In d u s t rial En gi n eeri n g| MARMARA UNIVERSIT Y

IE4031

DECISION ANALYSIS
Overview of Decision Analysis

Dr. Zeynep Tuğçe Kalender 07.10.2021

This video is copyrighted by Res. Asst. Dr. Zeynep Tuğçe Kalender,
Marmara University and is protected under the 5486-Law of on Intellectual
and Artistic Works (T.C. 5486 no'lu Fikir ve Sanat Eserleri Kanunu) and all
applicable international, federal, state and local laws, with all rights reserved.

No part of this may be copied, distributed, or changed in any format, sold or

used in any way other than individual learning purposes without express
permission from Res. Asst. Dr. Zeynep Tuğçe Kalender, Marmara University.
Welcome to class! In d u s t rial En gi n eeri n g| MARMARA UNIVERSIT Y

Today's Agenda

Course
Lecturer

Syllabus

Class
Objectives
and Rules
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Today's Agenda
MARMARA UNIVERSITY - Faculty of Engineering
SYLLABUS
Industrial Engineering
Course 2021-2022 Fall Semester
Lecturer Weekly Course
Weekly Time &
Course Code Course Name Course Type Hours Credits ECTS
Classroom Schedule
T A L
Thurs da y 13:00-15:00
IE 4031 Decision Analysis Compul s ory 3 0 0 5 5
Fri da y 11:30-12:30
Prerequisite IE 3033 Prerequisite to
Course Lecturer Dr. Zeynep Tuğçe KALENDER Office Hours
Monda y 14:00-16:00 & Thurs da y 11:00-13:00
E-mail tugce.simsit@marmara.edu.tr Schedule

Phone Office / Room No M5 204

Syllabus Deci s i on Ana l ys es i s a s ys tema tic a pproa ch a nd a conceptua l fra mework to ma ke ha rd deci s i ons . Therefore, thi s l ecture hel ps to provi de a cl ea r
Course
unders tandi ng of the deci s i on probl ems a nd provi des a ba s i s on how to a na l yze deci s i ons , eva l ua te a l terna tives , dea l wi th mul tipl e objectives ,
Objectives a nd ma ke choi ces .

Identifi ng a deci s i on probl em; Cons tructing a hi era rchy of objectives a nd model deci s i ons ; Model l i ng uncertai nty; Model l i ng preferences ;
Learning
Unders tandi ng the ba s i c pri nci pl es a nd a s s umptions of deci s i on a na l ys i s ; Us i ng mul tia ttri bute deci s i on ma ki ng methods to s ol ve deci s i on
outcomes
probl ems , Identifyi ng ri s ks a nd i ncorpora ting them i n deci s i on ma ki ng.

Textbooks 1- Making Hard Decisions with Decision Tools , R. T. Cl emen & T. Rei l l y, 2014, Cenga ge Lea rni ng, 3rd edi tion
Class and/or 2- Operations Research: An Introduction , H. A. Ta ha , Ei ghth Edi tion, Prentice-Ha l l , 2007.
3- Lecture Notes a nd Pres entations .
Objectives References

and Rules Teaching methods Lecture Notes , Powerpoi nt Pres entations , Exerci s es , Ca s e Studi es .
Welcome to class! In d u s t rial En gi n eeri n g| MARMARA UNIVERSIT Y

Today's Agenda

WEEK Date TOPICS

Week 1 7.10.2021 Overvi ew of Deci s i on Ana l ys i s : Concept a nd Defi ni tions

Course Week 2 14.10.2021 Model l i ng Probl em Structure-I
Lecturer Week 3 21.10.2021 Model l i ng Probl em Structure-II
Week 4 28.10.2021 NATIONAL HOLIDAY
Week 5 4.11.2021 Eva l ua ting Al terna tives a nd Ma ki ng Choi ces -I
Week 6 11.11.2021 Eva l ua ting Al terna tives a nd Ma ki ng Choi ces -II
Week 7 18.11.2021 Sens i tivi ty Ana l ys i s -I
Week 8 MIDTERM EXAM WEEK
Week 9 2.12.2021 Sens i tivi ty Ana l ys i s -II

Syllabus Week 10 9.12.2021 Model i ng Uncertai nty

Week 11 16.12.2021 Va l ue of Informa tion
Week 12 23.12.2021 Subjective Proba bi l i ty
Week 13 30.12.2021 Util i ty Theory
Week 14 6.1.2022 Ri s k Attitudes
Week 15 13.1.2022 Mul ti-Cri teri a Deci s i on Ma ki ng-II
Week 16 20.1.2022 Mul ti-Cri teri a Deci s i on Ma ki ng-II

