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 wise manager will correct
them as soon as they identified. The bigger issue is the manager who cannot or
do not want to make decisions.

• Management must strive to choose a decisions option as correctly a 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 become.
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”

● Decision making, according to William G. Nickels and others, “ Is the

heart of all the management functions”
Decision Making Process

● Diagnose Problem
If the manager wants to make an intelligent decision , his first
move must be to identify the problem.

● Analyze the Environment

The environment where the organization is situated plays a very
significant role in the success or failure of such an organization .
 Decision Making Process

Internal Limitations

 Limited Funds available purchase equipment

 Limited training on employees
 III-design facilities

External Limitations

 Patent are controlled by other organizations.

 A very limited market for the company’s products and services exixst.
 Strict enforcement of local zoning regulations.
Decision Making Process
The environment consists of 2 major concerns

 Internal environment
 Organizational Aspects
 Marketing Aspects
 Personnel Aspects
 Production Aspects
 Financial Aspects

 External environment
 Government
 Labor Unions
 Suppliers
 Banks
 Public
 Competitors
 Clients
 Engineers
Decision Making Process
● Articulate Problem
Discuss the problem with the member of the organizations and
gather data and information for future references.

● Develop Viable alternatives

This is made possible by using a procedure with the following steps:
I. Prepare a list of alternative solutions.
II. Determine the viability of solution.
III. Revise the list by striking out those which are not viable.
Decision Making Process
● Evaluate Alternatives
o Proper evaluation makes choosing the right solution less difficult.
o Each alternative must be analyzed and evaluated in terms of its value, cost, and
risk characteristics
o The value of the alternatives refers to the benefits that can be expected.

● Make a Choice
o This is the point that the decision maker must be convinced that all the previous steps were
correctly undertaken.
o Choice making refers to the process of selecting among alternatives representing potential
solutions to a problem.
o “ Particular effort should be mad to identify all significant consequences of each choice”
Decision Making Process
● Implement Decision
o Implementation refers to carrying out the decision so that the objectives sought
will be achieved.
o At this stage, the resources must be made available so that the decision may be
properly implemented.
o “ those who will be involved in implementation must understand and accept the
solution”.

● Evaluate and Adapt Decision Results

o Feedback
o Control
o If the desired result is achieved, one may assume that the decision made was good. If it was
not achieved, O.C. Ferrel and Geofrey Hirt suggests that further analysis is necessary.
Approaches in Solving
Problem

In decision making, the engineer manager is

faced with problems which may either be simple

or complex.
Approaches in Solving
Problem

Qualitative evaluation – This term refers to

evaluation of alternatives using intuition and

subjective judgement.
1. The problem is fairly simple.

2. The problem is familiar .

3. The cost involved are not great/low cost.

4. Immediate decisions are needed .

Approaches in Solving
Problem

Quantitative evaluation – This term refers to

evaluation of alternatives using any techniques

in a group classified as rational and analytical.

1. Inventory models 6. Simulation

2. Queuing theory 7. Linear programming

3. Network models 8. Sampling theory

4. Forecasting 9. Statistical decision theory

5. Regression analysis
Inventory models

Inventory models consist of several types all designed to help the

engineer manager make decisions regarding inventory.

Inventory models
They are as follows:

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.

Production order quantity model - this is an economic order

quantity technique applied to production orders.

Back order inventory model - inventory model used for

planned shortages .

Quantity discount model - an inventory model used to

minimize the total cost when quantity discounts are
offered by suppliers.
Queuing Theory

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.

Network Models
The two most prominent network models are:

1. The Program Evaluation Review Technique (PERT) - a technique

which enables engineer managers to schedule, monitor, and control
large and complex project by employing three time estimates for each
activity.

2. The 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

May be defined as “ the collection of past and current information

to make predictions about the future. "

Regression Analysis

The regression model is a forecasting method that

examines the association between two or more variables.

Simulation

Is a model constructed to represent reality on

which conclusion about the real-life problems can

be used.
Linear Programming

Linear programming is a mathematical technique which

determines the best way to use available resources.

Linear Programming

How is linear programming useful for

decision-making?
Linear Programming

How linear programming is

applied in real life?

Linear Programming

EXAMPLES OF LINEAR PROGRAMMING

● Production optimization

● transportation planning

● resource allocation in healthcare

Sampling Theory

Sampling theory is a field within statistics that focuses on how to

select a part of a population in such a way that it accurately

reflects the whole, and it is a method of selecting a subset of data

from a larger population to draw inferences or make decisions.

Sampling Theory

How is sampling theory used in decision

making?
Sampling Theory

What are the examples of sampling theory?

1.Market

● Research

● Clinical Trials

● Environmental Studies
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.

Statistical Decision-Theory

What are the uses of statistics in decision-

making?
Statistical Decision-Theory

What is an example of a statistical

decision?
Statistical Decision-Theory

Examples of statistical decision theory:

● Business Management

● Healthcare

● Engineering