Module 1: Decision Making in Management

Module 1: Decision Making

• Decision-making is a management responsibility, involving identifying and choosing alternative courses of action appropriate to a situation.
• Engineering managers must adapt procedures to determine the best available option.
• Decisions happen at multiple management levels (top, middle, lower) and across various management functions (planning, organization, directing/leading, control). Decision-making is the core of all management functions.

Rational Decision-Making Process

• Diagnose the problem: Identify the problem. Recognizing the difference between the desired situation and the actual situation defines the problem.
• Analyze the environment: Understanding the constraints (internal and external) impacting the organization is vital. Internal limitations include limited funds, training, or facilities. External limitations include patents controlled by other organizations, limited markets, or zoning regulations.
• Develop viable alternatives: Define possible solutions to the problem and measure their viability. Alternatives that are not viable are removed from consideration.
• Evaluate alternatives: Evaluate each alternative based on factors like its value, cost, and risk characteristics.
• Make a choice: Select the best alternative.
• Implement the decision: Execute the chosen option to achieve organizational objectives.
• Evaluate and adapt outcomes: Continuously monitor the implementation to ensure results match expectations and adapt adjustments as needed. Feedback and control mechanisms are crucial to success.

Qualitative Approach

• A subjective evaluation process, relying on intuition and judgment.
• Used when problems are simple, familiar, or if immediate decisions are required.

Quantitative Approaches

• Qualitative techniques for evaluating solutions objectively:
• Inventory Models:
• Economic Order Quantity (EOQ): Determine optimal order quantities to minimize total costs (ordering and holding).
• Production Order Quantity Model: EOQ applied to production orders.
• Back Order Inventory Model: Accounting for planned shortages.
• Quantity Discount Model: Utilize quantity discounts offered by suppliers.
• Queuing Theory: Determine optimal service units to minimize customer waiting times.
• Network Models: PERT (Program Evaluation Review Technique) and CPM (Critical Path Method) used to manage complex projects and allocate resources effectively.
• Forecasting: Predicting future events (e.g., demand in manufacturing), based on historical data.
• Regression Analysis: Modeling the association between variables to predict future outcomes.
• Simulation: Building mathematical models of a system for analysis.
• Linear Programming: Optimizing solutions while adhering to constraints (e.g. production limitations, supply).
• Sampling Theory: Statistical modeling of populations based on samples to analyze quality control and research.
• Statistical Decision Theory: Using probabilities to determine optimal decision strategies in situations with incomplete information.

Problem Solving Approaches

• Qualitative Evaluation: Useful with simple and familiar problems.
• Quantitative Evaluation: Utilizes objective techniques like those described above for more complex problems and analysis

Assignment

• Decision-Making: Focuses on the identification of decision-making processes (ignoring problems, etc.) and importance of understanding and support for the implemeantation of decisions
• Problem Solving: Discusses different appropriate approaches to solving problems.