Professional Documents
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Management
Chapter 2: Decision Making
Presented by:
Kenz Rix Magtoto
Jan Daniel Mallari
Peter Manabat
John Brix Manalo
Contents
DECISION-MAKING ● APPROACHES IN SOLVING PROBLEMS
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 the various options.
The engineer manager’s decision-making skills will be very crucial to his
success.
DECISION MAKING
AS A MANAGEMENT
RESPONSIBILITY
Decision Making as Management Responsibility
What is a problem?
Components of Environment
The environment consists of two major concerns:
1. Internal and
2. External
Internal Environment
It refers to organizational activities within a firm that surrounds decision
making. Figure 2.1 are the important aspects of the internal environment
External Environment
It refers to variables that are outside the organization and not typically
within the short-run control of top management. Figure 2.2 shows the
forces compromising the external environment of the firm.
DEVELOP VIABLE ALTERNATIVES
DEVELOP VIABLE ALTERNATIVES
To illustrate (example):
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.
DEVELOP VIABLE ALTERNATIVES
We now know how the engineering firm’s process on how they will come
up with their alternative courses of action. These are the list of alternative
options.
1. Improve the capacity of the firm by hiring more workers 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 customers and;
5. delay servicing some clients.
With added critical thinking, we know that the last two options can affect
the firm in the long run, so they decided to remove the 4th and 5th option.
EVALUATE ALTERNATIVES
This is important because the next step involves
making a choice. Proper evaluation makes choosing
the right solution less difficult. How the alternatives
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."
Qualitative Evaluation
Quantitative Evaluation
04. Forecasting
05. Regression Analysis
06. Simulation
07. Linear Programming
08. Sampling Theory
09. Statistical Decision Theory
INVENTORY MODELS
Inventory models consist of several types all designed to help the engineer
manager make decisions regarding inventory.
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
These are models where large complex tasks are broken into smaller
segments that can be managed independently.
2. The Critical Path Method (CPM) - - this is a net. work technique using
only one time factor per activity.
FORECASTING
REGRESSION ANALYSIS
LINEAR PROGRAMMING
SAMPLING THEORY
Bayesian Analysis
The purpose of the Bayesian analysis is to revise and update the initial
assessments of the event probabilities generated by the alternative
solutions.
When the decision-maker is able to assign probabilities to the various
events, the use of probabilistic decision rule, called the Bayes criterion,
becomes possible. It selects the decision alternative having the maximum
expected payoff, or the minimum expected loss if he is working with a loss
table.
SUMMARY (TLDL)