Decision making is a very important and complex process. In order to aid decision makers make the right choice, quantitative techniques are used that improve the overall quality of decision making.
Following are some of the commonly used techniques −
Decision Trees are tools that help choose between several courses of action or alternatives. They are −
· Represented as tree-shaped diagram used to determine a course of action or show a statistical probability.
· Each branch of the decision tree represents a possible decision or occurrence.
· The tree structure shows how one choice leads to the next, and the use of branches indicates that each option is mutually exclusive.
· A decision tree can be used by a manager to graphically represent which actions could be taken and how these actions relate to future events.
Delphi Technique is a method used to estimate the likelihood and outcome of future events. It is unique because −
· It is a group process using written responses to a series of questionnaires instead of physically bringing individuals together to make a decision.
· Individuals are required to respond to a set of multiple questionnaires, with each subsequent questionnaire built from the information gathered in the previous one.
· The process ends when the group reaches a consensus.
· The responses can be kept anonymous if required.
Payback analysis is a technique generally used in financial management.
· It refers to the period of time required to recoup the funds expended in an investment, or to reach the break-even point.
· It is generally used to evaluate capital-purchasing alternatives.
· Alternatives are ranked according to the time each takes to pay back its initial cost.
· The strategy is to choose the alternative that has the quickest payback of the initial cost.
Simulation is a technique that attempts to replace and amplify real experiences with guided techniques.
· It is a widely used technique in operations research.
· It models the behavior of individual elements within a given system.
· Methods generally used in simulation are random sampling to generate realistic variability.
· The overall behavior of the system emerges from the interactions between the elements.
· Widely used application areas of the simulation technique are - logistics and supply chain, service and operations management, business process improvement, health and social care information system, environment, etc.