DECISION MAKING

ENGINEERING MANAGEMENT
Presented by:
Dolormente, Johnwill T. |
Esperida, Russel D. | Garcia, Runny Charles Raven DV. |
Padilla, Niel Ivan T. | Pascual, Michael Angel B. |
Recalde, John Jasper R. | Saladino, Jessie Roi Z.
CEE43
 Introduction
O Managers of all kinds and types, including
the engineer manager, are primarily tasked
to provide leadership in the quest for
attainment of the organization’s objectives.
O If he is to become effective, he must learn
the intricacies of decision-making
 Introduction
O The Engineer manager’s decision making
skills will be very crucial to his success as a
professional. A major blunder in decision
making may be sufficient to cause
destruction of any organization.
O Good decisions, on the other hand, will
provide the right environment for continuous
growth and success of any organized effort.
 Introduction
Decision Making as management
responsibility
O Decisions must be made in various level.
O 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 are identified.
O The bigger issue is the manager who cannot or do not
want to make decisions (Dangerous)
O Management must strive to choose a decision option as
correctly as possible. Since they have that power, they
are responsible for whatever outcome their decision
bring.
 Introduction
Example
O The production manager of a certain company has
received a written request from a section head
regarding the purchase of air-conditioning unit.
Almost simultaneously, another request from another
section was forwarded to him requiring the purchase
of 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 decision.
What is Decision Making?
What is Decision Making?
O Decision Making may be defined as the
process of identifying and choosing the
alternative courses of action in a manner
appropriate to the demands of the situation.
O Engineer managers must adapt a certain
procedure designed to determine the best
option possible to solve certain problems.
O It is the heart of all the management
function.
What is Decision Making?
O Decision are at various management levels.
Top, Middle and Lower Levels
O Decision are made at various management
functions. Planning, Organizing, Directing,
and Controlling
Decision Making Process
The Decision Making Process
The Decision Making Process
1. Diagnose Problem
2. Analyze the Environment
3. Articulate Problem
4. Develop Viable Alternatives
5. Evaluate Alternatives
6. Make a Choice
7. Implement Decision
8. Evaluate and Adapt Decision Results
Diagnose Problem
Decision Making Process
 Diagnose Problem
O If a manager wants to make an intelligent
decision, his first move must be to identify
the problem.
O “Identification of the problem is tantamount
to having the problem solved..”
 Diagnose Problem
What is a Problem?
O A problem exist when there is a
difference between an actual
situation and a desired situation.
 Diagnose Problem
Example
O The actual situation of the firm is that it has
not yet constructed the building
O The desired situation is the finished 25-
storey building.
O In this case, the actual situation is different
from the desired situation
Analyze the Environment
Decision Making Process
Analyze the Environment
O The objective of environmental analysis is
the identification of constraints, which may
be spelled out as either internal or external
limitation.
Analyze the Environment
Examples
O Internal Limitation
• Limited funds available for the purchase of
equipment.
• Limited training on the part of employees.
• Ill-designed facilities.
O External Limitation
• Patents are controlled by other organization.
• A very limited market for the company’s products
and services exists.
• Strict enforcement of local zoning regulation
Analyze the Environment
O When decisions are to be made, the internal
and external limitations must be considered.
It maybe costly, later on, to alter a decision
because of a constraint that has not been
previously identified.
Analyze the Environment
Components of the Environment
O Internal Environment – refers to organizational
activities within the firm that surrounds decision
making.
Examples: Organizational, Marketing, Personnel,
Production, or Financial Aspects
O External Environment – refers to variables are
outside the organization and not typically within
short run control of top management.
Examples: Government, Labor Unions, Suppliers,
Banks, Public, Competitors, Clients, Engineers
 Analyze the Environment
Illustration of Failure to Analyze the Environment
O 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 with
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
clearances is given.
O The president decided to relocate the factory but not after much
time and money has been lost. This is a clear example of the cost
associated with management disregarding the environment when
decisions are made. In this case, the president would not consider
what resident would do.
Articulate Problem
Decision Making Process
 Articulate Problem
O Before the ways to solve the problem can be
explored, a clear articulation of the problem
has to happen.
O Discuss the problem with the members of
the organization
O Gather data and information for future
references
 Articulate Problem
O It encompasses focused and intentional
effort to provide a commonly understood
description of the problem.
O If you can’t clearly and concisely finish the
sentence, “The problem is…”, then nothing
that follows will be clear either.
Develop Viable Alternatives
Decision Making Process
Develop Viable Alternatives
O Problems may be solved by any of the
solutions offered.
O The best among the alternative solutions
must be considered by management using a
procedure with the following 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.
Develop Viable Alternatives
Illustration:
The Problem
O An engineering 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.
 Develop Viable Alternatives
Illustration:
The Engineering Firm and Its External Environments

