ENGINEERING MANAGEMENT

DECISION MAKING

Approaches in Problem Solving

1. Qualitative evaluation
2. Quantitative evaluation

 Qualitative evaluation
This term refers to evaluation of alternatives using intuition and subjective judgment.
 A manager tend to use the qualitative approach when:
1. The problem is fairly simple.
2. The problem is familiar.
3. The costs involved are not great.
4. Immediate decision is needed.

 Quantitative evaluation
This term refers to the evaluation of alternatives using any technique in a group classified as
rational and analytical.

The methodology of quantitative technique

 Quantitative models for decision making:

 Inventory model
 Queuing theory
 Network models
 Forecasting
 Regression analysis
 Simulation
 Linear programming
 Sampling theory
 Statistical decision theory
 Inventory models
Inventory models consist of several types all design to help the engineer manager make
decisions regarding inventory. They are as follows:
1. Economic order quantity model
2. Production order quantity model
3. Back order inventory model
4. Quantity discount model

 Queuing theory
Queuing theory is the one that describe how to determine the number of service units that will
minimize both customers waiting time and cost of service.

 Network models
These are models where large complex task are broken into smaller segments that can be
managed independently.
 The Program Evaluation Review Technique (PERT)
 The Critical Path Method (CPM)

 Forecasting
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.
Regression analysis may be simple or multiple depending on the number of independent
variables.

 Simulation
Simulation is a model constructed to represent reality, on which conclusions about real life
problems can be used.

 Linear Programming
Linear programming is a quantitative technique that is used to produce an optimum solution
within the bound imposed by the constraints upon the decision.

 Sampling Theory
Sampling theory is a quantitative technique where samples of population 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.”