The document outlines the decision-making process in management, emphasizing the steps from diagnosing problems to evaluating and adapting decision results. It distinguishes between internal and external environmental factors influencing decisions and discusses qualitative and quantitative approaches for evaluating alternatives. Various quantitative models such as inventory management, queuing theory, and regression analysis are also described as tools for effective decision-making.

1. DECISION MAKING

2.  Decision Making- the process of identifying
and choosing alternative courses of action in a
manner appropriate to the demands of
the situation.
- the heart of all the management
function.
 Decision are at various management levels. TOP ,
MIDDLE and LOWER LEVELS
 Decision are made at various management
functions. PLANNING, ORGANIZING, DIRECTING,
and CONTROLLING.

3. THE DECISION MAKING PROCESS
 Diagnose Problem
 Analyze environment
 Articulate problem or opportunity
 Develop viable alternatives
 Evaluate alternatives
 Make a choice
 Implement decision
 Evaluate and adapt decision results

4. DIAGNOSE PROBLEM
 If a manager wants to make an intelligent
decision, his 1st
move must be to identify the
problem.
 A problem exist when there is a difference
between an actual situation and desired
situation.

5.  Example : the actual situation of the firm is that
it has not yet constructed the building
 Example: the desired situation is the finished
25-storey building.
 In this case, the actual situation is different
from the desired situation

6. ANALYZE THE ENVIRONMENT
 The objective of environmental analysis is
the identification of constraints, which may
be spelled out as either internal or external
limitation.
* Internal limitation
1. limited funds available for the purchase
of equipment.
2. limited training on the part of
employees.
3. ill-designed facilities.

7. • External limitation:
1. Patents are controlled by other organization.
2. A very limited market for the company’s
products and services exists.
3.Strict enforcement of local zoning regulation.

8. COMPONENTS OF THE ENVIRONMENT
 Internal Environment – refers to the
organizational activities within a firm
that surrounds decision-
making.
 External Environment – refers to variables that
are outside the organization and not
typically within the short-run
control of top management.

9. DEVELOP VIABLE ALTERNATIVES
 The best among the alternative solutions must
be considered by management using a
procedure with the ff. 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.

10. THE ENGINEERING FIRM AND ITS EXTERNAL
ENVIRONMENT
Government
Engineers Labor Unions
Clients Suppliers
Competitors Banks
Public
ENGINEERING
FIRM

11.  The list of solutions prepared by the engineering
manager shows alternative courses of action:
1. improve the capacity of the firm by hiring
more workers and building additional facilities.
2. Secure the services of subcontractors;
3. Buy the needed additional output from another
firm.
4. Stop serving some of the company’s customers;
5. Delay servicing some clients.

12. EVALUATE ALTERNATIVE
 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.
• Each alternative must be analyzed and evaluated
in terms of its value, cost, and risk
characteristics.*
• The value of the alternatives refers to benefit
that can be expected

13. MAKE A CHOICE
 Choice – Making – refers to the process of
selecting among alternatives representing
potential solutions to a problem.
* To make selection process easier, the
alternatives can be ranked from best to worst
on the basis of some factors like benefit, cost,
or risk.*

14. IMPLEMENT DECISION
 Implementation
– refers to carrying out the
decision so that the
objectives sought will be achieved.
- to make Implementation
effective, a plan must be
devised.

15. EVALUATE AND ADAPT DECISION
RESULT
 Important for the manager to use control and
feedback mechanisms to ensure results and to provide
information for future decisions.
Feedback – refers to the process which
requires checking at each stage of the process
to assure that the alternatives generated.
Control – refers to the actions made to ensure that
activities performed match the desired
activities or goals, that have been set.

16. APPROACHES IN SOLVING PROBLEMS
 Qualitative evaluation – refers to the evaluation
of alternatives using intuition and subjective
judgement. 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.

17.  Example of an evaluation using the qualitative
approach:
A factory operates on 3 shifts with the ff. schedule:
First shift - 6:00A.M. to 2:00P.M.
Second shift - 2:00 P.M. to 10:00 P.M.
Third shift - 10:00 P.M.to 6:00 P.M.
Because of time constraints, the manager made an
instant decision on who among the 1st
shift workers
would work overtime to man the five machines.

18. Each shift consist of 200 workers/200
machines. That day the operations went
smoothly until the factory manager, an
industrial engineer, was notified at 1:00 P.M.
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.

19. APPROACHES IN SOLVING PROBLEM
 Quatitative evaluation
- this term refers to the
evaluation of alternatives using any technique
in a group classified as rational and analytical

20. QUANTITATIVE MODELS FOR DECISION MAKING
 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

21. QUANTITATIVE MODELS FOR DECISION MAKING
 Inventory Models :
1. Economic order quantity model – this one
is used to calculate the number of items
that should be ordered at one time.
2. Production order quantity model – this is an
economic order quantity technique
applied to production orders.

22. QUANTITATIVE MODELS FOR DECISION MAKING
* Inventory Models
3. Back order inventory model – this is 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.

23. QUANTITATIVE MODELS FOR DECISION MAKING
 Queuing Theory – is one that describes how
to determine the number of service
units that will minimize both customers
waiting time and cost of service.
- applicable to companies
where waiting lines are a common
situation.

24. QUANTITATIVE MODELS FOR DECISION MAKING
 Network Models – these are models where large
complex tasks are broken into smaller segments
that can be managed independently.
The 2 most prominent network models are:
1. The Program Evaluation Review Technique – a
technique w/c 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 – this is a network
technique using only one time factor per activity
that enables engineer managers to schedule,

25. QUANTITATIVE MODELS FOR DECISION MAKING
 Forecasting - the collection of past and current
information to make predictions
about the future
 Regression Analysis– examines the association
between 2 or more variables. It uses
data from previous periods to
predict future events.
 Simulation – is a model constructed to
represent reality, on w/c conclusions about
real-life problems can be used.

26. QUANTITATIVE MODELS FOR DECISION MAKING
 Linear Programming – is a quantitative
technique that is used to produce an optimum
solution within the bounds imposed by
constraints upon the decision.
 Sampling Theory – 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.

27. QUANTITATIVE MODELS FOR DECISION MAKING
 Statistical Decision-Theory
- rational way to conceptualize,
analyze, and solve problems in situations
involving limited, or partial information about
the decision environment.