The Problem : Decision on which product to choose that will give highest monetary value to

Bard Mfg

1.1 Introduction
1.2 Background of the problem
As responsible manager, a task is given to decide on which product to produce for the next
twenty years in this very highly evolving and competitive market. Making the right decision
is very important for the profit and sustainability of the production and company as a whole.
Good decisions is not an easy task. Therefore, we need to use the right quantitative analysis
to make the right decision. We have to choose between product Sterofundin or product
Aminoplasmal which will be transferred from Germany to be produce here in Penang Plant.
I need to make a right and wise decision.
1.3 Concerns/Challenges Currently Faced
The main concern here is the demand in Asia Pacific,. Its either we have a high and growing
demand which is favorable or low demand which is unfavorable. Besides that, the profit is
also very important.
1.4 Motivation of the Study
Which product to choose and what would be the basis or underlying reason of selection.
Which decision analysis to use. As a responsible manager, Im enthusiastic and motivated to
apply the decision analysis analysis that I have learned.

2.0 Problem Definition

2.1 Objective of the Study

To make the right and correct decision based on quantitative analysis

To apply the right technique and modeling it in real working environment.
To provide company a better solution. based on logic, considered all available data and
possible alternatives, and the quantitative approach.

2.2 Specific Description of the Problem

My company is deciding whether they need to produce product Sterofundin (Product A or
Aminoplasma (Product B). The profit margin for product B is much higher than product A
because product B is a high end product.
I have to make decision either to choose A, B or not producing any product at this moment to the
management. With favorable market, we project that company would make RM 1,200,000 from
product B and RM 500,000 with product A. If the market is unfavorable, we estimate that
company would only get RM 200,000 with product B but get a rather high amount of
RM400,000 with product A. Marketing team suggested that each product has a probability of
0.50 with given situation

2.3 Scope of Study

The scope of study is limited to these two products which shall be transferred the production
from Germany to Penang and which would give the highest monetary value based on market
situation or state
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3.0 Model Construction

Decision making under risk is chosen because it is the most appropriate decision making when
there are several possible states of nature, and the probabilities associated with each possible
state are known. The alternative with the highest expected monetary value (EMV) shall be
selected.
3.1 The Technique Used
Step 1 Define the problem.
The company is considering two transfer one profitable product with given two
choices

Step 2 List alternatives.

Sterofundin (Product A)
Aminoplasmal (Product B)
Step 3 Identify possible outcomes.
The market could be favorable or unfavorable.
Step 4 List the payoffs.

 Identify conditional values for the profits for Product A and Product B for the two
possible market conditions.
Step 5 Select the decision model.
Decision making under uncertainty
Step 6 Apply the model to the data.
Solution and analysis are then used to aid in decision-making.

3.2 The Criteria Involved

Select one best alternative with high monetary value from two product under the two market
conditions which is favorable and unfavorable.

4.2 Results or Findings

4.3 Evaluation of the Results

Based on the 4.2 calculation results, I can provide company a better solution for my company
based on logic. and data . I have better information for my decision making.
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Alternative with the highest expected monetary value (EV)

The maximum expected monetary value (EV) is RM 700,000 given by Aminoplasmal (Product
B)
Maximax
Alternative that maximizes the maximum payoff is by Aminoplasmal (b) = RM 1,2000,000
Maximin
Alternative that maximizes the minimum payoff is by Sterofundin (a) RM 400,000

5.0 Conclusions
With above data, its easy to make the right decision. The facts and figures shows clearly that we
shall transfer product Aminoplasmal from Germany to Penang to be produce here. The expected
monetary value of RM 700,000 is both encouraging and motivating to proceed with this project.

5.1 Advantages and Disadvantages of the Technique Used

This technique gives us a sound fundamental on making good decision. It is easy/simple

to understand and interpret and the result is comprehensive. Most people are able to understand
this analysis . Provide valuable input even with limited data.
Furthermore, worst, best and expected values can be determined for different scenarios.
Besides that, we can compare competing alternatives in terms of risk and probable value. The
expected value (EV) term combines relative anticipated payoffs and uncertainties into single
numerical value. The EV value reveals the overall merits of competing decision alternatives.
On the other hand, the disadvantages are the calculations can get very complex
particularly if many values are uncertain and/or if the outcome are linked. The reliability of the
information in the depends on the feeding the precise internal and external information at the
onset. Even a small change in input data can cause a large changes in the information and the
outcome which can lead to wrong decision. This includes changing variable, excluding
duplication information or altering the sequence midway.
5.2 Benefits of the Usage / Application to the Beneficiaries
I can easily make a wise decision by looking at the presented data. The decisions made are valid
and logic as it considers a lot of factor such as favorable market and unfavorable market.

5.3 Recommendation
Its certainly a very good tool to make the right decision provided we have the correct information
and data. In our working environment, we can not make decision by gut feelings and without any
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analysis. Therefore, I would strongly suggest to use this technique. Besides that, it is easy to be
presented and explain to top management. It not only helps in working task but it does help at
our daily life decision such as buying a house, buying a laptop and etc.

5.4 Limitation
The major limitations are such as mentioned below.
1) On the method of verification of given input and data
2) Other unknown factors which may the presented outcome
5.5 Future Work
We can use the above method in all our future projects in adding new or existing products from
Germany. The engineering team where they always face difficulties in making decisions on the
right type of machine to purchase or to invest. We also can use quantitative analysis approach in
our life when we make choices or decision almost everyday.

5.6 Reference

1) http://www.simafore.com/blog/bid/62333/4-key-advantages-of-using-decision-trees-forpredictive-analytics
2) http://en.wikipedia.org/wiki/Decision_tree
3) http://www.stylusandslate.com/decision_trees/
4) http://www.brighthubpm.com/project-planning/106005-disadvantages-to-using-decisiontrees/
5) Barry Render, Ralph M.Stair, Jr, Michael E. Hanna, Quantitative Analysis for
Management, Eleventh Edition, Pearson.
6) Lior Rokach, Oded Maimon, Data Mining with Decision Trees: Theory and
Applications, Series in Machine Perception and Artificial Intelligence- Vol. 61, World
Scientific Publishing, 2007.