Decision-making

GROUP 1 | BSCE 4-2

Introduction
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.

The engineer manager’s decision-making

skills will be very crucial to his success as
professional. A major blunder in decision-
making may be sufficient to cause the
destruction of any organization.
Decision-making as a management
responsibility
• Decisions must be made at various levels
in the workplace.

• Decision-making is a responsibility of the

engineer manager.

• Management must strive to choose a

decision option as correctly as possible.
 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.”

• Decisions are made at various management

levels (i.e., top, middle, and lower levels)
and at various management function (i.e.,
planning, organizing, directing, and
controlling).
Decision-making is the heart of all the
management functions”

Nickels
 The decision-making Process
01 Diagnose problem 05 Evaluate alternatives

02 Analyze the environment 06 Make a choice

Articulate problem or
03 07 Implement decision
opportunity

04 Develop viable alternatives 08 Evaluate and adapt decision

results
What is A problem?

A problem exists when there is a

difference between an actual situation and
a desired situation.
 If a manager wants to make
an intelligent decision, his first move must
be to identify the problem.
If a manager fails in this aspect, it is
almost impossible to succeed in the
subsequent steps.
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.

Diagnose
problem
 Analyze the
environment

The environment where the

organizations is situated plays a very
significant role in the success or
failure of such an organization.
It is, therefore, very important
that an analysis of the environment
be undertaken.
 The objective of environmental analysis is the identification of
of constraints, which may be spelled out as either internal or external
external limitations.

E x a m p le s o f in t e r n a l lim it a t io n s a re a s fo llo w s :

1. Limited funds available for the purchase of equipment.

2. Limited training on the part of employees.
3. III-designed facilities
Examples of external limitations are as
follows:

1. Patents are controlled by other organizations.

2. A very limited market for the company’s products and services
and services exists.
3. Strict enforcement of local zoning regulations.
Components of the environment
The environment consists of two major concerns:

1. Internal – refers to organizational activities within a firm that

surrounds decision-making.

1. External – refers to variables that are outside the organization and

not typically within the short-run control of top management.
 The engineering firm and the internal environment in decision-making
THE ENGINEERING FIRM
INTERNAL ENVIRONMENT
Organizational Aspects
like org. structure, policies, procedures, rules, EXTERNAL
ability of management, etc. ENVIRONMENT
Marketing Aspects
like product strategy, promotion strategy, etc.
DECISION
Personnel Aspects
like recruitment practices, incentive systems, etc.
EXTERNAL
ENVIRONMENT
Production Aspects
like plant facility layout, inventory control, etc.

Financial Aspects
like liquidity, profitability, etc.
 The engineering firm and its external environment
Government
Engineers Labor Unions

Clients ENGINEERING Suppliers

FIRM

Competitors Banks
Public
 Articulate
problem or
opportunity
Before delving into a strategy, it is
essential to clearly articulate the problem.
However, identifying the issue can
sometimes be a challenging task.
Achieving a precise understanding of
the issue in any given situation can
make the distinction between wasting
excessive time and resources or directing
effort towards the correct areas of
concentration to achieve tangible
 Freq uently, vario us so lutio ns m ay
ad d ress p ro b lem s, and it falls up o n
m anag em ent to carefully evaluate
and select the m o st o p tim al am o ng
the availab le alternatives. In
co nsid ering the b est am o ng the
alternative so lutio ns, the
m anag em ent fo llo ws these step s:

1. Prepare a list of alternative

Develop viable solutions.

2. Determine the viability of

alternatives each solutions.

3. Revise the list by striking out
those which are not viable.
 This holds significance because the
subsequent step entails making a decision,
and a proper evaluation makes the process
of selecting the correct solution less
challenging.
The assessment of the alternatives will
be depending on the problem's
characteristics, the firm's objectives, and
the characteristics of the presented
alternatives.

Evaluate
alternatives
 Make a
choice
Choice-making is the process of
selecting among alternatives
representing potential solutions to
a problem.
 Implement
decision

Implementation refers to carrying

out the decision so that the objectives
sought will be achieved.
 It is important for the manager
to use control and feedback
mechanisms to ensure results and
to provide information for future
decisions.

Evaluate and
adapt decision
results
APPROACHES IN
SOLVING PROBLEMS

1. Qualitative Evaluation, and

2. Quantitative Evaluation
 Qualitative EVALUATION
This term refers to evaluation of alternatives
using intuition and subjective judgement.
QUALITATIVE EVALUATION

Stevenson states that managers tend to

use the 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.
An example of an evaluation using the qualitative
approach is as follows:

A factory operates on three shifts with

the following schedule:

First shift – 6:00 A.M. to 2:00 P.M.

Second shift – 2:00 P.M. to 10:00 P.M.
Third shift – 10:00 P.M. to 6:00 A.M.
QUANTITATIVE EVALUATION
This term refers to the evaluation of
alternatives using any technique in a group
classified as rational and analytical.
 QUANTITATIVE MODELS FOR DECISION MAKING
The types of quantitative techniques which may be useful in decision-making
are as follows:

01 INVENTORY MODELS 06 SIMULATION

02 QUEUING THEORY
07 LINEAR PROGRAMMING

03 NETWORK MODELS
08 SAMPLING THEORY
04 FORECASTING
09 STATISTICAL DECISION THEORY
05 REGRESSION ANALYSIS
 INVENTORY MODELS
Inventory models consist of several types all designed to help
the engineer manager make decisions regarding inventory.
They are as follows:

1. Economic Order Quantity Model- 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
2. Production Order Quantity Model- an
economic order quantity technique applied
to production orders.
INVENTORY MODELS

3. Back Order Inventory Model-

an inventory model used for
planned shortages.
4. 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 The program evaluation review
technique (pert)
- A technique which enables engineer

MODELS managers to schedule, monitor, and

control large and complex projects
by employing three time estimates
for each activity.

These are models where

large complex tasks are broken THE CRITICAL PATH METHOD (CPM)
- This is a network technique using
into smaller segments that can be only one time factor per activity that
managed independently. enables engineer managers to
schedule, monitor, and control large
and complex projects.
 FORECASTING

These are instances when engineer

manager make decisions that will have
implications in the future.

It 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. It uses
data from previous periods to predict
future events.

Regression analysis may be simple

regression or multiple regression
dependent on the number of
independent variables present.
 simulation

Simulation is a model constructed

to represent reality, on which
conclusions about real-life
problems can be used. It is a highly
sophisticated tool by means of
which the decision maker develops
a mathematical model of the system
under consideration/
Linear
programming

It is a quantitative technique
that is used to produce an
optimum solution within the
bounds imposed by constraints
upon the decision.
 Sampling
theory
It is a quantitative technique
where samples of populations are
statistically determined to be used
for a number of processes, such as
quality control and marketing
research.

Sampling, in effect, saves time and

money.
STATISTICAL DECISION-THEORY

Decision theory refers to the

"rational way to conceptualize,
analyze, and solve the problems
in situations involving limited, or
partial information about the
decision environment."
 BAYESIAN ANALYSIS

The purpose of Bayesian analysis is to

revise and update the initial assessments
of the event probabilities generated by
the alternative solutions.
 summary

Decision-making is a very
important function of the engineer
manager. His organization will rise or
fall depending on the outcomes of
his decisions.
 thank you!
BSCE 4-2 GROUP 1

Pasco, Den Adrian John

Benedicto, Keith Nicole
Medina, Mica Ella
De Guzman, Jeathcaila
Saquilayan, Angelina Isabelle
Alegre, Juliene Aarole
Tendencia, Brynt
Milagroso, Jericho
Vidallo, Paul Andrei