TECHNIQUES OF DECISION MAKING PROCESS
The decision making process has become very cumbersome.in order to evaluate.certain quantitative techniques have been developed which facilitate objectives of decisions making process.Some of these techniques are discussed below:
- Marginal Cost Analysis: The techniques is also known as marginal costing as under it the additional revenues from additional coast are compared.The costs are maximum at the level where the revenues and marginal cost are equal.marginal analysis can also be used in comparing the factor other than costs and revenues for instance,in order to find the optimum output of a machine,one can vary input against output until tnhe additional input are equal to additional output.This would be the point of maximum efficiency of a machine.break-even analysis is the modification of the techniques which tell the management the point of production where there is no profit and no loss.
- Cost Benefit Analysis:This is the techniques of weighing alternatives where the optimum solution cannot be conveniently reduced to monetary terms as in the case of marginal cost analysis.it is used for choosing among alternatives to identify the preferred choice when the objectives are far less specific than those expressed by such clear quantities as sales, costs or profits. For instances, social objectives may be to reduce pollution of air and water which lacks precision.Cost models may be developed to show cost estimates for each alternatives and benefits modelsto show the relationship between each alternative and its effectiveness.Then,synthesizing models,combining these results,may be made to show the relationship of costs and effectiveness for each alternative.
3.Operations and Research:Operation Reasearch has been defined as the scientific method of analysis of decision problems to provide the executive the needed quantitative information in making these decisions.the object of operation is to provide the managers with the scientific basis for solving organisational problems involving the interaction of components of the organisations.In days gone by,executive decision used to be taken on the basis of institution,subjectivity and past experience even in big organisations.Operations reasearch seeks to replace the process by an analytic,objective and quantitative basis based on information supplied by the system in operation and possibility without disturbing the operation.
Operations research is widely used in modern business organisations.for instance inventory models are used to control the level of inventory. Linear programming is useful in allocation of work among the individual in the organisation.sequencing theory helps the management to determine the sequence of particular operations.In addition to this there are other theory like queuing theory,games theory,reliability theory and market theory which some important tools for operational research which can be used by management to analyse the problems and take decisions.
- Linear Programming: Linear programming is a technique derived for determining the optimum combination of limited resources to achieve a given objective. It is based on the assumption that there exists a linear relationship between variables and that the limits of variations could be quantified and objectives are subject to definite measurement.It is applicable in such problem areas as production planning ,transportation ,warehouse location and utilisation of production and warehousing facilities at an overall minimum cost. Linear programming involves maximisation or minimisation of a linear function subject to a set of some real or assured restrictions known as constraints,
- Network Analysis:Network analysis is used for planning and controlling the project activities. Under this, a project is broken down to small operation s which are engaged in a logicall cycle. The next step is to decide the sequence of operation to be performed. A network diagram may be drawn to present the relationship between all the operations involved. The diagram will reveal the gaps in the flow plans. It will also show the interdependence of various activities of projects and point out the activities which should be completed before the other are to be initiated.A number of network techniques have been developed of which PERT (Programme Evolution And Review Techniques) AND CPM(Critical Path Method)have become very popular.these techniques have been discussed in detail in the chapter on Management Control Techniques.
QUESTIONS THAT CAN BE ASKED:
Q.1 Explain Operational Research in detail?
Ans:Operational Research technique of decision making is based on experimentation and scientific methods.It follows a particular sequence:
(b)Defining the real problem.
(c)Development of Model.
(d)selection of optimum model by using experimentation.
(e)Implementation and verification of model.
(f)Establishment of proper controls.
Q.2 Explain Linear Programming in brief?
Ans:A linear programming can be solved by either the graphical or simplex method:
(a)Graphical Method: (i)Formulation of L.P. Problem.(ii)Constraints.(iii)Plotting the Constraints on Graph.(iv)Identification of feasibility region.
(b)Simplex Method:In this,the equations are made on the basis of objective function and constraints.