ENGINEERING MANAGEMENT

CHAPTER 2: DECISION-MAKING

The primary responsibility of managers is to lead the

organization in achieving its goals. He needs to understand the
complexities of decision-making if he wants to be productive. He will
encounter circumstances when he must make decisions from a range
of possibilities. Regardless of his decision, it will impact how the
corporation operates.
Decision-Making as a Management Responsibility
Decision-making is a responsibility of the engineer manager;
hence, he must strive to choose a decision option as correctly as
possible. Since they have the power, they are responsible for whatever
outcome their decisions bring. The wise manager will correct wrong
decisions as soon as they identified. The higher the management level
is, the bigger and the more complicated decisionmaking becomes.
What is Decision-Making?
Decision is a judgement. It is a choice between alternatives. It is
rarely a choice between right or wrong. It is at best a choice between
almost right and probably wrong. Right decisions grow out of the
clash and conflict if divergent opinions and competing alternatives.
Effective managers, encourages opinions. But he insists that people
who voice out an opinion must also take responsibility for defining
what factual findings can be expected and should be looked for.
The first rule in decision-making is that one does not decide
unless there is disagreement. Right decision demands adequate
disagreement first.
The Decision-Making Process
Effective decisions are made through a systematic process
clearly defining the elements in a distinct sequence of steps. Most
successful decision making follows a process that consists of the
following steps:
1. Identify the problem – the focal point of the process. Solutions
must address the basic problems not the symptoms. A problem
exists when there is a difference between an actual situation and a
desired situation.
2. Analyze the environment – the objective of environmental analysis
is the identification of constraints, which may be spelled out as
either internal or external limitations.
3. Articulate problem
 ENGINEERING MANAGEMENT
CHAPTER 2: DECISION-MAKING

4. Develop viable alternatives - problems can frequently be resolved

by any of the solutions offered. Management must consider the
greatest option out of all the alternatives.
5. Evaluate alternatives – proper evaluation makes choosing the
right solution less difficult. The evaluation of the alternatives will
depend on the nature of the problem, the objectives of the firm,
and the nature of alternatives presented.
6. Make a choice – this is the point where he must convince that all
the previous steps were correctly undertaken. To make the
selection process easier, the alternatives can be ranked from best
to worst based on some factors like benefit, cost, or risk.
7. Implement decision – this is necessary, or decision-making will
be an exercise in futility. It refers to carrying out the decision so
that the objectives sought will be achieved. To make an
implementation effective, a plan must be devised, and resources
must be made available.
8. Evaluate and adapt decision results – in implementing the
decision, the expected results may or may not happen. Thus, it is
important for the manager 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 the desired activities or goals, that has been set.
The success or failure in making decisions often depends on how
well each of these steps is handled.
Approaches in Solving Problems
In decision-making, the engineer manager is faced with problems which
may either be simple or complex. The following approaches will serve
some guide:
1. Qualitative Evaluation – it refers to the evaluation of alternatives
using intuition and subjective judgement. Usually, this approach
is used when:
 ENGINEERING MANAGEMENT
CHAPTER 2: DECISION-MAKING

a. The problem is simple.

b. The problem is familiar.
c. The cost involved are not great.
d. Immediate decisions are needed.
2. Quantitative Evaluation – it 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:
a. Inventory Models – it consists of several types that are all
designed to help the engineer manager make decisions. They are
as follows:
i. 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.
ii. Production order quantity model – this is an economic
order quantity technique applied to production orders.
iii. Back-order inventory model – this is an inventory model
used for planned shortages.
iv. Quantity discount model – an inventory model used to
minimize the total cost when quantity discounts are offered
by suppliers.
b. Queuing Theory – it describes how to determine the number of
service units that will minimize both customers waiting time and
cost of service. It is applicable to companies where waiting lines
are a common situation.
c. Network Models – it is where large complex tasks are broken into
smaller segments that can be managed independently. The two
most prominent network models are:
i. The Program Evaluation Review Technique (PERT) – a
technique which enables the engineer manager to
 ENGINEERING MANAGEMENT
CHAPTER 2: DECISION-MAKING
schedule, monitor and control large and complex projects
by employing three-time estimates for each activity.

ii. The Critical Path Method (CPM) – this is a network

technique using only one time factor per activity that
enables engineer

manager to schedule, monitor, and control large and

complex projects.
d. Forecasting – it is the collection of past and current information to
make predictions about the future because there will be instances
that the engineer managers make decisions that will have
implications in the future.
e. 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. It may be simple or
multiple depending on the number of independent variables
present. When one independent variable is involved, it is called
simple regression but when to or more variables are involved, it is
called multiple regression.
f. Simulation – it 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 maker
develops a mathematical model of the system under consideration.
However, it does not guarantee an optimum solution, but it can
evaluate alternatives fed into the process by the decision-maker.
g. Linear Programming – it is a quantitative technique that is used to
produce an optimum solution within the bounds imposed by
constraints upon the decision. It is very useful as a decision-
making tool when supply and demand limitations at plants,
warehouse, or market areas are constraints upon the system.
h. Sampling Theory – it is where samples of populations are
statistically determined to be used for several processes, such as
quality control and marketing research. When data gathering is
expensive, sampling provides an alternative because it can save
time and money.
 ENGINEERING MANAGEMENT
CHAPTER 2: DECISION-MAKING
i. Statistical Decision Theory – it refers to the rational way to
conceptualize, analyze and solve problems in situations involving
limited or partial information about the decision environment.