DECISION-MAKING company’s products and services exists, (3) Strict

enforcement of local zoning regulations.

Components of Environment:
WHAT IS DECISION-MAKING?
1. Internal Environment- refers to organizational
Decision-making may be defined as the process of activities within a firm that surrounds decision-
identifying and choosing alternative courses of action in making.
a manner appropriate to the demands of the situation. 2. External Environment- refers to variables that
are outside the organization and not typically
The definition indicates that the engineer manager must
within the short-run control of top management.
adapt a certain procedure designed to determine the
best option available to solve certain problems. Develop Viable Alternatives

Decisions are made at various management levels (i.e., This is made possible by using a procedure with the
top, middle, and lower levels) and at various following steps:
management functions (i.e., planning, organizing,
directing, and controlling). Decision-making, according to 1. Prepare a list of alternative solutions
Nickels and others, is the heart of all management 2. Determine the viability of each solutions
funtions. 3. Revise the list by striking out those which are
not viable
THE DECISION-MAKING PROCESS
Evaluate Alternatives
Rational decision-making, according to David H. Holt, is
a process involving the following steps: After determining the viability of the alternatives and
revised list has been made, an evaluation of the
1. Diagnose problem remaining alternatives is necessary. This is important
2. Analyze environment because the next step involves making a choice. Proper
3. Articulate problem or opportunity evaluation makes choosing the right solution less difficult.
4. Develop viable alternatives
5. Evaluate alternatives Make a Choice
6. Make a choice
7. Implement decision Choice-making refers to the process of selecting among
8. Evaluate and adapt decision results alternatives representing potential solutions to a problem.
At this point, particular effort should be made to identify
Diagnose Problem all significant consequences of each choice.

If a manager wants to make an intelligent decision, his Implement Decision

first move must be to identify the problem. If the
manager fails in this aspect, it is almost impossible to Implementation refers to carrying out the decision so that
succeed in the subsequent steps. An expert once said the objectives sought will be achieved. To make
“identification of the problem is tantamount to having the implementation effective, a plan must be devised. At this
problem half-solved.” stage, the resources must be made available so that the
decision may be properly implemented.
Analyze the Environment
Evaluate and Adapt Decision Results
The objective of environmental analysis is the
identification of constraints, which may be spelled out as Feedback- refers to the process which requires checking
either internal or external limitations. at each stage of the process to assure that the
alternatives generated, the criteria used in evaluation,
Internal limitations: (1) Limited funds available for the and the solution selected for implementation are in
purchase of equipment, (2) Limited Training on the part keeping with the goals and objectives originally specified.
of employees, (3) Ill-designed facilities.
Control- refers to actions made to ensure that activities
External limitations: (1) Patents are controlled by other performed match the desired activities or goals that have
organizations, (2) A very limited market for the been set.
In this last stage of decision-making process, the Network Models
engineer manager will find out whether or not the
desired result is achieved. 1. The Program Evaluation Review Technique
(PERT)- a technique which enables engineer
APPROACHES IN SOLVING PROBLEMS managers to schedule, monitor, and control
large and complex projects by employing three
1. Qualitative Evaluation time estimates for each activity.
This term refers to evaluation of alternatives 2. The Critical Path Method (CPM)- this is a
using intuition and subjective judgment. network technique using only one time factor per
Stevenson states that managers tend to use the activity that enables engineer managers to
qualitative approach when: schedule, monitor, and control large and
a. The problem is fairly simple. complex projects.
b. The problem is familiar.
c. The costs involved are not great. Forecasting
d. Immediate decisions are needed.
2. Quantitative Evaluation Forecasting may be defined as the collection of past and
This term refers to the evaluation of alternatives current information to make predictions about the future.
using any technique in a .group classified as
Regression Analysis
rational and analytical.
It is a forecasting method that examines the association
QUANTITATIVE MODELS FOR DECISION MAKING
between two or more variables. It uses data from
1. Inventory models previous periods to predict future events.
2. Queuing theory
Simulation
3. Network models
4. Forecasting Simulation is a model constructed to represent reality, in
5. Regression analysis which conclusions about real-life problems can be used.
6. Simulation It is a highly sophisticated tool by means of which the
7. Linear programming decision maker develops mathematical model of the
8. Sampling theory system under consideration.
9. Statistical decision theory
Linear Programming
Inventory Models
Linear programming is a quantitative technique that is
1. Economic order quantity model- this one is used used to produce an optimum solution within the bounds
to calculate the number of items that should be imposed by constraints upon the decision.
ordered at one time to minimize the total yearly
cost of placing orders and carrying the items in Sampling Theory
inventory.
2. Production order quantity model- this is an Sampling theory is a quantitative technique where
economic order quantity technique applied to samples of populations are statistically determined to be
production orders. used for a number of processes, such as quality control
3. Back order inventory model- this is an inventory and marketing research.
model used for planned shortages.
Statistical Decision-Theory
4. Quantity discount model- an inventory model
used to minimize the total cost when quantity Decision theory refers to the rational way to
discounts are offered by suppliers. conceptualize, analyze, and solve problems in situations
involving limited or partial information about the decision
Queuing Theory
environment.
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.