DECISION-MAKING

ENGINEERING MANAGEMENT
Arojado, Melba
Arsolon, Hanah Mae
Bassalaje, Jorina
Bernal, Kent
Borrinaga, Angela Jane

Contents in this ppt were from the book of Roberto G. Medina entitled “ENGINEERING MANAGEMENT”
• Managers of all kinds and types, including the engineer
manager, are primarily tasked to provide leadership in
the quest for the attainment of the organization’s
objectives.
• If he is to become effective, he must learn the
intricacies of decision-making .
• Many times, he will be confronted by situations where
he will have to choose from among various options.
• Whatever his choice, it will have effects, immediate or
otherwise, in the operations of this organization.
• The engineer manager’s decision making skills will
be very crucial to his success as a professional.
• A major blunder in decision-making may be
sufficient to cause the destruction of any
organization.
• Good decisions, on the other hand, will provide the
right environment for continuous growth and success
of any organized effort.
DECISION MAKING AS A MANAGEMENT
RESPONSIBILITY
• Decisions must be made at various levels in the workplace and at various stages in
the management process.
• Engineer manager is the one responsible in decision –making.
• The wise manager will correct them as soon as they are identified.
• Delaney concludes that the bigger issue are the managers who cannot or do not
want to make decisions, this type of managers are dangerous and “should be
removed from their positions as soon as possible.”
• 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 complicated the decision
making becomes.
 EXAMPLE
The production manager of a certain company has received a written
request from a section regarding the purchase of an air conditioning unit.
Almost simultaneously, another request from another section was
forwarded to him requiring the purchase of a forklift. The production
manager was informed by his superior that he can only buy one pf the
two requested items due to budgetary constraints.

The production manager must now make a decision. His choice,

however, must be based on sound arguments for he will be held
responsible, later on, if he had made the wrong choice.
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, controlling).
• According to Nickels and others, decision making “is the heart of all
the management functions.”
THE DECISION-MAKING PROCESS
Rational decision-making, according to David H. Holt, is a process
involving the following steps:
1. Diagnose the problem
2. Analyze the environment
3. Articulate problem or opportunity
4. Develop viable alternative
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.
• An expert once said, “Identification of the
problem is tantamount to having the problem
solved.”
What is a problem?
• A problem exists when there is a difference between actual
situation and a desired situation.

For instance, the management of a construction company

entered into a contract with another party for the construction
of a 25-storey building on a certain site. The actual situation
of the firm is that it has not yet constructed the building.
Analyze the environment
The objective of environmental analysis is the identification of constraints,
which may be spelled out as either internal or external limitations,
Examples of internal limitations Examples of external limitations
Limited funds available for Patents are controlled by other
the purchase of equipment organizations.
Limited training on the part of Very limited market for the
employees company’s products and services
exits
Ill-designed facilities Strict enforcement of local zoning
regulations
Contents in this ppt were form the book of Roberto G. Medina entitled
“ENGINEERING MANAGEMENT”
An illustration of failure to analyze
the environment;
The president of a new chemical manufacturing company
made a decision to locate his factory in a place adjacent to a
thickly populated area. Construction of the building was made
with precision and was finished in a short period. When the
clearance for the commencement of the operation was sought
from local authorities, this could not be given. It turned out that
the residents opposed the operation of the firm and made sure
that no clearance is given. The president decided to relocate the
factory but not after much time and money has been lost.
Components of the environment

1. Internal environment

2. External environment
INTERNAL ENVIRONMENT
• Refers to the organizational activities within a firm that surrounds decision-making.
EXTERNAL ENVIRONMENT
Refers to variables are outside the organization and not typically within short run
control of top management.
DEVELOP VIABLE ALTERNATIVES
PROCEDURES;

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.
ILLUSTRATION

An engineering firm has a problem of

increasing its output by 30%. This is the
result of a new agreement between the
firm and one of its clients.
 LIST OF SOLUTIONS

1. Improve the capacity of the firm by hiring more works and building
additional facilities

2. Secure the services of subcontractors

3. Buy the needed additional output from another firm

4. Stop serving some of the company’s costumer

5. Delay servicing some clients

EVALUATE ALTERNATIVES
• “Each alternative must be analyzed and evaluated in terms of its
value, cost, and risk characteristics.”

