Chapter 2: Decision Making

Decision-Making is the process of identifying and choosing alternative courses of action in a

manner appropriate to the demands of the situation.
Engineer Manager- the one who design and determine the procedure of what is the best the
option available to solve the problem.

The Decision-Making Process according to David H. Holt:

1. Diagnose problem
What is a Problem? A problem exists if there is a difference between an actual situation
and a desired solution.
2. Analyze environment
Components of Environment: internal and external
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

Approaches in Solving Problems

1. Qualitative Evaluation- an evaluation of alternatives using intuition and subjective
judgment.
2. Quantitative Evaluation- an evaluation of alternatives using any technique in a group
classified as rational and analytical.

Quantitative Models for Decision Making

 Inventory Models- consists of several types all designed to help the engineer manager make
decision regarding inventory; economic order quantity model, production order quantity
model, back order inventory model, and quantity discount model.
 Queuing Theory- describes how to determine the number of service units that will minimize
both customer waiting time and cost of service.
 Network Models- these are models large complex tasks are broken into smaller segments that
can be managed independently. The two most prominent networks are:
 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.
 The Critical Path Method (CPM)- a technique using only one time factor per activity that
enables engineer managers to schedule, monitor, and control large and complex projects.
 Forecasting- the collection of past and current information to make predictions about the
future.
 Regression Analysis- uses data from previous periods to predict future events, can be simple
or multiple regression.
 Simulation- a model constructed to represent reality, on which conclusions about real-life
problems can be used.
 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 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- refers to the rational way to conceptualize, analyze, and solve
problems in situations involving limited, or partial information about the decision
environment.

GROUP 1:
ACAT, MONICA
ACEPCION, ROTHER
ALAYON, HONNELYN