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# Introduction to Engineering Management ENMA 301

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This 4 page Class Notes was uploaded by Rylee Wyman on Monday September 28, 2015. The Class Notes belongs to ENMA 301 at Old Dominion University taught by Colin Barrows in Fall. Since its upload, it has received 31 views. For similar materials see /class/215286/enma-301-old-dominion-university in Engineering Mgmt & Technology at Old Dominion University.

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Date Created: 09/28/15

o ENMA 301 CHAPTER 4 Nature of Decision Making gt Relation to Planning Managerial Decision Making 0 The process of choosing between two alternatives in order to select the one with the most desirable consequence benefits relative to the least desirable consequence cost gt Occasions for Decisions Occasions for decisions stemming from the llrequirement of superior authority cannot be avoided although some of it may be delegated further to subordinates The test of executive action is to make these decisions when they are important or when they cannot be delegated reasonably and to decline the others Decisions arising from the initiative from the executive are the most important test of the executive Take the initiative to work through the problems and opportunities facing the organization conceives programs to make necessary changes and implements them In this he makes a difference gt Types of Decisions Routine and nonroutine decisions 0 Routine O Focusing on wellstructured situations that occur frequently involve standard decision procedures and entail a minimum of uncertainty gt Examples payroll processing reordering standard inventory items paying suppliers etc Q Can be delegated to subordinates o Nonroutine O Deal with unstructured situations of a novel nonreoccurring nature often involving incomplete knowledge high uncertainty and use of subjective judgment even intuition where no alternative can be proved to be the best possible solution to the particular problem 0 Objective versus bounded rationality O Decision is objectively rational if in fact it is the correct behavior for maximizing given values in a given situation gt Made by I Viewing the behavior alternatives prior to decision in panoramic fashion I Considering the whole complex of consequences that would follow on each choice I with the Rational decision making therefore consists of optimizing or maximizing the outcome by choosing the single best alternative from among all possible ones which is the approach suggested in the planningdecision making model O Managers must operate under conditions of llbounded rationality taking only into account those few factors of which he or she is aware understands and regards as relevant O Managers of engineers and scientist must learn to insist that their subordinates move onto other problems when they reach a solution that suffices rather than pursuing their research or design beyond the point at which incremental benefits no longer match the costs to achieve them O Level of certainty gt Decisions may also be classified as being made under conditions of certainty risk or uncertainty depending on the degree with which the future environment determining the outcome of these decisions is known 39239 Management Science gt Origins I Began at the Bawdey Research Station in England at the beginning of WWII o Studied optimum depth antisubmarine bombs should be exploded for greatest effectiveness 20 25 ft and the relative merits of large versus small convoys 0 US Navy and Army Airforce followed studying research on the operations of existing systems 0 After war these techniques were applied to longerrange military problems and to problems of industrial organizations 0 Development of more powerful electronic computers it became possible to model large systems as a part of the design process and the terms systems engineering and management science came into use O Management Science ahs the following primary distinguishing characteristics gt A systems view of the problem gt Team approach gt Emphasis on the use of formal mathematical models and statistical and quantitative techniques gt Models and Their Analysis I A model is an abstraction or simplification of reality designed to include only the essential features that determine the behavior of a real system 0 Most models of management science are mathematical models 0 Management science uses a fivestep process that begins in the real world moves into the model world to solve the problem and then returns to the real world for implementation 0 Real World 0 Simulated model world o Formulate the problem define o objectives variables and constraints 0 0 Construct a mathematical model a simplified yet realistic representation of the system 0 0 Test the model s ability to predict the present from the past and revise until you are satisfied 0 o Derive a solution from the model 0 Apply the model s solution to the real 0 system document its effectiveness and revise further as required gt The Analyst and the Manager The problemsolving team must include managers and others from the department or system being studied to establish objectives explain system operation review the model as it develops from an operating perspective and help test the model 0 The model is more likely to be used effectively if used by someone who helped develop it and has some understanding and confidence in it and feels a sense of ownership 39239 Tools For Decision Making gt Categories of Decision Making I Decision making can be discussed in three categories decision making under certainty under risk and under uncertainty 0 Use the payoff table or decision matrix Q Uses some number of alternatives future states of nature and probability of occurrence O Outcome will depend on alternative chosen and the future state of nature that occurs gt Decision Making Under Certainty I We are certain of the future state of nature or assume that we are 0 Probability P1 of future N1 is 10 and all other futures have zero probability 0 Chose alternative that gives the most favorable outcome I Linear programming 0 A desired benefit can be expressed as a mathematical function the value model or objective function of several variables O The solution is the set of values for the independent variables that serves to maximize the benefit or in many problems to minimize the cost subject to certain limits constraints I Computer solution 0 Narendra Karmarkar at ATampT s Bell Laboratories developed a shortcut method based on llan arcane discipline known as projective Geometry that is 50 to 100 times as fast finding a solution to the larger problem in less than an hour gt Decision Making Under Risk I Nature of risk One assumes that there exist a number of possible future states of nature Each has a known or assumed probability of occurring and there may not be one future state that results in the best outcome for all alternatives Ai Expected value O EZ391I 0j The sum of the future states of the probability times the outcome of the chosen alternative gt E expected value 0j sum of the products of each outcome probability that the associated state of nature will occur Can also use a decision tree to get the results Use the same math but provides a 9 very visible solution procedure Queuing waitingline theory O Identify the optimum number of servers needed to reduce overall cost Simulation O Construct a mathematical model that simulates the operation of the complex real world system by mathematically describing the behavior of individual parts and the interactions between the parts Risk as variance O Another common meaning of risk is variability of outcome measured by the variance or more often its square root the standard deviation gt Decision Making Under Uncertainty I Uncertainty occurs when there exist several future states of nature M but the probabilities I of each of these states occurring are not known I Methods used Optimist O Offers the highest possible outcome the maximax solution Pessimist O Chooses the alternative whose worst outcome is least bad the maximin solution In between O Position in between the optimist and pessimist Hurwicz approach All states of nature are equally likely O Set all values to 10n and maximize expected value based on that assumption principle of insufficient reason Smallest difference between the best and worst outcomes O minimax regret solution I Game Theory Future states of nature and their probabilities are replaced by the decisions of a competitor Leads to selecting a mixture of two or more strategies alternated randomly with some specified probability gt ComputerBased Information Systems

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