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

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

3. 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

4. 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

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

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

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

8. SCORING THE CARS CAR Cost C&C A&B F&F Toyota S. 90 60 80 Dodge GC 8570
Ford Exp 50
Honda Od. 75
Weights .4 .3 .2 .1

9. 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

10. 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

11. QUESTIONS?

12. 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