Decision-Making

Decision-Making as a
Management Responsibility
Decision-making is a responsibility of the
engineer manager.
The wise manager will correct them soon
as they are identified.
The manager who cannot or do not want to
make decisions.

Decision-Making
Delaney concludes that this type of managers
are dangerous and should be removed from
their position as soon as possible.
Management must strive to choose a decision
option as correctly as possible.

Decision making
An example may be provided as follows:
The production manager of a certain company has
received a written request from a section head
regarding the purchase of an air-conditioning unit.
Almost simultaneously, another request from another
section was forwarded to him requiring the purchase
of a forklift. The production manager was informed
by his superior that he can only buy one of the two
requested items due to budgetary constraints
The production manager must now make a
decision. His choice, however must be based on
sound arguments for he will be held responsible, later
on, if he had made the wrong choice .

Decision making
What is Decision-Making?
Decision making may defined as the
process of identifying and choosing
alternatives courses of action in a manner
appropriate to the demands of the situation.
It is designed to determine the best option
available to solve certain problems.

Decision making
Decision
are
made
at
various
management levels(i.e., top, middle, and
lower levels) and at various management
functions (i.e., planning, organizing,
directing, and controlling).

Decision-making according to Nickels

and others, is the heart of all the
management functions.

The Decision-Making
Process
1. Diagnose Problem
identify the problem
identification of the problem is tantamount to
having the problem half-solved.
What is a Problem?
A problem exists when there is a difference
between an actual situation and desired situation

 For instance, the management of a construction

company entered into a contract with another
party for the construction of a 25-storey building
on a certain site. The actual situation of the firm
is that it has not yet constructed the building.
The desired situation is the finished 25-storey
building. In this case, the actual situation is
different from desired situation. The company,
therefore, has a problem and that is the
construction of the 25-storey building.

2. Analyze the Environment

The environment where the organization is
situated plays very significant role in the
success or failure of such an organization.
The objective of environmental analysis can
be spelled into internal or external limitations.

 Examples of internal limitations:

1. Limited funds available for the purchase of
equipment.
2. Limited training on the part of employees.
3. ill-designed facilities
Examples of external limitations:
1. Patents are controlled by other organizations.
2. A very limited market for the companys
products and service exists.
3. Strict enforcement of local zoning
regulations.

An illustration of the failure to analyze the environment is

as follows:
The president of a new chemical manufacturing
company made a decision to locate his factory in a place
adjacent to a thickly populated area. Construction of the
building was made precision and was finished in a short
period. When the clearance for the commencement of
operation was sought from local authorities, this could not
be given. It turned out that the residents opposed the
operation of the firm and made sure that no clearance is
given.
The president decided to relocate the factory but not after
much time and money has been lost.

Components of the
Environment
1. Internal
Environment
refers
to
organizational activities within a firm
that surrounds decision-making.
2. External Environment refers to variables
that are outside the organization and not
typically within the short-run control of top
management.

Figure 2.1 The Engineering Firm and the

Internal Environment in Decision-Making
Internal
Environment

Organization Aspects like org.

structures, policies, procedures,
rules, ability of management ,etc.
Marketing Aspects like product
strategy, promotion strategy, etc.
Personnel Aspects like recruitment
practices, incentive systems, etc.
Production Aspects like plant
facility layout, inventory control, etc.
Financial Aspect like liquidity,
profitability , etc

External
Environment

Decision

External
Environment

The Engineering Firm a Its External

Environment

Government
Labor
Unions

Engineers

Clients

Engineering
Firm

Suppliers

Competitors
Banks
Public

3. Develop Viable Alternatives

Steps or procedure:
. 1. Prepare a list of alternative solutions.
2. Determine the viability of each solutions.
3. Revise the list by striking out those which
are not viable.

To Illustrate:
. An engineer firm has a problem of increasing its
output by 30%. This is the result of a new
agreement between the firm and one of its clients.
Solutions prepared by engineering management:
1. Improve the capacity of the firm by hiring more
workers and building additional facilities

2.Secure the services of subcontractors.

3. Buy the needed additional output from
another firm;
4. Stop serving some of the companys
customers;
And
5. Delay servicing some clients.

4. Evaluate Alternatives
This is important because the next step
involves making a choice. Proper
evaluation makes choosing the right
solution less difficult.

Evaluation Sheet
Tittle of Vacant Position: JUNIOR ENGINEER
Date of Evaluation: December 28,1996
Applicant

Educatio
n

Training

Experienc
e

Age

Total
Points

1. Jose
Sibayan,
Jr

40

35

10

89

2.
Menandro
Rillon

40

36

90

3. Dante
dela Cruz

40

38

91

5. Make a Choice
Choice-making refers to the process of
selecting among alternatives representing
potential solutions to a problem.
6. Implement Decision
Implementation refers to carrying out the
decision so that the objectives sought will be
achieved.

 7. Evaluate and Adapt Decision Results

It is important to use control and feedback
mechanisms to ensure results and to provide
information for future decisions.
Feedback
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.
Control
refers to actions made to ensure that
activities performed match desired activities
or goals, that have been set.

APPROACHES IN SOLVING
PROBLEMS
QUALITATIVE EVALUATION
Evaluation of alternatives using
intuition
and
subjective
judgement
Often used when:

The problem is fairly simple

The problem is familiar
The costs involved are not great
Immediate decisions are needed

 QUANTITATIVE EVALUATION
Evaluation of alternatives using
any technique in a group
classified as rational and
analytical

QUANTITATIVE MODELS
FOR DECISION MAKING
INVERTORY MODELS
ECONOMIC ORDER QUANTITY MODEL
To calculate the number of items that should be
ordered at one time
PRODUCTION ORDER QUANTITY MODEL
Applied to production orders
BACK ORDER INVENTORY MODEL
Used for planned shortages
QUANTITY DISCOUNT MODEL
Used to minimize the total cost when quantity
discounts are offered by suppliers

QUANTITATIVE MODELS
FOR DECISION MAKING
QUEUING THEORY
Describes how to determine the number of service units
that will minimize both costumer waiting time and cost of
service

NETWORK MODEL
THE PROGRAM EVALUATION REVIEW TECHNIQUE
A technique that enables the engineer managers
to schedule, monitor, and control large and
complex projects by employing three time
estimates for each activity
TH E CRITICAL PATH METHOD
A network technique that uses only one time
factor per activity that enables the engineer
managers to schedule, monitor and control large
and complex projects

QUANTITATIVE MODELS
FOR DECISION MAKING
SIMULATION
A model constructed to
represent reality on which
conclusions about real-life can
be used
Do not guarantee an optimum
solution but can evaluate
alternatives fed into the process

QUANTITATIVE MODELS
FOR DECISION MAKING
LINEAR PROGRAMMING
A quantitative technique that is used to
produce an optimum solution within the
bounds imposed by constraints upon the
decision.
SAMPLING THEORY
A quantitative technique where samples of
populations are statically determined to be
used for a number of processes

QUANTITATIVE MODELS
FOR DECISION MAKING
STATISTICAL DECISIONTHEORY
Refers to the rational way to conceptualize,
analyze, and solve problems in situations
involving limited, or partial information about
the decision environment

BAYESIAN ANALYSIS
To revise and update the initial assessments of
the event probabilities generated by the
alternative solutions.
The Bayes criterion selects the decision
alternative having the maximum expected
payoff, or the minimum expected loss if he is
working with a loss table.