either internal or e0ternallimitations.

30ample of internal limitations&

'. 4imited funds available for the purchase ofequipment.

(. 4imited training on the part of employees.

*. Ill#designed facilities.



30ample of e0ternal limitations&'. 5atents are controlled by other organi)at(. very limited market for the company6sproducts and services e0ists.*. 7trict enforcement of local )oning

regulations.



Exampe( The president of a new chemical manufacturing company

made a decision to locate his factory in a place ad2acent to

a thickly populated area. 8onstruction of the building wasmade with precision and was nished in a short period.9hen the clearance for the commencement of operationwas sought from local authorities! this could not be given. Itturned out that the residents opposed the operation of therm and made sure that no clearance is given.

The president decided to relocate the factory but not aftemuch time and money has been lost. This is a clear e0ampleof the cost associated with management disregarding theenvironment when decisions are made. In this case! thepresident did not consider what the residents could do.



Components of the Environment. The environmentconsists of two ma2or concerns&

'. internal and

(. e0ternal

The internal environment refers to organi)ationalactivities within a rm that surrounds decision#making7hown in gure (.' are the important aspects of theinternal environment.

The e0ternal environment refers to variables thatare outside the organi)ation and not typically withinthe short#run control of top management. :igure (.(shows the forces comprising the e0ternal environmentof the rm.



T"E ENGINEERING /IRM

Fig. 2.1





0% A&,ic1a,e P&o'em o& Oppo&



2% De.eop 3ia'e A,e&na,i.es

;ftentimes! problems may be solved byany of the solutions o1ered. The best amongthe alternative solutions must be consideredby management. This is made possible byusing a procedure with the following steps&

'. 5repare a list of alternative solutions.

(. Determine the viability of each solutions

*. %evise the list by striking out thosewhich are not viable.



Exampen engineering rm has a problem of increasing its outp

by *<=. This is the result of a new agreement between the

rm and one of its clients. The list of solutions prepared by the engineering manag

shows the following alternative courses of action&

'. Improve the capacity of the rm by hiring more workersand building additional facilities>

(. 7ecure the services of subcontractors>

*. ?uy the needed additional output from another rm>

+. 7top serving some of the company6s customers> and

,. Delay servicing some clients.

The list was revised and only the rst three were deemeto be viable. The last two were deleted because of adversee1ects in the long#run protability of the rm.



4% E3AL5ATE ALTERNATI3ES

• 3valuation sheet



6% MAKE A C"OICE

• 8hoice#making refers to the process selecting among alternatives represepotential solutions to a problem. t tpoint ! 9ebber advises that “@ parti

e1ort should be made to identify allsignicant consequences of each cho



7% IMPLEMENT DECISION

• Implementation refers to carryout he decision so that theob2ectives sought will be achie

To make implementation e1eca plan must be devised.



8% E3AL5ATE AND ADAPTDECISION RES5LT

• :eedback refers to the process which requireschecking at each stage of the process to assurethat the alternatives generated! the criteria usedin evaluation! and the solution selected forimplementation are in keeping with the goals and

ob2ectives originally specied.• 8ontrols refers to actions made to ensure that

activities performed match the desired activities goals! that have been set.



7eatwork& Aune *<! (<',

1. Why are engineers considered an important

segment of the society? 2. What qualifications must an engineer manager

have?

3. When a problem becomes apparent and the

engineer manager chooses to ignore it, is he makindecision? !plain your ans"er.

#. $an the engineer manager avoid making

management decision? Why or "hy not?



pp&oaces in So.ing P&o'



In decision#making! the engineermanager is faced with problems which

may either be simple or comple0. Toprovide him with some guide! he must befamiliar with the following approaches&

Bualitative 3valuation Buantitative 3valuation



91ai,a,i.e e.a1a,ion

This term refers to evaluation ofalternatives using intuition andsub2ective 2udgment. 7tevensonstates that managers tend to usethe qualitative approach when&





'. The problem is fairly simple.(. The problem is familiar.*. The cost involve are not great.+. Immediate decisions are needed.

n e0ample of an evaluation using thequalitative approach is as follows& factory operates on three shifts with thefollowing schedule&

:irst shift # -&<< .C. to (&<< 5.C.7econd shift (&<< 5.C. to '<&<< 5.C.

Third shift # '<&<< 5.C. to -&<< .C.



3ach shift consists of (<< workers manning (machines. ;n 7eptember '-! 'EE-! theoperations went smoothly until the factorymanager! as industrial engineer! was notied'&<< 5.C. that ve of the workers assigned tothe second shift could not report for workbecause of in2uries sustained in a traFcaccident while they were on their way to thefactory.

?ecause of time constraints! the managermade an instant decision on who among therst shift workers would work overtime to mathe ve machines.



91an,i,a,i.e E.a1a,ion

This term refers to the evaluation ofalternatives using any technique in agroup classied as rational andanalytical.



QUANTITATIVEMODEL FOR

DECISION MAKING



In.en,o&* Mo:eCathematical equation or

formula that helps a rm indetermining the economic orderquantity! and the frequency ofordering! to

keep goods or services Howing tothe customer without interruptioor delay.



• 3conomic order quantity

model• 5roduction order quantity

model• ?ack order inventory model• Buantity discount model



95E5ING T"EORY

It describes how to determinethe number of services unitsthat will minimi)e both

customer waiting time and costof service.



NET!ORK MODELSCodels where large comple0 tasks are

broken into smaller segments that can bemanaged independently.

• Te P&og&am E.a1a,ion Re.ie;

Tecni<1e =PERT>• Te C&i,ica Pa, Me,o: =CPM>



/ORECASTING planning tool that helps

management in its attempts tocope with the uncertainty of thefuture! relying mainly on data fro

the past and presentand analysis of trends.



REGRESSION ANALYSIS

:orecasting method that e0amithe association between two ormore variables. It uses data fromprevious periods to predict future



SIM5LATION model constructed to represen

reality on which conclusions aboutreal#life problems can be used.



LINEAR PROGRAMMING quantitative technique that is

used to produce an optimum soluwithin the bounds imposed by the

constraints about the decision.



SAMPLING T"EORY

quantitative technique wheresamples of populations arestatistically determined to be usefor a number of processes! such a

quality control and marketingresearch.



STATISTICAL DECISION-

T"EORY It denes as “%ational way to

conceptuali)e! analyse! and solveproblems in situations involvinglimited or partial information abouthe decision environment”.

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2 Decision Making