Value of alternatives refers to benefits that can be expected.

Cost of the alternative refers to out-of-pocket costs

Risk characteristics refers to the likelihood of achieving the goals of

the alternatives.
 EXAMPLE
An engineer manager is faced with problem of
choosing between three applicants to fill up a lone
vacancy for a junior engineer. He will have to set up
certain criteria for evaluating the applicants. If the
evaluation is not done by a professional human
resource officer, then the engineer manager will be
forced to use a predetermined criteria.
 EVALUATION SHEET
Title of Vacant Position: JUNIOR ENGINEER
Date of Evaluation: December 28, 1996

Evaluator:
Edgardo J. Viloria
Manager
Engineering Division III
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.”
• To make the selection process easier, the alternatives
can be ranked from best to worst on the basis of some
factors like benefit, cost, or risk
IMPLEMENT DECISIONS
• Implementation refers to carrying out the decision
so that the objectives sought will be achieved.
• At this stage, the resources must be made available
so that the decision may be properly implemented.
• According to Aldag and Stern, those who will be
involved in implementation must understand and
accept the solution.
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.
Feedback as a Control Mechanism in the Decision- Making
Process
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
• Refers to the evaluation of alternatives using intuition and
subjective judgement. Managers use this when:

1. The problem is fairly simple.

2. The problem is familiar.

3. The costs involved are not great.

4. Immediate decisions are needed.

EXAMPLE
A factory operates on three shifts with the following schedule:
First Shift: 6:00 AM to 2:00 PM
Second Shift: 2:00PM to 10:00PM
Third Shift: 10:00PM to 6:00PM

Each shift consist of 200 workers manning 200 machines. On Sept. 16, 1996, the operations
went smoothly until the factory manager, an industrial engineer was notified at 1:00PM,
that 5 of the workers assigned to the second shift could not report for work because of
injuries sustained in a traffic accident while they were on their way to the factory.

Because of the time constraints, the manager made an instant decision on who among the
first shirt workers would work to man the five machines.
2. QUANTITATIVE MODELS FOR
DECISION-MAKING

Refers to the evaluation of alternatives using

any technique in a group classified as rational
and analytical.
Types of quantitative
techniques:
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 MODEL
Consists of several types all designed to help the engineer manager make
decisions regarding inventory.

1. Economic order quantity model – this one is used to calculate the number of
items that should be ordered at one time to minimize total yearly cost of
placing orders and carrying the items in inventory.
2. Production order quantity model – economic order quantity technique
applied to production orders
3. Back order quantity model – inventory used for planned shortages.
4. Quantity discount model – used to minimize the total cost when quantity
discounts are offered by supplier
QUEUING THEORY
• Determines the number of service units that will minimize both
costumers waiting time and cost of service.
• Applicable to companies where waiting lines are common situation.

Examples are cars waiting for service at a car service center, ships and
barges waiting at the harbor for loading and unloading by dock-dock
workers, programs to be run in a computer system that processes
jobs, etc.
NETWORK MODELS
These are the models where large complex task are broken into smaller
segments that can be managed independently.
1. Program Evaluation Network Model (PERT) – a technique which
enables engineer manager to schedule, monitor, and control large
and complex projects by employing three time estimates for each
activity.
2. 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
It may be defined as “the collection of past and current information to
make predictions about the future.”

Example, a managing firm must put up a capacity which is sufficient

to produce the demand requirements of customers within the next 12
month =s. as such, manpower and facilities must be procured before
the start operations. To make decisions on capacity more effective,
the engineer manager must be provided with data on demand
requirements for the next 12 months.
REGRESSION ANALYSIS
It is a forecasting method that examines the associations between
two or more variables.
It uses data from previous periods to predict future events.
It may be simpler or multiple depending on the number of
independent variables present.
Simple regression- when one independent variable is involved
Multiple regression- when two or more variables are involved
LINEAR PROGRAMMING

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.
SAMPLING THEORY

 It is a quantitative technique where samples of populations are

statistically determined to be used for number of processes, such
as quality control and marketing research.

When data gathering is expensive, sampling provides an

alternative.

Sampling in effect saves time and money.

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.”