PHILIPPINE STATE COLLEGE OF AERONAUTICS

INSTITUTE OF ENGINEERING AND TECHNOLOGY

AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

LEARNING
MODULE 02:
Decision Making

AE 322 -
ENGINEERING MANAGEMENT

Prepared by:
AERONAUTICAL ENGINEERING DEPARTMENT

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

TABLE OF CONTENTS
Title Ref. no Page
INTRODUCTION 1 5
1. DECISION MAKING 1,2 5
2. DECISION-MAKING AS A MANAGEMENT RESPONSIBILITY 1 6
3. DECISION-MAKING PROCESS 1,2 8
4. APPROACHES IN SOLVING PROBLEMS 1,3 15
5. QUANTITATIVE MODELS FOR DECISION MAKING 1,4 16
APPENDIX A: RUBRIC 23

TIME COMMITMENT FOR THIS MODULE

Video Materials Time
https://www.youtube.com/watch?v=2tCYy66CyuQ 8 Minutes
Online Meeting WEEK 4 100 Minutes
Reading Materials
INTRODUCTION 2 Minutes
1. DECISION MAKING 2 Minute
2. DECISION-MAKING AS A MANAGEMENT RESPONSIBILITY 2 Minutes
3. DECISION-MAKING PROCESS 15 Minutes
4. APPROACHES IN SOLVING PROBLEMS 5 Minutes
5. QUANTITATIVE MODELS FOR DECISION MAKING 15 Minutes
Module Activities
Learning Activity 1 10 Minutes
Learning Activity 2 5 Minutes
Learning Activity 3 15 Minutes
Mastery Check 20 Minutes
Module Review Questions 15 Minutes
Outside Module Activities
Quiz No. 2 30 Minutes
Assignment/Research Document 70.4 Minutes

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

LIST OF REFERENCES
References
No.
Roberto Medina, Engineering Management from
https://www.academia.edu/35813394/Engineering_Management_by_Roberto_Me 1
dina
University of Massachusetts, Decision-Making Process, retrieved from
https://www.umassd.edu/fycm/decision-
2
making/process/#:~:text=Decision%20making%20is%20the%20process,relevant
%20information%20and%20defining%20alternatives.
The Quantitative Approach to Decision Making: Methods, Purpose & Benefits.
(2017, July 27). Retrieved from https://study.com/academy/lesson/the- 3
quantitative-approach-to-decision-making-methods-purpose-benefits.html.
Toppr, Decision Making – Quantitative Techniques of Decision Making, Retrieved
from https://www.toppr.com/guides/fundamentals-of-economics-and- 4
management/decision-making/quantitative-techniques-of-decision-making/

LIST OF FIGURES
FIGURES References

Roberto Medina, Engineering Management from

Fig. 3.1, 3.2
https://www.academia.edu/35813394/Engineering_Management_by_Ro
berto_Medina

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

LEARNING OUTCOMES

Course Learning Outcomes (CLO]

CLO1. Develop understanding in the
fields of engineering management by Module Learning Outcomes [MLO]
the principles of the personalities and MLO 1. Describe decision-making as
legal aspects of engineering. a management responsibility in an Topic Learning Outcomes [TLO]
CLO2. Evaluate decision-making as a essay.
TLO4. Familiarize with the decision-
management responsibility of an MLO 2. Create a flowchart of the making process by creating flow chart
organization using the flow chart and decision-making process following the of the steps.
different techniques of decision- steps of decision-making procedure,
making process. showing conditions of achieving and TLO5 Identify the techniques in
not achieving the rightful results. decision-making by classification of
CLO3. Understand the need for the different quantitative models and
effective project management skills, MLO 3. Identify the quantitative approaches in solving problems.
training, ang the specific training techniques in decision-making by
needs of project managers for the classification of the different TLO6. Evaluate an example problem
success of project management. quantitative models for decision using qualitative approach.
CLO12 Demonstrate ability to making.
collaborate within a diverse group of
people through modular activities and
research documents.
CLO13. Display Professional
commitment by complying with the
academic requirements such as
assignments, reasearch papers, and
other modular activities.

OVERVIEW

This module discusses about the decision making as a management responsibility,

decision making process, approaches in solving problems in engineering management and the
qualitative models in decision-making.