Class Week 17 FINAL EXAM WEEK

Objectives
and Rules
Welcome to class! In d u s t rial En gi n eeri n g| MARMARA UNIVERSIT Y

Today's Agenda
Weight in
Weight in
Evaluation Tool Quantity Date Semester Evaluation
Total (%)
(%)
Final Exam 1 TBA 40
Course Evaluation Final Make-up Exam (if exists)
Lecturer Tools Semester Evaluation 60 100

Midterm(s) 1 TBA 39,96 67

Project(s) 1 TBA 21 35

Homework(s) TBA TBA 9 15

Requirements:
Syllabus The assessment of this course consists of: 1 midterm exams, 1 project and 1 final exam.

• Midterm: Midterm will take place on week 8, and will be on topics we have covered up until
that date. (%40)

• Term Project: Details will be explained in the next slide (1st and 2nd installments- overall
Class impact %20).
Objectives • Final exam: The final exam is in week 17 but the final day will be announced.
and Rules
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Term project: This project covers the entire content of the course. The project will be done in groups of
5 or 6 people. You should form your groups by October 22, and notify the instructor via e-mail. If you
Today's Agenda have not formed a group by this date, you will be assigned to a group by the instructor. All members of
the group need to take part in the project installments.

Note: Suggested outlines for each installment will be shared.

Please pick a decision problem which can be anything e.g. decision for dinner, what to do after
Course graduation, where to live etc. The point is, your decision problem needs to fulfill the criteria what
Lecturer constitutes a decision problem we will see in class. In the project you are going to model this problem
using a decision tree, solve it and conduct various types of analysis For that reason, while picking a
problem keep this in mind.

Project will be delivered in 2 installments.

1. Decision Tree Analysis: In this part of the project, take the problem you have picked, and first
Syllabus model this problem using a decision tree. Then, associate values for the consequences and finally
solve the deicsion tree.

2. Uncertainty Analyses: In class we will see that there are different methods to measure utility, and
different people can have different utility functions. For this part of the project, pick 3 decision
makers (other than yourself), and construct their utility functions. Determine each decision makers’
risk attitude then, determine the best choice for each of your decision makers’, given your problem.
Class
Objectives
and Rules 1st Installment 2nd Installment
Decision Tree Analysis Uncertainty Analysis
Length Max. 5 pages Max. 10 pages
Due Date 14.11.2021 09.01.2022
Welcome to class! In d u s t rial En gi n eeri n g| MARMARA UNIVERSIT Y

• If you cannot take a midterm due to a documented health problem, or a similar

Today's Agenda issue, you should contact the instructor before the exam.

• All written papers related to your project should be submitted on the scheduled
due date. Late submissions will not be accepted.
Course
Lecturer • Allowed maximum similarity ratio will be %15.

• If you have a question, you are always free to open your microphone and
ask your questions. But except those, please do not open your camera and
microphones.

Syllabus
Any work that is submitted to be evaluated in this class should be an original piece of
writing, presenting your ideas in your own words. Everything you borrow from any
resources such as books, articles, or web sites (including those in the syllabus) should be
properly cited.

Class You are encouraged to discuss your ideas with others (including your friends in the class),
Rules and it is important that you do not share your writing (Project reports, etc.) with anyone.
Outcomes
Using ideas, text and other intellectual property developed by someone else while claiming
it is your original work is plagiarism. Copying from others is cheating. Unauthorized help
from another person or having someone else write one’s paper or assignment is collusion.

Cheating, plagiarism and collusion are serious offenses that could result in an F grade and
disciplinary action. Please pay utmost attention to avoid such accusations.
Welcome to class! In d u s t rial En gi n eeri n g| MARMARA UNIVERSIT Y

Today's Agenda
Relations
No Program Outcomes
1 2 3

Course 1
Sufficient accumulation of knowledge in mathematics, natural sciences and their own field; ability to apply
theoretical and applied knowledge to model and solve engineering problems in this field.
X
Lecturer
Ability to determine, identify, formulize and solve complex engineering problems; capability of choosing and
2 applying appropriate analysis and modeling methods.
Ability to design a complex system, process device or product to meet certain requirements under realistic
3 constraints and conditions; ability to apply modern design methods for this purpose. (Depending on the design, X
realistic constraints and conditions may include elements such as economics, environmental problems,
Ability to develop, select and utilize modern tools and techniques needed for engineering applications; ability to
Program and Learning 4 use information technologies effectively.
Outcome Relations Ability to design and conduct experiments, gather data, analyze and interpret results to investigate engineering
5
Syllabus problems.

