Decision Making - Engineering Management

ENGINEERING MANAGEMENT LECTURE 2

Managers of all kinds and types, inclusing the engineer manager, are primarily tasked to provide leadership in the quest for attainment of the organization’s objectives. If he is to become effective, he must learn the intricacies of decision-making

The Engineer manager’s decision making skiils 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. Good decisions, on the other hand, will provide the right environment for continuous growth and success of any organized effort.

Decisions must be made in various level.  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.  The bigger issue is the manager who cannot or do not want to make decisions (Dangerous)  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. 

The production manager of a certain company has received a written request from a section head regarding the purchase of airconditioning 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.

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. Engineer managers must adapt a certain procedure designed to determine the best option possible to solve certain problems.

1. 2. 3. 4. 5. 6. 7. 8.

Diagnose Problem Analyze Environment Articulate Problem Develop Viable Alternatives Evaluate Alternatives Make a choice Implement Decision Evaluate and Adapt Decision Results

If a manager wants to make an intelligent decision, his first move must be to identify the problem. “Identification of the problem is tantamount to having the problem solved..”

A problem exist when there is a difference between an actual situation and a desired situation.

Example of internal or external limitation: (due to environment) 1. Limited funds available for the purchase 2. Limited training on the part of employess 3. Ill-designed facilities 4. Patents are controlled by other organizations 5. Very limited market for the company’s products and services exits 6. Strict enforcement of local zoning regulations

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.

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. 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.

1.

2.

Internal Environment – refers to organizational activities within the firm that surrounds decision making. External Environment – refers to variables are outside the organization and not typically within short run control of top management.

 Problems

may be solved by any of the solutions offered.  Pick the best solution by using a procedure with the following: 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.

 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.

 Improve

the capacity of the firm by hiring more works and building additional facilities  Secure the services of subcontractors  Buy the needed additional output from another firm  Stop serving some of the company’s costumer  Delay servicing some clients.

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. “Each alternative must be analyzed and evaluated in terms of its value, cost, and risk characteristics.”

Another example of an evaluation of alternatives is shown below: 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.

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

 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.  Choice making refers to the process of selecting among alternatives representing potential solutions to a problem.  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.

 Implementation

refers to carrying out the decision so that the objectives sought will be achieved.  At this stage, the resources must be made available so that the decision may be properly implemented.

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. 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.

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.

 Refers

to the evaluation of alternatives using intuition and subjective judgement.  Managers use this when: 1. The problem is fairly simple. 2. The problem is familiar. 3. The costs involved are not great. 4. Immediate decisions are needed.

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 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. 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.

 Refers

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

 Types 1. 2. 3. 4. 5. 6. 7. 8. 9.

of quantitative techniques: Inventory Models Queuing theory Network models Forecasting Regression analysis Simulation Linear programming Sampling theory Statistical decision theory

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2.

3. 4.

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. Production order quantity model – economic order quantity technique applied to production orders Back order quantity model – inventory used for planned shortages. Quantity discount model – used to minimize the total cost when quantity discounts are offered by suppliers

 Determines

the number of service units that will minimize both costumers waiting time and cost of service.  Network Models: These are the models where large complex task are broken into smaller segments.  1. Program Evaluation Network Model (PERT)  2. Critical Path Method