DECISION-MAKING company’s products and services exists, (3) Strict
enforcement of local zoning regulations.
WHAT IS DECISION-MAKING?
Decision-making may be defined as the process of
identifying and choosing alternative courses of action in
a manner appropriate to the demands of the situation.
The definition indicates that the engineer manager must
adapt a certain procedure designed to determine the
best option available to solve certain problems.
Decisions 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 management
funtions.
THE DECISION-MAKING PROCESS
Rational decision-making, according to David H. Holt, is
a process involving the following steps:
1. Diagnose 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 Problem
If a manager wants to make an intelligent decision, his
first move must be to identify the problem. If the
manager fails in this aspect, it is almost impossible to
succeed in the subsequent steps. An expert once said
“identification of the problem is tantamount to having the
problem half-solved.”
Analyze the Environment
The objective of environmental analysis is the
identification of constraints, which may be spelled out as
either internal or external limitations.
Internal limitations: (1) Limited funds available for the
purchase of equipment, (2) Limited Training on the part
of employees, (3) Ill-designed facilities.
External limitations: (1) Patents are controlled by other
organizations, (2) A very limited market for the
Components of 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.
Develop Viable Alternatives
This is made possible by using a procedure with the
following steps:
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
Evaluate Alternatives
After determining the viability of the alternatives and
revised list has been made, an evaluation of the
remaining alternatives is necessary. This is important
because the next step involves making a choice. Proper
evaluation makes choosing the right solution less difficult.
Make a Choice
Choice-making refers to the process of selecting among
alternatives representing potential solutions to a problem.
At this point, particular effort should be made to identify
all significant consequences of each choice.
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. At this
stage, the resources must be made available so that the
decision may be properly implemented.
Evaluate and Adapt Decision Results
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 the desired activities or goals that have
been set.
In this last stage of decision-making process, the
engineer manager will find out whether or not the
desired result is achieved.
APPROACHES IN SOLVING PROBLEMS
1. Qualitative Evaluation
This term refers to evaluation of alternatives
using intuition and subjective judgment.
Stevenson states that managers tend to use the
qualitative approach when:
a. The problem is fairly simple.
b. The problem is familiar.
c. The costs involved are not great.
d. Immediate decisions are needed.
2. Quantitative Evaluation
This term refers to the evaluation of alternatives
using any technique in a .group classified as
rational and analytical.
QUANTITATIVE MODELS FOR DECISION MAKING
1. Inventory models
2. Queuing theory
3. Network models
4. Forecasting
5. Regression analysis
6. Simulation
7. Linear programming
8. Sampling theory
9. Statistical decision theory
Inventory Models
1. Economic order quantity model- this one is used
to calculate the number of items that should be
ordered at one time to minimize the total yearly
cost of placing orders and carrying the items in
inventory.
2. Production order quantity model- this is an
economic order quantity technique applied to
production orders.
3. Back order inventory model- this is an inventory
model used for planned shortages.
4. Quantity discount model- an inventory model
used to minimize the total cost when quantity
discounts are offered by suppliers.
Queuing Theory
The queuing theory is one that describes how to
determine the number of service units that will minimize
both customer waiting time and cost of service.
Network Models
1. The Program Evaluation Review Technique
(PERT)- a technique which enables engineer
managers to schedule, monitor, and control
large and complex projects by employing three
time estimates for each activity.
2. The Critical Path Method (CPM)- this is a
network technique using only one time factor per
activity that enables engineer managers to
schedule, monitor, and control large and
complex projects.
Forecasting
Forecasting may be defined as the collection of past and
current information to make predictions about the future.
Regression Analysis
It is a forecasting method that examines the association
between two or more variables. It uses data from
previous periods to predict future events.
Simulation
Simulation is a model constructed to represent reality, in
which conclusions about real-life problems can be used.
It is a highly sophisticated tool by means of which the
decision maker develops mathematical model of the
system under consideration.
Linear Programming
Linear programming is a quantitative technique that is
used to produce an optimum solution within the bounds
imposed by constraints upon the decision.
Sampling Theory
Sampling theory is a quantitative technique where
samples of populations are statistically determined to be
used for a number of processes, such as quality control
and marketing research.
Statistical Decision-Theory
Decision theory refers to the rational way to
conceptualize, analyze, and solve problems in situations
involving limited or partial information about the decision
environment.