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Decide Whether Or
Not toTake
Precautions in
Production Process
Author: Anthony Mok
Date: 16 Nov 2023
Email: xxiaohao@yahoo.com
An Application of Decision
Tree in Decision Making
3/31/2024 Annual Review 2
Agenda
• Brief On Decision Tree & Its Use For Prediction
• Project’s Objectives
• Context, Risks & Mitigation Cost
• Strategies For Modelling & Data Analysis
• Findings & Conclusions
16 November 2023 An Application of Decision Tree in Decision Making
3/31/2024 Annual Review 3
DecisionTree
▪ A diagram that shows a sequence of decisions and
their possible outcomes
▪ Used to help make decisions by breaking down a
complex problem into smaller, easier-to-manage
steps
▪ Often used in machine learning, where they can be
used to make predictions about data
▪ Useful as they are:
• Are easy to understand and interpret
• Can handle complex problems
• Can be used with different types of data
16 November 2023 An Application of Decision Tree in Decision Making
Project Goal
Use Decision Tree to Decide
Whether Or Not to Invest in a
Simulation to Predict the
Possibility of Production Failure
Before Deciding on Spending on
Additional Precautions in the
Manufacturing Process
3/31/2024 Annual Review 5
Context, Risks & Mitigation Cost
• Company A, a sports company based in Country
B, signed a deal worth $5.5 million with Company
C to install sports courts and golf courses
• Z, the lead manager, is confident in Company A's
ability to meet Company C’s expectations, but is
concerned with the risks of installation faults
• Company A’s past experience suggests that 95%
of project failures occur during the final
installation phase
• Under normal production techniques, Company
A can produce and install all products for $5
million, but there is a 6% chance of not meeting
measurement specifications
• If the products fail to meet specifications, they
must be returned back to Country B for
modification and reinstallation at a cost of $600k
16 November 2023 An Application of Decision Tree in Decision Making
• For an additional of $250k to ensure no errors,
Company A could test its products prior to the
installation
• The Test and Evaluation Manager approached Y
to look into using simulation to predict the
possibility of failure before deciding on spending
on additional precautions
• Building a simulation model will cost $33k, which
will give a positive or negative rating
• If the product is all right, the chance of testing
Positive is 90%. If it is not all right, the chance of
testing Negative is 65%
• If Company A fails to meet customer
expectations, it may lose $200k in goodwill and
reputation
3/31/2024 Annual Review 6
Probabilities of Naive Bayes
Known Probabilities
▪ Probability that the product will meet the
measurement specifications = P(OK)
▪ Probability that the product will not meet the
measurement specifications = P(NOK)
▪ Probability that the product will test positive
given that it meets the measurement
specifications = P(+ve|OK)
▪ Probability that the product will test negative
given that it does not meet the
measurement specifications = P(-ve|NOK)
Calculate Probabilities
▪ Probability that the product will test positive
= P(+ve)
▪ Probability that the product will test negative
= P(-ve)
▪ Also to calculate: P(-ve|OK), P(+ve|NOK),
P(OK|+ve), P(NOK|+ve), P(OK|-ve), &
P(NOK|-ve)
16 November 2023 An Application of Decision Tree in Decision Making
3/31/2024 Annual Review 7
Set-up the Calculations
16 November 2023 An Application of Decision Tree in Decision Making
3/31/2024 Annual Review 8
Findings
16 November 2023 An Application of Decision Tree in Decision Making
3/31/2024 Annual Review 9
16 November 2023 An Application of Decision Tree in Decision Making
Fitting Findings toTree
Conclusion*
▪ To apply normal production
techniques WITHOUT
conducting simulation
▪ Since the probability of Positive
Outcome without conducting the
Simulation is higher than doing it
▪ Since the probability of Negative
Outcome without the Simulation is
lower than doing it
* More details on the conclusion are found in the project
report, which are not released at the request of Company A
Decide Whether Or
Not toTake
Precautions in
Production Process
Author: Anthony Mok
Date: 16 Nov 2023
Email: xxiaohao@yahoo.com
An Application of Decision
Tree in Decision Making

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Decision Making Under Uncertainty - Decide Whether Or Not to Take Precautions