6 Ability to work effectively in intra- and inter-disciplinary teams; individual work capability.

7 Effective verbal and written communication skills in Turkish; knowledge of at least one foreign language.
Conscience of necessity of lifelong learning; ability to access knowledge, follow developments in science and
8
technology, and continuous self-revival.
9 Conscience of professional and ethical responsibilities.
Knowledge about business applications such as project management, risk management and change
10 management; awareness of entrepreneurship, innovation and sustainability.
Class Knowledge about universal and social effects of engineering applications on health, environment and safety;
Rules and 11 awareness about legal consequences of engineering applications.

Outcomes
In d u s t rial En gi n eeri n g| MARMARA UNIVERSIT Y

IE4031

DECISION ANALYSIS
Concepts and Definitions

Dr. Zeynep Tuğçe Kalender 08.10.2021

This video is copyrighted by Res. Asst. Dr. Zeynep Tuğçe Kalender,
Marmara University and is protected under the 5486-Law of on Intellectual
and Artistic Works (T.C. 5486 no'lu Fikir ve Sanat Eserleri Kanunu) and all
applicable international, federal, state and local laws, with all rights reserved.

No part of this may be copied, distributed, or changed in any format, sold or

used in any way other than individual learning purposes without express
permission from Res. Asst. Dr. Zeynep Tuğçe Kalender, Marmara University.
 Decision Analysis
Guidance to think systematically about hard decisions

• A systematic approach and conceptual framework to make hard decisions

• A process that provides a structured method to improve decision making
• Helps to provide a clear understanding of the decision problem
• Provides a guide on how to analyze decisions, evaluate alternatives, deal with
multiple objectives and make choices
• Provides methods for organizing decisions
• Allows identification of important sources of uncertainty
• An information source that support decision makers
• Supplies analytical tools to provide insights

Ref: Clemen, R.T., & Reilly, T. (2001) Making Hard

Decisions with Decision Tools, Duxbury/Thomson
Learning
Decision Analysis

Ref: Clemen, R.T., & Reilly, T. (2001) Making Hard

Decisions with Decision Tools, Duxbury/Thomson
Learning
 Why decisions are hard?
Uncertainty
Many stakeholders
We define a stakeholder as someone who can
affect, or will be affected by, the decision.
Difficult because of fear of a bad
outcome, or fear of regret, or even fear
of blame.
Complexity Conflicting Diffirent
Objectives Conclusions
Decision analyses provides effective
A decision maker may be interested in Even from a single perspective, slight
methods for organizing a complex
working toward multiple objectives, but changes in certain inputs may lead to
problem into a structure that can be
progress in one direction may impede different choices.
analyzed.
progress in others.
Basic elements of a decision's structure;
Require making trade-offs among Different individuals may look at the
several factors problem from different perspectives, or
- The possible courses of action
they may disagree on the uncertainty or
- The possible outcomes that could result
value of the various outcomes.
- The likelihood of those outcomes
- Eventual consequences (e.g. costs and
benefits) to be derived from different
outcomes.
 In d u s t rial En gi n eeri n g| MARMARA UNIVERSIT Y

CASE STUDY
GYPSY MOTHS and THE ODA
In the winter of 1985, the Oregon Department of Agriculture
(ODA) faced the problem of gypsy moth infestation in Lane
County. Forest industry representatives thought an aggressive
eradication campaign with potent chemical insecticides was Complexity Uncertainty of Key
necessary. But The ODA instead proposed a plan that involved
spraying most of the affected area with BT (Bacillus
thuringiensis), a bacterial insecticide known to be
Elements
(1) target-specific (that is, it does little damage to organisms Three Objectives,
other than moths),
(2) ecologically safe, and Multiple Perspectives Size of the Infestation,
(3) reasonable effective.
Health Effect,
As well as using BT, the ODA proposed spraying three smaller Location of Gypsy Moth
areas near the city of Eugene with the Chemical Spray
Orthene. This is an accepted insecticide for home garden use
but there are doubts about its ecological effects and its
potential danger to humans.
Multiple Different
Forestry officials argued that the chemical insecticide was
more potent than BT and was necessary to ensure eradication Objectives Perspectives
in the most heavily affected areas. Environmentalists argued
that the potential danger from the chemical spray was too great
to warrant its use. Some individuals argued that spraying
would not help because the infestation already was so Target Specific, Forestry Officials,
advanced that no program would be successful. Others argued
that an aggressive spray program could solve the problem once
Ecologically Safe, Environmentalists,
and for all, but only if done immediately. Effective Some Individuals,
Clearly in making its final Decision the ODA would have to Others
deal with many issues.
 What is good decision?
Suppose you had a choice between two deals. Which deal would you choose?

