The Role And Importance Of Decision Making In Different Businesses

Definition of Decision Making in Businesses

Question:

Discuss about the Proposal Of Empirical Model For Suppliers Selection.

The report helps in analysing the role of decision making along with application of the decision-making analysis in different kind of businesses. Decision-making is defined as the vital part of the different kind of businesses that comprises different kind of segments of different organizations that included strategic, operational and managerial decision makers. The decision-making process is essential and complex process that requires detailed processing that will evade consequences that can bring undesirable consequences for the entire organization.

There can be different kind of complexities in process of decision-making wherein there are different aspects that needs to be weighed and considered as to achieve effective and balanced decision that will help in achieving the different objectives in an effective manner. Furthermore, it can be seen that when the managers will be making decisions on behalf of the organization, it is essential to weigh the options in a proper manner as the poor kind of results in different kind of legal and financial losses to the company.

Furthermore, in order to make effective decisions, it is essential to define the issues as this will help in eliminating different kind of restrictions that is irrelevant to the decisions. The different alternative methods have to be adopted for approaching problem and best alternative methods has to be adopted to approach the issues effectively.

Figure 1: Process of decision-making

(Source: Conrado et al. 2016)

The different kind of strategic decisions are adopted by higher level management as they create core influence on the performance of the organization. Furthermore, the decision-making is under the category of phase of planning in the management. Without proper decision-making, there is different kind of managerial functions that includes planning, organizing, directing, controlling along with staffing that cannot be conducted. The process of decision-making will help in differentiating the key performance of the business in the competitive market (Shepherd, Williams and Patzelt 2015).

Figure 2: Importance of Decision-Making

(Source: Azadnia, Saman and Wong 2015)

There are plenty of theorists of management who have verified the process of decision-making as one of the essential management activities in comparison to the other activities of organization (Azadnia, Saman and Wong 2015). There are different business organizations wherein there is constraint relating to the availability of resources. It is essential in nature to utilize the existing kind of resources as this will help in achieving target without any kind of issues. The decision making helps in providing a clear view of objective that will allow top management as this will divide the utilization of resources effectively (Yayla et al. 2015).

There is different kind of decision making process that is carried at the time of planning phase in the management . The decision-making is a vital element in the different stages of the process of management wherein the study of different alternatives of process of decision-making that can help in generating different policies along with referrals (Shay and Lafata 2015). There are different kinds of information that will help in allowing key personnel to analyse the different kind of decisions that are made and prepared. This kind of information will be used as to make different long-term decisions for the entire organization and this will help in making quick decisions.

Complexities of the Decision-Making Process

Figure 3: Management functions

(Source: Azadnia, Saman and Wong 2015)

There are multiple objectives that are required to be implemented in the process of decision making. In order to fulfil such objectives, there are different methods of solving that has to be explored and considered effectively. Proper creative and innovative decisions are required to be undertaken as this will help in facing challenges to resolve issues effectively (Zheng et al. 2015).

The analysis of decision is defined as the set of different kind of tools that has to be established as to aid the managers in solving different problems in different kind of uncertain situations. The entire analysis is carried by weighing different kind of alternatives along with generation of statistical and quantitative data in regards to the problems related to decision-making. The entire data can be used in order to produce reasonably and rational data and systematic kind of solutions as this will make decisions in a corporate level.

The role of the analysis of decision-making is useful in complex situations wherein the solutions that are easy are difficult to be identified effectively. The analysis of decision is used in an extensive manner in different fields that includes management and government business operations (Power, Sharda and Burstein 2015). There is different kind of applications of analysis of decision-making that is summarized as follows:

There are different kinds of methodologies that can be adopted for analysis of decision application (Mardani, Jusoh and Zavadskas 2015). This includes multiple attribute technology, decision tree analysis, and heuristics strategy and rationality methodology. The SMART (Simple Multi attribute Rating Technique) is one such tools that is adopted for analysis of decision (Cabrerizo et al. 2015).

The entire technique of SMART helps in allowing prioritizing the different attributes that helps in contributing towards the decision (Wright et al. 2016). It is regarding model of linear additive wherein certain kind of values are assigned to each of the attributes and the sum of such attributes leads to selection of final decision. The process of SMART technique is as follows:

From the above figure, it can be analysed that proper technique has to be used as this will help in understanding the SMART procedure that will be used for performing sensitivity analysis. The proper calculation of the weighted average of the values is required to be done as this will help in identification of different criteria that will identify the issues of the issues in an effective manner.

