Decision-Making

Decision-Making as a Management Responsibility

• Decision-making is a responsibility of the engineer manager.

• The wise manager will correct them soon as they are identified.

• The manager who cannot or do not want to make decisions.

Decision-Making

• Delaney concludes that this type of managers are dangerous and “should be removed from their position as soon as possible.”

• Management must strive to choose a decision option as correctly as possible.

Decision making

An example may be provided as follows: The production manager of a certain company has received a written request from a section head 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 of 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.

Decision making

What is Decision-Making?• Decision –making may defined as “the

process of identifying and choosing alternatives courses of action in a manner appropriate to the demands of the situation.”

• It is designed to determine the best option available to solve certain problems.

Decision making

• Decision are made at various management levels(i.e., top, middle, and lower levels) and at various management functions (i.e., 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

“ identification of the problem is tantamount to having the problem half-solved.”

What is a Problem?

• A problem exists when there is a difference between an actual situation and 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. The desired situation is the finished 25-storey building. In this case, the actual situation is different from desired situation. The company, therefore, has a problem and that is the construction of the 25-storey building.

2. Analyze the Environment

• The environment where the organization is situated plays very significant role in the success or failure of such an organization.

• The objective of environmental analysis can be spelled into internal or external limitations.

• Examples of internal limitations: 1. Limited funds available for the purchase of equipment. 2. Limited training on the part of employees. 3. ill-designed facilities Examples of external limitations: 1. Patents are controlled by other organizations. 2. A very limited market for the company’s products and service exists. 3. Strict enforcement of local zoning regulations.

An illustration of the failure to analyze the environment is as follows: 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 precision and was finished in a short period. When the clearance for the commencement of 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 refers to organizational activities within a firm that surrounds decision-making.

2. External Environment refers to variables that are outside the organization and not typically within the short-run control of top management.

Figure 2.1 The Engineering Firm and the Internal Environment in Decision-Making

• Internal Environment

• Organization Aspects like org. structures, policies, procedures, rules, ability of management ,etc.

• Marketing Aspects like product strategy, promotion strategy, etc.

• Personnel Aspects like recruitment practices, incentive systems, etc.

• Production Aspects like plant facility layout, inventory control, etc.

• Financial Aspect like liquidity, profitability , etc

External Environment

External Environment

Decision

The Engineering Firm a Its External Environment

Engineering Firm

GovernmentLabor

Unions

Suppliers

BanksPublic

Competitors

Clients

Engineers

3. Develop Viable AlternativesSteps or procedure:

. 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.

To Illustrate:

. An engineer 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.

Solutions prepared by engineering management:

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.

4. Evaluate Alternatives

• This is important because the next step involves making a choice. Proper evaluation makes choosing the right solution less difficult.

Evaluation SheetTittle of Vacant Position: JUNIOR ENGINEERDate of Evaluation: December 28,1996

Applicant Education Training Experience Age Total Points

1. Jose Sibayan, Jr

40 35 4 10 89

2. Menandro Rillon

40 36 5 9 90

3. Dante dela Cruz

40 38 6 7 91

5. Make a Choice

• Choice-making refers to the process of selecting among alternatives representing potential solutions to a problem.

6. Implement Decision

• Implementation refers to carrying out the decision so that the objectives sought will be achieved.

• 7. Evaluate and Adapt Decision Results

It is important 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 desired activities or goals, that have been set.

APPROACHES IN SOLVING PROBLEMS

• QUALITATIVE EVALUATION• Evaluation of alternatives using

intuition and subjective judgement

• Often used when:– The problem is fairly simple– The problem is familiar– The costs involved are not great– Immediate decisions are needed

• QUANTITATIVE EVALUATION Evaluation of alternatives using any technique in a group classified as rational and analytical

QUANTITATIVE MODELS FOR DECISION MAKING

• INVERTORY MODELS ECONOMIC ORDER QUANTITY MODEL

To calculate the number of items that should be ordered at one time

PRODUCTION ORDER QUANTITY MODELApplied to production orders

BACK ORDER INVENTORY MODELUsed for planned shortages

QUANTITY DISCOUNT MODELUsed to minimize the total cost when quantity discounts are offered by suppliers


• QUEUING THEORY Describes how to determine the number of service units that will minimize both costumer waiting time and cost of service

• NETWORK MODEL THE PROGRAM EVALUATION REVIEW TECHNIQUE

– A technique that enables the engineer managers to schedule, monitor, and control large and complex projects by employing three time estimates for each activity

TH E CRITICAL PATH METHOD– A network technique that uses only one time

factor per activity that enables the engineer managers to schedule, monitor and control large and complex projects


• SIMULATION A model constructed to represent reality on which conclusions about real-life can be usedDo not guarantee an optimum solution but can evaluate alternatives fed into the process


• 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 quantitative technique where samples of populations are statically determined to be used for a number of processes


• 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”

• BAYESIAN ANALYSIS To revise and update the initial assessments of

the event probabilities generated by the alternative solutions.

The Bayes criterion selects the decision alternative having the maximum expected payoff, or the minimum expected loss if he is working with a loss table.

Decision-Making

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