As an introductory activity, you are encouraged to watch a short video entitled “How
To Improve Decision Making Skills | Decision Making Process”, using the following link:
https://www.youtube.com/watch?v=2tCYy66CyuQ shows a discussion about the basic
principles of decision making. The speaker also discusses the factors affecting why we make
poor decisions and as well as the tips on making good decisions. Now, to get you acquainted
with the terms as well as concepts presented in the video, let us start our discussion with the
important terminologies in Decision Making.

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

INTRODUCTION
Managers of all kinds, including the engineer manager, are mainly responsible for providing
leadership in the effort to achieve the goals of an organization. He must learn the
complexities of decision-making if he is to become effective.

An engineer must make choices in order to design a product or a system or to schedule an

operation. The engineer determines that a certain material will be used for a component,
will have a certain form, and will be made in a certain manner. The engineer decides how
the work will be carried out, who will perform what tasks, and when they will be completed.
There are several potential options, and one must be chosen by the engineer. The nature of
decision making is this.

Many times, he will encounter circumstances in which he will have to choose between
multiple options. Whatever his choice, it will have effects, immediate or otherwise, in the
operations of this organization.

The decision-making skills of the engineering manager would be very important to his
success as a professional. A major blunder in decision-making may be sufficient to cause the
destruction of any organization. On the other hand, successful decisions would create the
right atmosphere for consistent development and progress.

1. DECISION MAKING
- Decision-making may be defined as “the process of identifying and choosing
alternative courses of action in a manner appropriate to the demands of the
situation.”
- Decision-making, according to Nickels and others, “is the heart of all the
management functions.”
- Decision making is the way of making choices by establishing a decision,
collecting data, and analyzing alternative resolutions. By arranging relevant
information and identifying options, using a step-by - step decision-making
approach will help you make more deliberate, reflective decisions. This technique
increases the chances of selecting the most rewarding option possible.

CONDITIONS FOR MAKING A DECISION

In order to make a decision you:

• MUST have at least two (2) choices from which to choose (to do or not to do)
• MUST involve something that is achievable
• MUST have the POWER to decide

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

2. DECISION-MAKING AS A MANAGEMENT RESPONSIBILITY

Decisions need to be taken at different levels in an organization. They are often produced at
different stages of the management process. If certain resources must be used, someone
must make a decision authorizing certain persons to appropriate such resources.

The engineering manager is responsible for decision-making. For executives, it is

understandable to make incorrect choices at times. As soon as they are identified, the wise
manager will correct them. The bigger issue is the manager who cannot or do not want to
make decisions. Delaney concludes that this type of managers are dangerous and “should
be removed from their position as soon as possible”.

Management must try to choose a choice as reliably as possible. As they have the authority,
they are accountable for whatever result their choices carry. The higher the level of
management, the greater and more complex the decision-making becomes.

Example:

The production manager of a certain organization has received a written order from a
section head about the procurement of an air conditioning unit. Almost simultaneously,
another request from another segment was forwarded to him requiring the purchase of a
forklift. His superior told the manufacturing manager that he could only purchase one of the
two requested products 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 choice.

Decisions are made at various management levels (i.e., top, middle, and lower levels) and at
various management functions (i.e., planning, organizing, directing, and controlling).

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

LEARNING ACTIVITY 1
Accomplish the following activities in an “8.5 x 11” word document.

1) Define the term “Decision-making” in your own words.*

2) Explain how does decision-making becomes a management responsibility.*
3) Enumerate the conditions in order to make a decision.

*Refer to page 30 Appendix A for the rubric

HONESTY CLAUSE

The students are expected to accept and maintain principles of intellectual and academic integrity
as members of the academic community. The state college expects the students to be honest as
a basic and minimum standard of conduct in academic matters and that they only submit
the outputs of their own efforts for credit.

For Submission: Kindly attach the file on our Google Classroom with a file name
“Module 2 – Learning Activity 1 – (Surname)”.

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 PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

3. DECISION-MAKING PROCESS
Rational decision-making, according to David H. Holt, is a process involving the following
steps:

1. Diagnose problem
2. Analyze environment
3. Develop viable alternatives
4. Evaluate alternatives
5. Make a choice
6. Implement decision
7. Evaluate and adapt decision results

1. DIAGNOSE PROBLEM

If a manager wishes to make an intelligent decision, finding the issue must be his first
move. It is almost impossible to succeed in the subsequent steps if the manager fails
in this aspect. An expert once said “identification of the problem is tantamount to
having a problem half-solved.”

What is Problem?

