THE DECISION PROCESS (SIX STEP METHOD) CAR-BUYING EXAMPLE

STEP 1: DEFINE THE PROBLEM BACKGROUND RESEARCH - Intensive reading of car and consumer magazines - Consult with the experts - Investigate finance options PROBLEM STATEMENT

To determine the type of car to buy for a young family with 2 children PROBLEM STATEMENT To determine the type of car to buy for a young family with 2 children

STEP 2: DEVELOP CRITERIA ESTABLISH FEASIBILITY CRITERIA - New - Four Wheels (No motorcycles) - Seats at least four - 18 MPG Minimum (open highway) - Costs less than $32,000 - Trunk Space at least 15 cu. Ft. - Mini-van or SUV

STEP 2: DEVELOP CRITERIA (continued) ESTABLISH OPTIMALITY CRITERIA - Cost - Comfort and Convenience (C&C) - Acceleration and Braking (A&B) - Fit and Finish (F&F)

STEP 3: SELECT MODEL SELECT MODELS (MFEP, Regression, Forecasting, ANOVA etc.) Identify key Variables Collect Data

STEP 4: IDENTIFY & EVALUATE ALTERNATIVES TOYOTA SIENA DODGE GRAND CARAVAN FORD EXPLORER HONDA ODYSSEY

SCORING THE CARS CAR Cost C&C A&B F&F Toyota S. 90 60 80 Dodge GC 85 70 Ford Exp 50 Honda Od. 75 Weights .4 .3 .2 .1

STEP 5: SELECT BEST ALT & SENSITIVITY ANALYSIS CHANGE WEIGHTS BY +/- 5% - Robust solution if optimum solution does not change - Sensitive solution if optimum solution changes CHANGE SCORES BY +/- 5% AND REPEAT ABOVE PROCESS

STEP 6: IMPLEMENTATION Ensure that all qualitative factors have been considered (do they override the quantitative analysis?) Ensure all steps are taken to make the decision a reality

QUESTIONS?

DECISION MAKING PROCESS (SIX STEP METHOD) Define the Problem Develop Criteria (Feasibility/Optimality) Formulate the Model Identify and Evaluate the Alternatives Select Optimal Alternative and do Sensitivity Analysis Implementation