1. Decision Making

2. Decision Making & Problem Solving
Identify and define the problem
Determine the set of alternative solutions
Determine the criteria to evaluate alternatives
Evaluate the alternatives
Choose an alternative
Implement the selected alternative
Evaluate the results to determine whether a satisfactory solution has been obtained

3. Decision Making
The first five steps of Problem Solving constitute the Decision Making process: i.e.:
Identify and define the problem
Determine the alternatives
Determine the criteria
Evaluate the alternatives
Choose an alternative
The choice of an alternative is the Decision

4. Classification of the Stages in the Decision Making Process
Structuring the Problem
Define the Problem
Identify the Alternatives
Determine the Criteria
Analyzing the Problem
Evaluate the Alternatives
Choose an Alternative

5. Analyzing a Problem Qualitative Analysis
Dependent on the decision maker, his/her experience, judgment, intuitive feel, relative simplicity of the problem etc.
More of an art than a science
The skills in qualitative approach are inherent in the manager and improve with experience
Subjective

6. Analyzing a Problem Quantitative Analysis
Relatively large/complex problem or when the manager lacks previous experience with similar situation or where the nature of the problem demands quantitative treatment
The skills in quantitative approach are learnt only by studying the methods of Management Science
Objective

7. Qualitative and Quantitative Analyses have their roles in Decision Making
Analyzing the Problem
Qualitative Analysis
Summary and Evaluation
Make the Decision
Quantitative Analysis
A manager who knows quantitative procedures is in a much better position to compare and evaluate the qualitative and quantitative recommendations and combine them to arrive at the best decision.

8. Summary of the instances requiring Quantitative Analysis
The problem is large or complex; the manager cannot develop a good solution without quantitative analysis
The problem is important; demands a thorough analysis
The problem is new; no previous experience to rely on
The problem is repetitive; quantitative methods save time and effort for the decision maker

9. Stages in Quantitative Analysis
Analysis begins once the problem has been properly structured.
Model Development follows; i.e. creating a mathematical representation of the problem
Model Solution, using appropriate techniques
Generation of Report for the use of the decision maker giving the recommendations and other pertinent aspects that aid the decision making process
Model Development
Model Solution
Report Generation

10. Models Iconic Analog Mathematical
The value of a model-based analysis depends on how well the model represents the real situation

11. Mathematical Models Objective function: Constraint
A mathematical function that describes the problem’s objective
Constraint
Restrictions that limit the degree to which the objective can be pursued (production capacities, availability of inputs, committed outputs etc.)
Uncontrollable inputs
Environmental factors affecting the objective function and the constraints, but beyond the control of the decision maker
Controllable inputs or decision variable

12. Deterministic Vs Stochastic
Deterministic Model: Uncontrollable variables are all known and do not vary. E.g.: tax rates
Stochastic or Probabilistic Model: One or more of the uncontrollable variables are uncertain and subject to variation. E.g.: demand

13. Iterative Process
Often the model development and model solution steps will be iterative
Simplifications in the model are often justifiable for reasons of cost, speed, ease of developing and understanding, and is often of acceptable accuracy

14. Techniques for Model Solution
Breakeven Analysis, Financial Models
Linear Programming, ILP, Network Models
Inventory Models, Queueing Models
Simulation
Decision Analysis / Decision Trees
Cause-effect (Ishikawa / fishbone) Diagrams