A problem exist when there is a difference between an actual situation and a desired
situation. For instance, the management of a construction company entered into a
contract with another party for the construction of a 25-storey building on a certain
site.

The actual situation of the firm is that it has not yet constructed the building. The
desired situation is the finished 25-story. In this case, the actual situation is different
from the desired situation. The company, therefore, has a problem and that is, the
construction of 25-storey building.

2. ANALYZE THE ENVIRONMENT

In the success or failure of such an organization, the environment where the

organization is located plays a very important role. It is, therefore, very necessary that
an environmental review be conducted. The objective of environmental analysis is the
identification of constraints, which may be spelled out as either internal or external
limitations.

Example of internal limitations are as follows:

1. Limited Funds available for the purchase of equipment.

2. Limited training on the part of employees.
3. Ill-designed facilities.

Examples of external limitations are as follows:

1. Patents are controlled by other organization.

2. A very limited market for the company’s products and services exist.

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

3. Strict enforcement of local zoning regulations.

When decisions are to be made, the internal and external limitations must be
considered. It may be costly, later on, to alter a decision because of a constraint that
has not been previously identified.

An illustration of failure to analyse the environment is as follows:

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 measure
that no clearance is given.

The president decided to relocate the factory but not after much time and money has
been lost. This is clear example of the cost associated with management disregarding
the environment when the decisions are made. In this case, the president did not
consider what the residents could do.

Components of the Environment

The environment is consist of two major concerns:

1. Internal and
2. External

The internal environment refers to organizational activities within a firm that surrounds
decision-making. Shown in Figure 3.1 are the important aspects of the internal
environment.

The external environment refers to factors that are outside of the organization and not
usually under top management's short-run supervision. Figure 3.2 shows the forces
comprising the external environment of the firm.

3. DEVELOP VIABLE ALTERNATIVES

Sometimes, any of the solutions offered could solve problems. You will possibly find
many potential courses of action, or alternatives, as you gather information.
Management must consider the best one among the alternative solutions. You can
also use your imagination and additional information to construct new alternatives.

This is made possible by 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.

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

THE ENGINEERING FIRM

INTERNAL ENVIRONMENT

Organizational Aspects

Like org. structure, policies,

procedures, rules, ability of EXTERNAL
management, etc. ENVIRONMENT
Marketing Aspects

Like product strategy,

promotion strategy, etc.
DECISION
Personnel Aspects

Like recruitment practices,

incentive systems, etc.
EXTERNAL
Production Aspects
ENVIRONMENT
Like plant facility layout,
inventory control, etc.

Financial Aspects

Like liquidity, profitability,

etc.

Figure 3.1 The Engineering Firm and the Internal Environment in Decision-
Making.

Government
Engineers Labor Unions

Clients ENGINEERING FIRM Suppliers

Competitors Banks
Public
Figure 3.2 The Engineering Firm and its External Environment.

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

Sample:

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.

The list of solutions prepared by the engineering manager shows the following
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.

The list was revised and only the first three were deemed to be viable. The last two
were deleted because of adverse effects in the long-run profitability of the firm.

4. EVALUATE ALTERNATIVES

An assessment of the remaining alternatives is required after the viability of the

alternatives has been determined and a revised list has been made. This is important
because the next step involves making a choice. Proper assessment makes it less
difficult to select the best option.

How the alternatives would be assessed depends on the nature of the problem, the
company's objectives, and the nature of the provided alternatives. Souder suggests
that “each alternative must be analysed and evaluated in terms of its value, cost, and
risk characteristics.

The value of the alternatives refers to benefits that can be expected. An example may
be described as follows: a net profit of ₱10 million per year if the alternative is chosen.

The cost of the alternative refers to out-of-pocket costs (like ₱100 million for
construction of facilities), opportunity costs (like the opportunity to earn interest of ₱2
million per year if money is invested elsewhere), and follow-on costs (like ₱3 million
per year for maintenance of facilities constructed).

The risk characteristics refer to the likelihood of achieving the goals of the alternatives.
If the probability of a net profit of ₱10 million is only 10 percent, then the decision-
maker may opt to consider an alternative with a ₱5 million profit but with an 80
percent probability of success.

Another example of an evaluation of alternatives is shown below:

An engineering manager is faced with a dilemma of choosing between three

candidates to fill a junior engineer's lone vacancy. For the assessment of the
applicants, he will have to set those criteria. If a professional human resources officer
does not conduct the assessment, then the engineering manager will be required to
use a predetermined criterion.