• Deal A gives you $100 if a tossed coin lands on heads and $0 otherwise;
• Deal B gives you $100 if a rolled die lands on 5 and $0 otherwise.

The most fundamental distinction

quality of a decision
&
quality of its outcome
The distinction implies that we can
make good decisions but still get a bad
outcome due to uncertainty. Observing
the outcome tells us nothing about the
quality of the decision—just about the
quality of the result.
 What is good decision?
“A good decision is one that produces a desired outcome.” NOT CORRECT

“A good decision is one that has the highest chance of getting the NOT CORRECT
best outcome.”
This definition takes into
account neither the absolute
desirability of the best
“A good decision is one that has the lowest chance of getting the outcome nor the chances of
worst outcome.” very bad outcomes

To answer the question of what
constitutes a good decision, we
first need to understand the
main elements of a decision:
1. The decision-maker;
2. A frame;
3. Alternatives from which to choose;
4. Preferences;
5. Information; and
6. The logic by which the decision is made.
 The Six Elements of Decision Quality
1. Decision-Maker 2. Frame
• Deciding whether to buy or lease a car, whether
to own a car in the first place or to use public
transportation, or even whether to commute to a
job or work at home.
• Each frame presents a different view of the
decision problem to be addressed.
4. Preferences- What you want 5. Information-What you know
• A decision maker will also have preferences • The linking of what we can do to what we want to
on the futures that arise from different do is provided by what we know, also known as
alternatives. our information
• Generally we prefer pleasure to pain; success • We are always tempted to get more information,
to failure; health to illness; wealth to poverty; but information costs resources.
youth to old age; etc.
3. Alternatives- What you can do
• Creation of alternatives appropriate to that frame.
These alternatives are available courses of action
that the person believes would lead to different
futures.
• An alternative is a choice that is actually
available and is under the decision maker’s
control.
6. Logic
• We must use some process to derive the action
we should take, from what we can do, what we
want, and what we know.
• If we desire to use a systematic process, such as
logical reasoning, then we will want to use the
best rules we know for this reasoning
 Decision Analysis
Process
Flowchart

Ref: Clemen, R.T., & Reilly, T. (2001) Making Hard Decisions with Decision Tools,
Duxbury/Thomson Learning
 Given a complicated problem,
how should one begin?

Critical Step –

Identify the elements:

• Values and objectives

• Decisions to make
• Values refer to things that matter to you.
• Uncertain events
• An objective is a specific thing that you want to
• Consequences achieve.

• Each specific decision situation calls for specific

objectives. The setting in which the decision occurs is

called the decision context.

 Given a complicated problem,
how should one begin?

Critical Step –

Identify the elements:

• Values and objectives

• Decisions to make
• Uncertain events
• In many cases, instead of a single decision, a sequence of decisions have to be made.
• Consequences • Suppose that there are several weeks of the growing season. Each day the farmer will get a new weather
forecast, and each time there is a forecast of bad weather, it will be necessary to decide once again whether to
protect the crop. The farmer has a number of decisions to make, and the decisions are ordered sequentially.
• A future decision may depend on exactly what happened before. These kind of problems are referred to as
dynamic decision situations.
 Given a complicated problem,
how should one begin?

Critical Step –

Identify the elements:

• Values and objectives

• Decisions to make
• Uncertain events
• Consequences
 Given a complicated problem,
how should one begin?
It must be consistent with the decision context and the relevant
objectives.

Critical Step –
• Once the planning horizon is determined, the next step is to figure
Identify the elements:
• Values and objectives
• Decisions to make
• Uncertain events
• Consequences
out how to value the consequences. In many cases we can directly
work in monetary terms, like profit, cost items.
• For the nonmonetary objectives one should do his best to
convert them into dollar terms. Things like loss of
workforce, improved recruitment conditions, better
goodwill between the company and the workers can be
translated (some with more difficulty) into dollars.
• There are cases where it will be very difficult to determine
exactly how the different objectives can be traded off. Loss
of human life, damage to environment are such examples.
Time Value of Money
An important consequence in personal and business decisions is a stream of cash flows.
Project Remarks !!
• The project will be done in groups of
min. 5 or max. 6 people.

• You should form your groups by October 22, 2021

• Notify the instructor via e-mail

(ztsimsit@gmail.com ;

tugce.simsit@marmara.edu.tr)

• If you have not formed a group by this date, you will

be assigned to a group by the instructor (randomly).

• All members of the group need to take part in the

reports.
Any
Questions?
 In d u s t rial En gi n eeri n g| MARMARA UNIVERSIT Y

See you next week…