Government
Engineers Labor Unions

Clients ENGINEERING Suppliers

FIRM

Competitors Banks
Public
Develop Viable Alternatives
Illustration:
The List of Solutions prepared by the engineering
manager shows alternative courses of action
O Improve the capacity of the firm by hiring more works
and building additional facilities
O Secure the services of subcontractors
O Buy the needed additional output from another firm
O Stop serving some of the company’s costumer
O Delay servicing some clients.
Evaluate Alternatives
Decision Making Process
 Evaluate Alternatives
O After determining the viability of the
alternatives and a revised list has been
made, an evaluation of the remaining
alternatives is necessary. This is important
because the next step involves decision
making.
 Evaluate Alternatives
How the alternatives will be evaluated:
1. Depend on the nature of the problem
2. The objectives of the firm
3. The nature of the alternatives presented
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
benefit that can be expected.
 Evaluate Alternatives
Another example of an evaluation of
alternatives is shown below:
O An engineer manager is faced with problem of
choosing between three applicants to fill up a
lone vacancy for a junior engineer. He will have
to set up certain criteria for evaluating the
applicants. If the evaluation is not done by a
professional human resource officer, then the
engineer manager will be forced to use a
predetermined criteria.
 Evaluate Alternatives:
Evaluation Sheet for the Three Alternatives
TOTAL
APPLICANTS EDUCATION TRAINING EXPERIENCE AGE
POINTS
1. Jun Well T. Del Monte 40 35 4 10 89

2. Mar Kalen A. Gur 40 36 5 9 90

3. Kim Lee G. Aspin 40 38 6 7 91

Make a Choice
Decision Making Process
 Make a Choice
O After the alternatives have been evaluated, the
decision-maker must now be ready to make a
choice. This is the point where he 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 To make the selection process easier, the
alternatives can be ranked from best to worst on
the basis of some factors like benefit, cost, or
risk.
Implement Decision
Decision Making Process
 Implement Decision
O Implementation refers to carrying out the
decision so that the objectives sought will be
achieved.
O To make Implementation effective, a plan
must be devised.
O At this stage, the resources must be made
available so that the decision may be
properly implemented.
Evaluation and Adapt
Decision Results
Decision Making Process
Evaluation and Adapt Decision
Results
O In implementing the decision, the results
expected may or may not happen. It is
therefore, important for the engineer
manager to use control and feedback
mechanisms to ensure results and to
provide information for future decisions.
O Control refers to the actions made to ensure
that activities performed match the desired
activities or goals, that have been set.
Evaluation and Adapt Decision
Results
O 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.
Decision Making Process
Basis for Decision Making
Approaches in Problem-solving
 Basis for Decision Making
O In decision making, the engineer manager is
faced with problems which may either be
simple or complex. To provide him with some
guide, he must be familiar with the following
approaches.
Qualitative Evaluation
Basis for Decision Making
 Basis for Decision Making

1. Qualitative Evaluation
O It refers to the evaluation of alternatives
using intuition and subjective judgement.
Stevenson states that managers tend to use
the qualitative approach when:
• The problem is fairly simple.
• The problem is familiar.
• The costs involved are not great.
• Immediate decisions are needed.
 Basis for Decision Making
1. Qualitative Evaluation
Example
O A factory operates on three shifts with the following schedule:
First Shift: 6:00 AM to 2:00 PM
Second Shift: 2:00PM to 10:00PM
Third Shift: 10:00PM to 6:00PM
O Each shift consist of 200 workers manning 200 machines. On
Sept. 16, 1996, the operations went smoothly until the factory
manager, an industrial engineer was notified at 1:00PM, that 5 of
the workers assigned to the second shift could not report for work
because of injuries sustained in a traffic accident while they were
on their way to the factory.
O Because of the time constraints, the manager made an instant
decision on who among the first shirt workers would work to man
the five machines.
Quantitative Evaluation
Basis for Decision Making
 Basis for Decision Making

2. Quantitative Evaluation
O It refers to the evaluation of alternatives
using any technique in a group classified as
rational and analytical
 Basis for Decision Making
2. Quantitative Evaluation
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
 Basis for Decision Making
2.1. Inventory Models
a. Economic order quantity model – this one is used
to calculate the number of items that should be
ordered at one time to minimize total yearly cost of
placing orders and carrying the items in inventory
b. Production order quantity model – economic order
quantity technique applied to production orders
c. Back order quantity model – inventory used for
planned shortages
d. Quantity discount model – used to minimize the
total cost when quantity discounts are offered by
suppliers
 Basis for Decision Making

2.2. Queuing Theory

O It is one that describes how to determine the
number of service units that will minimize
both customers waiting time and cost of
service.
O It is applicable to companies where waiting
lines are a common situation.
 Basis for Decision Making
2.3. Network Models
O These are models where large complex tasks
are broken into smaller segments that can be
managed independently.
O The 2 Most Prominent Network Models are:
1. The Program Evaluation Review Technique – a
technique which enables engineer managers to
schedule, monitor, and control large and
complex projects by employing three time
estimates for each activity
2. The Critical Path Method – a network technique
using only one time factor per activity that
enables engineer managers to schedule,
monitor, and control large and complex projects
 Basis for Decision Making
2.4. Forecasting
O It is the collection of past and current
information to make predictions about the future
2.5. Regression Analysis
O It examines the association between 2 or more
variables
O It uses data from previous periods to predict
future events
2.6. Simulation
O It is a model constructed to represent reality, on
which conclusions about real-life problems can
be used.
 Basis for Decision Making

2.7. Linear Programming

O It is a quantitative technique that is used to
produce an optimum solution within the
bounds imposed by constraints upon the
decision
2.8. Sampling Theory
O 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
 Basis for Decision Making

2.9. Statistical Decision Theory

O It is a rational way to conceptualize, analyze,
and solve problems in situations involving
limited, or partial information about the
decision environment
*End of Presentation*
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