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

A typical evaluation of job applicants will appear as follows:

EVALUATION SHEET
Title of Vacant Position: JUNIOR ENGINEER
Date of Evaluation: December 28, 1996
Applicant Education Training Experience Age Total Points

1. Jose Sibayan, Jr. 40 35 4 10 89

2. Menandro Rillon 40 36 5 9 90
3. Dante dela Cruz 40 38 6 7 91

Evaluator:

Edgardo J. Viloria
Manager
Engineering Division III

5. MAKE A CHOICE

The decision-maker must now be able to make a choice after the alternatives have
been assessed. This is the point at which he needs to be persuaded that all the prior
steps have been properly taken.

Choice-making refers to the practice of choosing between alternatives that constitute

possible solutions to a problem. Webber advises that “…particular effort should be
made to identify all significant consequences of each choice.”

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.

6. IMPLEMENT DECISION

Implementation follows after a decision has been made. This is important, otherwise
the decision-making will be an empty gesture.

Implementation refers to carrying out the decision so that the objectives sought will be
achieved. To make implementation effective, a plan must be devised.

The resources must be made available at this stage, so that the decision can be
properly enforced. According to Aldag and Stearns, those who will be involved in
implementation must understand the solution and support it.

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

7. EVALUATE AND ADAPT DECISION RESULTS

The outcomes predicted may or may not occur in enforcing the decision. Consider the
outcomes of your decision in this final phase and decide whether or not the need you
have defined in Step 1 has been resolved. You would want to repeat those steps of
the process to make a new decision if the decision has not fulfilled the specified need.
In order to ensure performance and to provide information for future decisions, it is
therefore necessary for the manager to use control and feedback mechanisms.

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.

Control refers to steps taken to ensure that the tasks conducted adhere to the
intended activities or set goals.

In this last stage of decision-making process, the engineer manager will find out
whether or not the desired outcome was accomplished. If the desired outcome is
obtained, it is safe to conclude that the decision taken was successful. Ferrell and
Hirt say that further research is required if it has not been achieved.

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

LEARNING ACTIVITY 2
Accomplish the following activities in an “8.5 x 11” word document.

Create a flow chart of the decision-making process, considering the conditions of

achieving and not achieving the desired results.

Desired results
? not achieved In what step did
the error occur?

Desired results
achieved ?

HONESTY CLAUSE

The students are expected to accept and maintain principles of intellectual and academic integrity
as members of the academic community. The state college expects the students to be honest as
a basic and minimum standard of conduct in academic matters and that they only submit
the outputs of their own efforts for credit.

For Submission: Kindly attach the file on our Google Classroom with a file name
“Module 2 – Learning Activity 2 – (Surname)”.

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

4. APPROACHES IN SOLVING PROBLEMS

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:

1. Qualitative evaluation, and

2. Quantitative evaluation

Qualitative Evaluation

This term refers to the assessment using intuition and subjective judgement for
alternatives. 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/ low cost.
4. Immediate decisions are needed.

An example of an evaluation using qualitative approach is as follows:

A factory operates on three shifts with the following schedule:

• First shift – 6:00 A.M. to 2:00 P.M.

• Second shift – 2:00 P.M. to 10:00 P.M.
• Third Shift – 10:00 P.M. to 6:00 A.M.

Each shift consist of 200 workers manning 200 machines. On September 16, 1996, the
operations went smoothly until the factory manager, an industrial engineer, was notified
at 1:00 P.M. that five 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.

Because of time constraints, the manager made an instant decision on who among the
first shift workers would work overtime to man the five machines.

Quantitative Evaluation

This term refers to the evaluation of alternatives using any technique in a group
classified as rational and analytical.

BENEFITS OF QUANTITATIVE APROACH

Project management uses a variety of quantitative methods when conducting planning,

scheduling, forecasting, and controlling functions, similar to operations management.
The main aim of the quantitative method is to make an optimal decision in a situation
where the probability of all outcomes is uncertain, using mathematical and statistical
models.

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

When the problem is well defined, several solutions exist, and decision outcomes are
easily observable, the quantitative approach to decision-making provides the best
outcomes. In the event, however, that many external variables are beyond the
influence of the decision-maker and their probability is uncertain, the quantitative
methods can become unreliable.
Quantitative approach techniques, especially the ones relying on statistical software,
have the advantage of suggesting the best solution to the problem without even
identifying all possible alternatives. This feature is quite useful in problems where the
number of possible alternatives is very large though only a few are worth considering
for selection. Once the problem and conditions are defined, the decision-making process
becomes quick.