  • 1. Decide Whether Or Not toTake Precautions in Production Process Author: Anthony Mok Date: 16 Nov 2023 Email: xxiaohao@yahoo.com An Application of Decision Tree in Decision Making
  • 2. 3/31/2024 Annual Review 2 Agenda • Brief On Decision Tree & Its Use For Prediction • Project’s Objectives • Context, Risks & Mitigation Cost • Strategies For Modelling & Data Analysis • Findings & Conclusions 16 November 2023 An Application of Decision Tree in Decision Making
  • 3. 3/31/2024 Annual Review 3 DecisionTree ▪ A diagram that shows a sequence of decisions and their possible outcomes ▪ Used to help make decisions by breaking down a complex problem into smaller, easier-to-manage steps ▪ Often used in machine learning, where they can be used to make predictions about data ▪ Useful as they are: • Are easy to understand and interpret • Can handle complex problems • Can be used with different types of data 16 November 2023 An Application of Decision Tree in Decision Making
  • 4. Project Goal Use Decision Tree to Decide Whether Or Not to Invest in a Simulation to Predict the Possibility of Production Failure Before Deciding on Spending on Additional Precautions in the Manufacturing Process
  • 5. 3/31/2024 Annual Review 5 Context, Risks & Mitigation Cost • Company A, a sports company based in Country B, signed a deal worth $5.5 million with Company C to install sports courts and golf courses • Z, the lead manager, is confident in Company A's ability to meet Company C’s expectations, but is concerned with the risks of installation faults • Company A’s past experience suggests that 95% of project failures occur during the final installation phase • Under normal production techniques, Company A can produce and install all products for $5 million, but there is a 6% chance of not meeting measurement specifications • If the products fail to meet specifications, they must be returned back to Country B for modification and reinstallation at a cost of $600k 16 November 2023 An Application of Decision Tree in Decision Making • For an additional of $250k to ensure no errors, Company A could test its products prior to the installation • The Test and Evaluation Manager approached Y to look into using simulation to predict the possibility of failure before deciding on spending on additional precautions • Building a simulation model will cost $33k, which will give a positive or negative rating • If the product is all right, the chance of testing Positive is 90%. If it is not all right, the chance of testing Negative is 65% • If Company A fails to meet customer expectations, it may lose $200k in goodwill and reputation
  • 6. 3/31/2024 Annual Review 6 Probabilities of Naive Bayes Known Probabilities ▪ Probability that the product will meet the measurement specifications = P(OK) ▪ Probability that the product will not meet the measurement specifications = P(NOK) ▪ Probability that the product will test positive given that it meets the measurement specifications = P(+ve|OK) ▪ Probability that the product will test negative given that it does not meet the measurement specifications = P(-ve|NOK) Calculate Probabilities ▪ Probability that the product will test positive = P(+ve) ▪ Probability that the product will test negative = P(-ve) ▪ Also to calculate: P(-ve|OK), P(+ve|NOK), P(OK|+ve), P(NOK|+ve), P(OK|-ve), & P(NOK|-ve) 16 November 2023 An Application of Decision Tree in Decision Making
  • 7. 3/31/2024 Annual Review 7 Set-up the Calculations 16 November 2023 An Application of Decision Tree in Decision Making
  • 8. 3/31/2024 Annual Review 8 Findings 16 November 2023 An Application of Decision Tree in Decision Making
  • 9. 3/31/2024 Annual Review 9 16 November 2023 An Application of Decision Tree in Decision Making Fitting Findings toTree Conclusion* ▪ To apply normal production techniques WITHOUT conducting simulation ▪ Since the probability of Positive Outcome without conducting the Simulation is higher than doing it ▪ Since the probability of Negative Outcome without the Simulation is lower than doing it * More details on the conclusion are found in the project report, which are not released at the request of Company A
  • 10. Decide Whether Or Not toTake Precautions in Production Process Author: Anthony Mok Date: 16 Nov 2023 Email: xxiaohao@yahoo.com An Application of Decision Tree in Decision Making