Republic of the Philippines

Sorsogon State University

College of Engineering and Architecture Department
Baribag, Sorsogon City
S.Y. 2022-2023

Title of the Report

DECISION MAKING

Submitted by:
Domens Cendy E.
Balbedina Ana Mae D.
Ofracio Zyrone Cedric

Submitted to:
Engr. Noel D. Heroy
Instructor
 Decision Making

Decision Making as a Management Responsibility

➢ Decision making is a responsibility of the engineer manager. It is understandable
for managers to make wrong decisions at times. The bigger issue is the manager
who cannot or do not want to make decisions.
➢ Management must strive to choose a decision option as correctly as possible.
Since they have that power, they are responsible for whatever outcome their
decisions bring. The higher the management level is, the bigger and the more
complicated decision making becomes.

What is decision-making?
➢ The process of identifying and choosing alternative courses of action in a manner
appropriate to the demands of the situation.
➢ Engineer manager must adapt a certain procedure designed to determine the best
option available to solve certain problem.
➢ Decisions are made at various management level (top, middle and lower levels)
and at various management functions (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
• An expert once said “identification of the problem is tantamount to having the
problem half-solved.”
• A problem exists when there is a difference between an actual situation and a
desired situation.

2. Analyze the Environment

• The environment where the organization is situated plays a very significant role in
the success or failure of such organization. It is therefore important that an analysis
of the environment must undertake.
What is the goal of the Environmental Analysis?
✓ To identify the constraint or the limitations
TWO Kinds of Limitations
Components of the Environment
- Internal refers to organizational activities within a firm that surrounds decision
making.
- External refers variable that are outside the organizational and not typically
within the short run control of top management.
Examples of internal limitations
o Limited funds available for the purchase of equipment.
o Limited training on the part of employees.
o III designed facilities.
Examples of external limitations
o Patents are controlled by other organization.
o A very limited market for the company’s products and services exists.
o Strict enforcement of local zoning regulations.
 3. Articulate the problem or opportunity
• Getting clarity is becoming increasingly high in value to leaders because the world
and its complexity clouds our thinking.
• Brainstorming the possibilities and having dialogue can build clarity quickly on what
is creating the issues.

4. Develop Viable Alternatives

• Often times, problems may be solved by any of the solutions offered. The best
among the alternative solutions must be considered by management. this is
made possible by using a procedure with the following steps.
✓ Prepare a list of alternative solutions.
✓ Determine the viability of each solution.
✓ Revise the list by striking out those which are not viable.

To illustrate:
An engineering firm has a problem of increasing its output by 30%. This result of a
new agreement between the firm and one of its clients. The list of solutions
prepared by the engineering manager shows the following alternative courses of
action.
1. Improve the capacity of the firm by hiring more workers and building additional
facilities.
2. Secure the service of subcontractors
3. Buy the needed additional output from another firm
4. Stop serving some of the company’s customers.
5. Delay servicing some clients.

5. Evaluate Alternatives
• With proper evaluation, choosing the right solution will be less difficult. How the
alternative will be evaluated will depend on the nature of the problem, the
objectives of the firm, and the nature of alternatives presented.
• Souder suggests that “each alternative must be analyzed and evaluated in
terms of its value, cost, and risk characteristics”

6. Make a Choice
• Choice-making refers to the process of selecting among alternatives
representing potential solutions to a problem.
• Webber advises that “particular effort should be made to identify all significant
consequences of each choice”.
• The alternatives can be ranked from best to worst based on some factors like
benefit, cost, or risk to simplify the choosing process.

7. 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.
• The resources must be made available at this stage so that the decision may
be properly implemented.
• According to Aldag and Stearns, those who will be involved in implementation
must understand and accept the solution.
8. Evaluate and Adapt Decision Results

The intended outcomes of the decision-making process may or may not happen. In
order to guarantee results and offer information for decision-making in the future, it is
important for the manager to use control and feedback mechanisms.

➢ 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.

The engineer manager will determine whether or not the desired result is achieved
during this final stage of the decision-making process.

➢ If the desired result is achieved, one may assume that the decision made was
good.
➢ If it was not achieved, Ferrell and Hirt suggest that further analysis is necessary.

(Figure 2.3 presents an elaboration of this last step)

APPROACHES IN SOLVING PROBLEMS

In decision-making, the engineer manager is faced with problems which may either be
simple or complex. To provide him with some guide, he must be familiar with the following
approaches:

1. Qualitative Evaluation

2. Quantitative Evaluation
Qualitative Evaluation

• This term refers to evaluation of alternatives using intuition and subjective

judgement. Stevenson states that managers tend to use this approach when:

1. The problem is fairly simple.

2. The problem is familiar.

3. The costs involved are not great (low cost).

4. Immediate decisions are needed.

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

The types of quantitative techniques which may be useful in decision-making are as
follows:
1. Inventory models
2. Queuing theory
3. Network models
4. Forecasting
5. Regression analysis
6. Simulation
7. Linear programming 8. Sampling theory
8. Statistical decision theory

1. Inventory Models
This consist of several types all designed to help the engineer manager make
decisions regarding inventory. They are as follows:
1. Economic order quantitative 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 item 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.

2. Queuing Theory
• This is one that describes how to determine the number of service units that will
minimize both customers' waiting time and cost of service. The queuing theory is
applicable to companies where waiting lines are common situation.
3. Network Models
• These are models where large complex tasks are broken into smaller segments
that can be managed independently.

The two most prominent network models are:

1. The Program Evaluation Review Technique (PERT) – is used to

identify the time it takes to finish a particular task or activity. It is a
system that helps in proper scheduling and coordination of all tasks
throughout a project. It also helps in keeping track of the progress,
or lack thereof, of the overall project. First developed by the United
States Navy in 1958 by Booz Allen Hamilton.

2. The Critical Path Method (CPM) — is a project modeling

technique that's used by project managers to find the important
deadlines and deliver a project on time. In a project, the critical path
is the longest distance between the start and the finish, including all
the tasks and their duration.
4. Forecasting
• It may be defined as "the collection of past and current information to make
predictions about the future."

5. Regression Analysis
• This is a forecasting method that examinees the association between two or
more variables. It uses data from previous periods to predict future events.
• Regression analysis may be simple or multiple depending on the number of
independent variables present.

6. Simulation
• This is a model constructed to represent reality, on which conclusions about
real-life problems can be used.
• It is a highly sophisticated tool by means of which the decision make develops
a mathematical model of the system under construction.

7. Linear Programming
• It is the process of taking various linear inequalities relating to some situation,
and finding the "best" value obtainable under those conditions.
• Linear Programming is very useful as decision-making tool when supply and
demand limitations at plants, warehouse, or market areas are constraints
upon the system.

8. Sampling Theory
• This is quantitative technique where samples of populations are statistically
determined to be used for a number of processes, such as quality control and
marketing research.

9. Statistical Decision Theory

• This refers to the "rational way to conceptualize, analyze and solve problems
in situations involving limited or partial information about the decision
environment."