5. QUANTITATIVE MODELS FOR DECISION MAKING

The types of quantitative techniques which may be useful in decision-making are as
follows:

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

A. INVENTORY MODELS

Inventory models consist of several types all designed to help the engineer manager
are decisions regarding inventory. They are as follows:

1. Economic order quantity model

This one is used to calculate the number of items that should be ordered at
one time to minimize the total yearly cost of placing orders and carrying the
items in inventory.
2. Production order quantity model
This is an economic order quantity technique applied to production orders.
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.

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

B. QUEUING THEORY

Every business often suffers waiting for periods or queues pertaining to personnel,
equipment, resources or services.

The queuing theory is one that describes how to determine the number of service
units that will minimize both customer waiting time and cost service.

The queuing theory is applicable to companies where waiting lines are common
situation. Examples are cars waiting for service at a car center, ships and barges
waiting at the harbour for loading and unloading buy dockworkers, programs to be
run in a computer system that processes jobs, etc.

The aim of this theory is to minimize such waiting periods and also reduce
investments on such expenses.

C. NETWORK MODELS

These are models in which large, complex tasks are divided into smaller segments
that can be independently managed in order to avoid wasting time, energy and
money. This technique aims to solve this by creating strong network structures for
work.

The two most prominent network models are:

1. The Program Evaluation Review Technique (PERT) – A technique that helps

engineers and executives to plan, track and manage large and complex
projects by using three time estimates for each task.
2. The Critical Path Method (CPM) – this is a network technique using only one
time factor per activity that enables engineer managers to schedule,
monitor, and control large and complex projects.

D. FORECASTING

There are times where engineering executives make choices that will have
repercussions in the future. For example, a manufacturing firm must put up a
capacity that is sufficient over the next 12 months to generate the demand
requirements of customers. As such, before the start of operations, manpower and
equipment must be procured. In order to make capacity decisions more accurate,
data on the demand requirements for the next 12 months must be given to the
engineering manager. It is possible to derive this type of information by forecasting.

Forecasting may be defined as “the collection of past and current information to

make predictions about the future”.

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

E. REGRESSION ANALYSIS

The regression model is a method of forecasting which examines the relation

between two or more variables. To forecast future events, it utilizes data from
previous times.

Regression analysis may be simple or multiple depending on the number of

independent variables present. When one independent variable is involved, it is
called simple regression; when two or more independent variables are involved, it is
called multiple regression.

F. SIMULATION

Simulation is a model constructed to represent reality, on which conclusions about

real-life problems can be used. It is a highly sophisticated tool by means of which the
decision maker develops a mathematical model of system under consideration.

Simulation does not guarantee an optimal solution, but the alternatives introduced
into the model, by the decision-maker, can be evaluated. They therefore finalize the
decision that is likely to be the most useful to them. Understanding outcomes under
such simulated environments instead of natural settings reduces risks drastically.

G. LINEAR PROGRAMMING

Linear programming is a quantitative approach that is used to generate an optimal

solution within the limits imposed on the decision by constraints. Linear programming
is very useful as a decision-making mechanism when the system is limited by supply
and demand constraints in factories, warehouses, or business areas.

This approach is commonly used by managers only in circumstances that require

certainty. Therefore, when conditions are unclear or unpredictable, it may not be
very useful.

H. SAMPLING THEORY

The theory of sampling is a quantitative approach in which population samples are

statistically calculated to be used for a variety of processes, such as quality control
and marketing research.

When data gathering is expensive, sampling provides an alternative. Sampling, in

effect, saves time and money.

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

I. STATISTICAL DECISION-THEORY

Decision theory refers to the 'logical way of conceptualizing, evaluating and solving
problems in situations involving minimal or partial decision-environment knowledge.

The decision making process presented at the beginning of this module is a more
detailed description of decision theory. What was not, but is rather relevant, included
in the discussion on the assessment of alternatives is the topic of alternatives to
Bayesian analysis.

The objective of the Bayesian analysis is to revise and update the initial evaluations
of the probabilities of the event generated by the alternative solutions. This is
achieved by the use of additional information.

