moduleA

moduleA - Operations Operations Management Management...

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A-1 Operations Operations Management Management Decision-Making Tools Decision-Making Tools Module A Module A
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A-2 Outline Outline Decision Tables. Decision making under uncertainty. Decision making under risk. Expected value of perfect information ( EVPI ). Decision Trees.
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A-3 The Decision-Making Process The Decision-Making Process Problem Decision Quantitative Analysis Logic Historical Data Marketing Research Scientific Analysis Modeling Qualitative Analysis Emotions Intuition Personal Experience and Motivation Rumors
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A-4 Models and Scientific Management Models and Scientific Management Can Help Managers to Can Help Managers to : Gain deeper insights into the business. Make better decisions! Better assess alternative plans and actions. Quantify, reduce and understand the uncertainty surrounding business plans and actions.
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A-5 Steps to Good Decisions Steps to Good Decisions Define problem and influencing factors. Establish decision criteria. Select decision-making tool (model). Identify and evaluate alternatives using decision-making tool (model). Select best alternative. Implement decision. Evaluate the outcome.
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A-6 Benefits of Models Benefits of Models Allow better and faster decisions. Less expensive and disruptive than experimenting with the real world system. Allow managers to ask “What if…?” questions. Force a consistent and systematic approach to the analysis of problems. Require managers to be specific about constraints and goals.
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A-7 Limitations of Models Limitations of Models May be expensive and time-consuming to develop and test. May be unused, misused or misunderstood (and feared!). Due to mathematical and logical complexity. May downplay the value of qualitative information. May use assumptions that oversimplify the real world.
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A-8 Decision Theory Decision Theory Terms : Alternative : Course of action or choice. Decision-maker chooses among alternatives. State of nature : An occurrence over which the decision maker has no control .
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A-9 Decision Table Decision Table States of Nature State 1 State 2 Alternative 1 Outcome 1 Outcome 2 Alternative 2 Outcome 3 Outcome 4
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A firm has two options for expanding production of a product: (1) construct a large plant; or (2) construct a small plant. Whether or not the firm expands, the future market for the product will be either favorable or unfavorable. If a large plant is constructed and the market is favorable, then the result is a profit of $200,000. If a large plant is constructed and the market is unfavorable, then the result is a loss of $180,000. If a small plant is constructed and the market is favorable, then the result is a profit of $100,000. If a small plant is constructed and the market is unfavorable, then the result is a loss of $20,000. Of course, the firm may also choose to “do nothing”, which produces no profit or loss. Example - Decision Making Under
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This note was uploaded on 02/15/2012 for the course BA 252 taught by Professor Jamescampbell during the Winter '03 term at UMSL.

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moduleA - Operations Operations Management Management...

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