DECISION-MAKING

Decision-Making

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

appropriate to the demands of the situation.
Decision-Making Process

1. Diagnose problem
2. Analyze environment
3. Articulate problem or opportunity
4. Develop viable alternatives
5. Evaluate alternatives
6. Make a choice
7. Implement decision
8. Evaluate and adapt decision results
Approaches in Solving Problems

1. Qualitative evaluation – refers to evaluation of alternatives using intuition and subjective

judgement
2. Quantitative Evaluation – refers to the evaluation of alternatives using any technique in a
group classified as rational and analytical
Quantitative Models for Decision Making

1. Inventory models – consist of several types

a. Economic order quantity model- used to calculate the number of items that should be
ordered at one time
b. Production order quantity model- an economic order quantity technique applied to
production orders
c. Back order inventory model- used for planned shortages
d. Quantity discount model- to minimize the total cost when quantity discounts are
offered by suppliers
 Quantitative Models for Decision Making

2. Queuing theory- describes how to determine the

number of service units that will minimize both
customer waiting time and cost of service
3. Network Models- large complex tasks are
broken into smaller segments that can be managed
independently
a. The Program Evaluation Review
Technique ( PERT)
b. The Critical Path Method
( CPM )
 Quantitative Models for Decision Making
4. Forecasting- collection of past and current information to
make predictions about the future
5. Regression Analysis- a forecasting method that examines the
association between two or more variables
6. Simulation- model constructed to represent reality on which
conclusions about real-life problems can be used
7. Linear Programming- used to produce an optimum solution
within the bounds imposed by constraints upon the decision
Quantitative Models for Decision Making

8. Sampling Theory- samples of populations are statistically determined to be used for a

number of processes such as quality control and marketing research
9. Statistical Decision-Theory- refers to the “ rational way to conceptualize, analyse and solve
problems in situations involving limited or partial information about the decision environment