If the decision-maker is able to assign probabilities to the different events, it

becomes possible to use the probabilistic decision rule, called the Bayes criterion.
When dealing with a loss table, the Bayes criterion chooses the alternative decision
with the highest expected payoff, or the minimum expected loss.

SUMMARY

Decision-making is a very important function of the engineer manager. His organization will
rise or fall depending on the outcomes of his decisions. It is, therefore, necessary for the
engineer manager to develop some skills in decision-making.

The process of identifying and choosing alternative courses of action in a manner

appropriate to the demands of the situation is called decision-making. It is done at various
management levels and functions.

The decision-making process consist of various steps, namely: diagnose problem, analyse
environment, articulate problem or opportunity, develop viable alternatives, evaluate
alternatives, make a choice, implement decision, and evaluate and adapt decision results.

There are two approaches in solving problems, namely: qualitative evaluation and
quantitative evaluation. Qualitative evaluation is used for solving fairly simple problems
while quantitative evaluation is applied to complex ones.

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

LEARNING ACTIVITY 3
Accomplish the following activities in an “8.5 x 11” word document.
IDENTIFICATION: Identify the following personalities described below.

_________1. This quantitative model is applicable to companies where waiting lines are
common situation. This describes how to determine the number of service
units that will minimize both customer waiting time and cost service.
__________2. A quantitative technique where samples of populations are statistically
determined to be used for a number of processed, such as quality control
and marketing research.
__________3. Models where large complex tasks are broken into smaller segments that
can be managed independently.
__________4. A model constructed to represent reality, on which conclusions about real-
life problems can be used.
__________5. Is a quantitative technique that is used to produce an optimum solution
within the bounds imposed by constraints upon the decision.
__________6. Its purpose is to revise and update the initial assessments of the event
probabilities generated by the alternative solutions. This is achieved by the
use of additional information.

ENUMERATION:
1. Enumerate and differentiate the two approaches in solving problems.
2. Enumerate the two (2) most prominent of Network Models.
3. Enumerate the four (4) types of Inventory Models.

HONESTY CLAUSE

The students are expected to accept and maintain principles of intellectual and academic integrity
as members of the academic community. The state college expects the students to be honest as
a basic and minimum standard of conduct in academic matters and that they only submit
the outputs of their own efforts for credit.

For Submission: Kindly attach the file on our Google Classroom with a file name
“Module 2 – Learning Activity 3 – (Surname)”.

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

MASTERY CHECK
Accomplish the following activities in an “8.5 x 11” word document.

IDENTIFICATION
1. Refers to the process of selecting among alternatives representing potential
solutions to a problem.
2. It is “the process of identifying and choosing alternative courses of action in a
manner appropriate to the demands of the situation.”
3. Refers to carrying out the decision so that the objectives sought will be achieved.

ENUMERATION
1. Decision-Making process (in chronological order).
2. Enumerate the two (2) types of evaluation in solving problems.
3. List down the nine (9) qualitative models used in engineering management.

HONESTY CLAUSE

The students are expected to accept and maintain principles of intellectual and academic integrity
as members of the academic community. The state college expects the students to be honest as
a basic and minimum standard of conduct in academic matters and that they only submit
the outputs of their own efforts for credit.

For Submission: Kindly attach the file on our Google Classroom with a file name
“Module 2 – Mastery Check – (Surname)”.

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 PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

Module Review Questions

In an 8.5” x 13” word document, write the answer for the following questions
1. Can the engineer manager avoid making management decision? Why or Why not?
2. When a problem becomes apparent and the engineer manager chooses to ignore it, is he
making a decision? Explain your answer.
3. Why is proper diagnosis of the problem important?
4. What are the components of the environment from the point of view of the decision-
maker? What do they consist of?
5. How may one develop viable alternatives in problem solving?
6. How may alternative solutions be evaluated?
7. Why is it important for those who will be involved in implementation to understand and
accept the solution to the problem?
8. What is the purpose of Bayesian analysis?
9. What are the approaches in solving problems?
10. What quantitative techniques are useful in decision-making?

For Submission: Kindly attach the file on our Google Classroom with a file name “Module 2
– Module Review Questions – (Surname)”.

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PHILIPPINE STATE COLLEGE OF AERONAUTICS
INSTITUTE OF ENGINEERING AND TECHNOLOGY
AERONAUTICAL ENGINEERING DEPARTMENT
Laboratory Module 02: Decision Making (Prelim)

APPENDIX A: RUBRIC

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