Engineering Management Module 2

Manager / Engineer Manager

mainly responsible for providing leadership in the effort to achieve goals of an organization

Engineer

make choices in order to design a product or schedule an operation

Decision Making

- process of identifying and choosing alternative courses of action in every situation encountered

- heart of all management functions

- way of making choices by establishing a decision, collecting data, and analyzing alternative resolutions

• at least 2 choices to choose from
• involve something achievable
• power to decide

conditions for making a decision (3)

Engineering Manager

responsible for decision-making

David H. Holt

he said that rational decision-making is a process involving 7 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

7 steps of rational decision-making

Diagnose Problem

to make an intelligent decision, it is necessary to find the issue first

identification of the problem

is said to be tantamount to having a problem half-solved

problem

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

Analyze Environment

necessary to conduct an environmental analysis to identify such constraints

• limited funds
• limited training
• ill-designed facilities

Internal Limitations

• patents controlled by other organization
• limited market
• strict local zoning regulations

External Limitations

Internal Environment

refers to organizations activities within a firm

External Environment

factors that are outside of the organization and not usually under top management’s short-run

Develop Viable Alternatives

the manager must consider the best one among alternative situations

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

steps for the procedure of developing viable alternatives

Evaluate Alternatives

proper assessment of remaining alternatives makes it less difficult to select the best option

alternative

must be analyzed and evaluated in terms of its value, cost, and risk characteristics

Value

refers to benefits that can be expected

Cost

refers to out-of-pocket cost

Risk Characteristics

refer to the likelihood of achieving the goals

Make a Choice

the decision-maker must now be able to make choice after the alternatives have been assessed

Choice-making

refers to tube practice of choosing between alternatives constitute possible solutions to a problem

Implement Decision

- follows after decision has been made

- a plan must be devised to make an effective implementation

Evaluate and Adapt Decision Results

predicted outcome may or may not occur in enforcing the decision

Feedback

process which requires checking at each stage of the process to assure that the alternatives generated, and solution selected for implementation are still aligned with the goals and objectives originally specified

Control

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

Qualitative Evaluation

Quantitative Evaluation/Approach

approaches in solving problems

Qualitative Evaluation

assessment using intuition and subjective judgement for alternatives

• problem is simple
• problem is familiar
• low cost
• needs immediate decisions

When is qualitative approach needed?

Quantitative Evaluation

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

• to make optimal decision in a situation where the probability of all outcomes is uncertain through the use of mathematical and statistical models

• 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

• have the advantage of suggesting the best solution to the problem without identifying all possible alternatives

benefits of Quantitative Approach

Economic Order Quantity Model

Production Order Quality Model

Order Inventory Model

Quantity Discount Model

Inventory Models

Economic Order Quantity Model

used to calculate the number of items that should be ordered at one time

Production Order Quantity Model

economic order quantity technique applied to production orders back

Back Order Inventory Model

inventory model used for planned shortages

Quantity Discount Model

used to minimize the total cost when quantity discounts are offered by suppliers

Queuing Theory

- applicable to companies where waiting lines are common situation

- determine the number of service units that will minimize both customer waiting time and cost service

Network Models

complex tasks are divided into smaller segments that can be independently managed in order to avoid wasting time, energy, and money

Program Evaluation Review Technique (PERT)

helps engineers and executives to plan, track, and manage large and complex projects by using three time estimates for each task

Critical Path Method (CPM)

network of technique using only one time factor per activity that enables engineer managers to schedule, monitor and control complex projects

Forecasting

the collection of past and current information to make predictions about the future

Regression Analysis

a method of forecasting which examines the relation between two or more variables

Simple Regression

Multiple Regression

two kinds of Regression Analysis

Simulation

- model constructed to represent reality

- highly sophisticated tool by means of which the decision maker develops a mathematical model of system under consideration

Linear Programming

- used to generate an optimal solution within the limits imposed on the decision by constraints

- very useful as a decision-making system when the system is limited by supply and demand constraints

- not useful when the conditions are unclear or unpredictable

Sampling Theory

quantitative approach in which population sample are statistically calculated to be used for a variety of purposes

Statistical Decision Theory

logical way of conceptualizing, evaluating, and solving problems in situations involving minimal or partial decision-environment knowledge

Bayesian Analysis

its objective is to revise and update the initial evaluations of the probabilities of the event generated by the alternative solutions