Chapter II

DECISION-MAKING
Decision Making as a
Management Responsibility
What is Decision Making?
The Decision Making Process
Approaches in Solving
Problems
Quantitative Models for
Decision Making
 DECISION-MAKING AS A
MANAGEMENT RESPONSIBILITY
O Decisions must he made at various
levels in the workplace.
O Decision-making is a responsibility of
the engineer manager.
O Management must strive to choose a
decision option as correctly possible.
O The higher the management level is,
the bigger and the more complicated
decision-making becomes.
WHAT IS DECISION-MAKING?
O the process of identifying and
choosing alternative courses of
action in a manner appropriate to
the demands of the situation.
O Decisions are made at various
management levels and at various
management functions.
O is the heart of all the management
functions Nickels and others
 2. Analyze the
O
Environment
The objective of environmental analysis is the
identification of constraints, External and Internal
limitations
O Example of internal limitations
1. Limited funds available for the purchase of
equipment.
2. Limited training on the part of employees
3. III-designed facilities
O Example of external limitations
1. Patents are controlled by other organizations
2. Avery limited market for the companys products
and services exists.
3. Strict enforcement of local zoning regulations
 THE DECISION-MAKING
PROCESS
O Steps:
1. diagnose problem
2. analyze environment
3. articulate problem or opportunity
4. develop viable alternatives
5. evaluate alternatives
6. make a choice
7. implement decision
8. evaluate and adapt decision results
O Components of the Environment
Two major concerns:
1. Internal
2. External
 INTERNAL
ENVIRONMENT

Organizational
Aspects
Like org. structures, EXTERNAL
policies, procedures,
ENVIRONMENT
rules, ability of
management, etc.

Marketing Aspects
Like product strategy,
promotion strategy, etc. DECISIO
N
Personnel Aspects
Like recruitment
practices, incentive
systems, etc.

Production Aspects EXTERNAL

Like plant facility ENVIRONMENT
layout, inventory
control, etc.

Financial Aspects
Like liquidity,
profitability, etc.
 4. Develop Viable
Alternatives
O Steps:
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.
 APPROACHES IN SOLVING
PROBLEMS
O Engineer manager is faced with problems which may
either be simple or complex.
O Approaches:
1. Qualitative Evaluation
2. Quantitative Evaluation
O Qualitative Evaluation refers to evaluation of
alternatives using intuition and subjective judgment.
O Stevenson states that managers tend to use qualitative
approach when:
1. The problem is fairly simple
2. The problem is familiar
3. The costs involved are not great
4. Immediate decisions are needed
O Quantitative Evaluation refers to
the evaluation of alternatives using
any technique in a group classified
as rational and analytical
QUANTITATIVE MODELS FOR
DECISION-MAKING
O 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
 1. Inventory Models
O Types:
1. Economic order quantity model used
to calculate the number of items
2. Production order quantity model an
economic order quantity
3. Back order inventory model an
inventory model used for planned
shortages.
4. Quantity discount model used to
minimize the total cost when discounts are
offered by suppliers.
 3. Network Models
O The two most prominent network models are:
1. The Program Evaluation Review
Technique (PERT) which enables
engineer managers to schedule, monitor, and
control large complex projects by employing
three time estimates for each activity.
2. The Critical Path Method (CPM)
using only one time factor per activity that
enables engineer managers to schedule,
monitor, and control large and complex
projects.
 THE END
O Group 2:
O Duenas, Brian Kim DV.
O Empemano, Jake Chesterphil S.
O Enriquez, Jean F.
O Evangelista, Robert John L.
O Galeza, Jore Gil D.
CE-4D