1. ©Chelst & Canbolat Value-Added Decision Making Chapter 3 Common Decision Templates: Influence Diagrams Efficient construction of influence diagrams Learn by example 9/19/2011 1

2. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 2 Decision Templates-Topic: Context 1. 1n-house or outsource: make or buy (a) simple and (b) strategic 2. Change or keep status quo: (a) upgrade and (b) late design change 3. Products: (a) launch and (b) portfolio 4. Project management: product development tasks 5. Capacity planning: (a) basic and (b) flexible 6. Technology choice: (a) large scale and (b) personal 7. Personnel or organization selection: hire research faculty 8. Facility location: sports arena 9. Bidding: make offer 10. Personal decision: University 11. Information gathering decisions: market research, medical tests, prototypes, and pilot plants

3. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.1 – Make or Buy Decision – Minimize Cost Demand Wage Inflation Currency Fluctuation Make or Buy Fixed Cost Variable Cost Total Cost or ROI Productivity Communication & Oversight Logistics

4. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.2 – Make or Buy Decision – Multiple Objectives Demand Wage Inflation Currency Fluctuation Make or Buy Investment Cost Variable Cost Productivity Communication & Oversight Logistics Worker turnover Quality Strategic value Responsiveness Total Cost Design changes Competitor Actions Total Value

5. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.3 – Corporate Software Upgrade Upgrade Now Performance Enhancement Purchase Cost Immediate & Long-term Value Next Upgrade Performance and Cost Next Upgrade Launch Date Corporate Training IT Team Workload Changeover & Compatibility Issues Support Old Version User Training User Hassle Total Cost IT System Impact

6. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.4 – Late Design Change Lost Production Make Late Design Change Solve Quality Problems Implementation Time Manufacturing Cost Performance Total Quality Create Quality Problems Sales Total Profit

7. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.5 – Launch Product Initial Competitor Actions Initial Demand Continuing Operational & Support Costs Total Profit Long-term Price Introduce Product or Service at Price with Launch Budget Quality Issues Long-term Demand On-going Marketing Budget Economy Competitor Strategy

8. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.6 - Product Portfolio: Two Classes Product Portfolio Demand (Luxury) Cannibalization Effect Price Points Product Characteristics Demand (Standard) Total Profit

9. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.7 - Project Management: Product Development Task Execution Strategy Manufacturing Feasibility Overlapping Magnitude Initial Magnitude of Design Infeasibility Number of Design Iterations Information Accumulated Additional Resources Final Design Timing Cost Performance Total Value

10. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.8 –Capacity Planning Competitor Actions Short Term Demand How Much Capacity Long-term Demand Economy & Growth Actual Yield Company Market Share Total Cost Annual Sales Technological Advances Total Profit Productivity Gains

11. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.9 – Capacity Planning with Flexibility Competitor Actions Short Term Demand How Much Capacity Long-term Demand Economy & Growth Actual Yield Company Market Share Total Cost Annual Sales Technological Advances Total Profit Productivity Gains Changing Product Mix Product Flexible Capacity Upgradable Capacity

12. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.10 – Technology Selection – Large Scale Technology Choice Performance Purchase Cost Total Value Training Total Cost System Impact Integration Cost Support Services Operating Cost Problems Energy Prices Environmental Impact Timing

13. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.11 – Detection Technology – Performance Objectives Performance False Negatives False Positives System Sensitivity Speed of Processing Deterrent Affect Discover Weapons Discover Range of Explosives Personal Intrusiveness Risk of Terrorist Boarding Plane Passenger Acceptance

14. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.12 – Technology Selection – Personal User Hassle Technology Choice Performance Purchase Cost Total Value Training Total Cost Operating Cost Energy Prices Support Services Problems

15. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.13 – Hire Research Faculty Member Design Course Select Faculty Research Area Fundable Independent Research Teaching Research Funding Publications Relates to Students Grant writing Collaborative Ability Strategic Value Specialty Supervise Research Prestige of Education Invite On Site Research Lecture Interview To Each Objective Recommendations

16. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.14: Locate Sports Arena Opposition Groups Locate Arena Land Acquisition Environmental Impact Study Neighborhood Development Timing Total Value Ease of Access Cost Local Community Support Neighborhood Change

17. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.15: Simple Bid How Much To Bid Profit Win Bid Competitor Bids Cost Value

18. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.16 – Large Scale Bid with Multiple Decisions How Much To Bid Profit Win Bid Competitor Bids Cost Partner Value Information Timing Seller’s Response Financing Strategy Bid Package Economy Local Instability

19. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.17 - University Selection

20. ©Chelst & Canbolat Value-Added Decision Making 9/19/2011 Figure 3.18 – Gather Imperfect Information