Operation Management 9th Edition Manual
QUANTITATIVE MODULE
Decision-Making Tools
Discussion Questions
1. The 6 steps of the decision process are: 1. Clearly define the problem and the factors that influence it. 2. Develop specific and measurable objectives. 3. Develop a model. 4. Evaluate each alternative solution. 5. Select the best alternative. 6. Implement the solution.
2. The purpose of this question is to make students use a personal experience to distinguish between good and bad decisions. A “good” decision is one that is based on logic and all available information. A “bad” decision is one that is not based on logic and all avail- able information. It is possible for an unfortunate or undesired out- come to result from a “good” decision (witness a patient expiring after open-heart surgery). It is also possible to have a favorable or desirable outcome result from a “bad” decision (you win at Blackjack, even though you drew a card when you already held an “18”).
3. The equally likely model selects the alternative with the highest average value; it assumes each state of nature is equally likely to occur.
4. The basic difference between decision making under certainty, risk, or uncertainty is based on the nature and amount of chance or risk that is involved in making the decision. Decision making under certainty assumes that we know with complete confidence the outcomes that result from our choice of each alternative. Decision making under risk implies that we do not know the specific outcome that will result from our choice of a particular alternative, but that we do know the set of possible outcomes, and that we are able to objectively measure or estimate the probability of occurrence of each of the outcomes in the set. Decision making under uncertainty implies that we do not know the specific outcome that will result from our choice of a particular alternative; we know only the set of possible outcomes and are unable to objectively measure or estimate
Decision-Making Tools
Discussion Questions
1. The 6 steps of the decision process are: 1. Clearly define the problem and the factors that influence it. 2. Develop specific and measurable objectives. 3. Develop a model. 4. Evaluate each alternative solution. 5. Select the best alternative. 6. Implement the solution.
2. The purpose of this question is to make students use a personal experience to distinguish between good and bad decisions. A “good” decision is one that is based on logic and all available information. A “bad” decision is one that is not based on logic and all avail- able information. It is possible for an unfortunate or undesired out- come to result from a “good” decision (witness a patient expiring after open-heart surgery). It is also possible to have a favorable or desirable outcome result from a “bad” decision (you win at Blackjack, even though you drew a card when you already held an “18”).
3. The equally likely model selects the alternative with the highest average value; it assumes each state of nature is equally likely to occur.
4. The basic difference between decision making under certainty, risk, or uncertainty is based on the nature and amount of chance or risk that is involved in making the decision. Decision making under certainty assumes that we know with complete confidence the outcomes that result from our choice of each alternative. Decision making under risk implies that we do not know the specific outcome that will result from our choice of a particular alternative, but that we do know the set of possible outcomes, and that we are able to objectively measure or estimate the probability of occurrence of each of the outcomes in the set. Decision making under uncertainty implies that we do not know the specific outcome that will result from our choice of a particular alternative; we know only the set of possible outcomes and are unable to objectively measure or estimate