Management of Engineering

Projects
(ES303)

July 04, 2024

Prepared by: Engr. Rosalie Vertudes, REE, MSEE

DECISION-MAKING

• What is Decision Making?

• Decision Making as a Management
Responsibility
• The Decision-Making Process
• Approaches to Solving Problems
• Quantitative Models for Decision Making
WHAT IS DECISION-MAKING?

• “The process of identifying and choosing

alternative courses of action in a manner
appropriate to the demands of the situation.
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• “Is the heart of all the management
functions”.
DECISION-MAKING AS A MANAGEMENT
RESPONSIBILITY

• Decision-making is the responsibility of

the engineer manager.

• The higher the management level, the

more complicated the decision-making
becomes.
THE DECISION-MAKING PROCESS

• Diagnose Problem
If a manager wants to make an intelligent decision, his first move must be
to identify the problem.

What is a Problem? A problem exists when there is a difference between

an actual situation and a desired situation.
THE DECISION-MAKING PROCESS
• Analyze the Environment
The objective of environmental analysis is the identification of constraints, which may be
spelled out as either internal or external limitations.

1. Limited funds are available for the purchase of equipment.

2. Limited training on the part of employees.
3. Designed facilities.

Examples of external limitations are as follows:

4. Patents are controlled by other organizations.

2. A very limited market for the company's products and services.
3. Strict enforcement of local zoning regulations.
Components of the Environment.

1. Internal environment refers to organizational

activities within a firm that surrounds decision-
making.

2. The external environment refers to variables

that are outside the organization and not typically
within the short-run control of top management.
Develop Viable Alternatives

1. Prepare a list of alternative solutions.

2. Determine the viability of each solution.

3. Revise the list by striking out those which are not viable.
ILLUSTRATION:

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.
Figure 2.1 The Engineering Firm and the Internal Figure 2.2 The Engineering Firm end Its External
Environment In Decision-Making Environment
List of Solutions prepared by the Engineering
Manager

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;
Evaluate Alternatives

• Proper evaluation makes choosing the

right solution less difficult.

• The risk characteristics refer to the

likelihood of achieving the goals of the
alternatives.
Make a Choice
• Choice-making refers to the process of selecting among alternatives
representing potential solutions to a problem.
Implement Decision
• Implementation refers to carrying out the decision so that the objectives
sought will be achieved.
Evaluate and Adapt Decision Results
• In implementing the decision, the expected results may or may not happen.
Therefore, it is important for the manager to use control and feedback
mechanisms to ensure results and 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.

Control refers to actions made to ensure that activities performed match the
desired activities or goals, that have been set.
Figure 2.3 Feedback as Control Meehanlam In the
DecisionMaking-Process
APPROACHES IN SOLVING PROBLEMS

1. Qualitative evaluation
This term refers to the evaluation of alternatives using intuition and
subjective judgment.

2. Quantitative evaluation
This term refers to the evaluation of alternatives using any
technique in a group classified as rational and analytical.
An example of an evaluation using the 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 consists 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 on instant decision on who among
the first-shift work· ers would work overtime to man the five machines.
QUANTITATIVE MODELS FOR DECISION MAKING

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
Inventory Models

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.
Queuing Theory

• The queuing theory is one that describes how to determine the

number of service units that will minimize both customer waiting
time and cost of service.
Network Models

The two most prominent network models are:

1. The Program Evaluation Review Technique

a technique which enables engineer managers to schedule, monitor, and
control large and complex projects by employing three time estimates for
each activity.

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.
Forecasting may be defined as "the collection of past and current information
to make predictions about the future.

Regression Analysis
The regression model is a forecasting method that examines the association
between two or more variables. It uses data from previous periods to predict
future events.
Simple regression - When one independent variable is involved.
Multiple regression - two or more independent variables are involved.
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 the system under consideration.

Simulation does not guarantee an optimum solution, but it can

evaluate the alternatives fed into the process by the decision-maker.
Linear programming is a quantitative technique that is used to
produce an optimum solution within the bounds imposed by
constraints upon the decision.

Linear programming is very useful as a decision-making tool when

supply and demand limitations at plants, warehouse, or marke t
areas are constraints upon the system
Sampling theory
is a quantitative technique where samples of populations are
statistically determined to be used for a number of
processes, such as quality control and marketing research.

Statistical Decision
Theory Decision theory refers to the rational way to
conceptualize, analyze, and solve problems in situations involving
limited, ·or partial information about the decision environment .
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 consists of various steps, namely: diagnose problem,
analyze 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.
Seatwork No. 2 by Group