Decision Making can be commenced when the different kind of unclear issues are structured into the attributes that are organized in nature. The entire scenario helped in explaining the different application of decision problem with the help of business case analysis that is done as follows:

Southern Industrial Gases is one of the largest organizations with different involvement of different industries in the world (Siggases.com, 2018). The respective organization is top industrial suppliers of gases with more than 25 centres of sales and more than 55 manufacturing plants in the entire world (Strandburg-Peshkin et al. 2015). The manufacturers and suppliers of the medical gases division of Southern Industrial Gases help in supplying medical industrial gases to other hospitals in Malaysia. The medical industrial gases are supplied to the different hospitals that are manufactured and later stored in the Air plant and later on they are distributed to the other hospitals accordingly (Soltani et al. 2015).

Strategic Decision Making and its Significance

The medical air plant of Southern Industrial Gases comprises of different kind of equipment, valves, tanks, pumps and other kind of machines that are related to medication. The main equipment in the plant of Southern Industrial gases are Valves and tanks. The valves functions as the primary and major machine in the process of manufacturing (Celebi et al. 2017). Furthermore, in the present era, it can be seen that the efficiency of the valves has been dropping gradually to the level that is non-favoured in nature. The main cause is due to the aspect of the wear and tear as the valves are operating for more than twenty years and they are depreciated in the market as well(Conrado et al. 2016). The demand for the medial industrial air gases is high in nature in different hospitals as there are different kind of threatening surgeries and other operations in the hospital that requires air gases (Li, Liao and Liu 2015). The procedures of the hospital can be affected when the supply along with production of the air gases is reduced and disrupted in nature. There are times when there are break down of the valves in the hospitals and this charges huge maintenance costs and volume of the supply that is unreliable in nature.

With such kind of deliberations, the entire invention team with the corporate management has decided to substitute the valves as to evade the disruption in the medical gases supply. The valves of the trade scale are on high-level cost items, therefore decision-making team has to select valve as this will help in solving issues in the economic climate. The cost, quality and the production outputs have to be analysed effectively before making a decision of replacing such valves (Govindan et al. 2015).

The five alternatives that are required to be considered are as follows:

• AVK is one of the USA based companies that is specialised in supplying valves and they operate in more than 200 countries with good track record in supplying medical valves in different hospitals globally (Musen, Middleton and Greenes 2014).
• Encord is the France based company that is famous for supplying valves of high quality and the after sales service is lower in comparison to different suppliers (Perera et al. 2017)
• VAG is one of the Indian Companies that is situated in Malaysia and it is a new organization that has started operating before nine years. The prices are attractive and there is no such track record of it as well.
• Arita is the local company based in Malaysia that has lowest cost of transportation due to the location of the origin.
• VAT is one of the France based organizations wherein the quality of valves is good and the after sales service is low as compared to other companies

The given attributes are the five key attributes. There may exist other attributes also

• Cost is one of the factors that has be considered as this has huge influence on the replacement of valves
• Benefits include the different kind of attributes that will help in efficiently improving the situation
• Production is the other factor that will help in understanding the reduction of the different sales service
• Training is the other attribute that will help in generating valves of high quality and this will help in satisfying demands of hospitals
• Warranty is the attribute that is essential in order to produce valves that are better in quality than the previous ones

After identifying the problem in the earlier section, the key decision makers who will be useful for choosing the valve and tank which needs to be replaced are the team in charge of production and the corporate management team of Southern Industrial gases. It is suggested that the production team is chosen to make sure that all technical aspects which consist of the quality and efficiency of the tanks and valve are considered. Along with their expertise the corporate management can also be considered as they will be looking after the commercial aspect of the valve and tank replacement. This way both the cost and long term investment from the viewpoint of Southern Industrial Gases will be considered.

The given diagram is a representation of the five key suppliers who were chosen as optional criteria in the key decision making procedure.

AVK is a brand which was formed n the United States. It specialises in valves with its customer base in more than 200 countries. It has a good track record with respect to the supply of components in different hospitals.

Theorists’ Views on Decision Making

The second company is the Encord which is based in France and is extremely popular for supplying high quality valves. One of their key components is there after sale services.

The third option is the VAG. It is an Indian company with its head office in Malaysia. The company is comparatively new with respect to others and offers an attractive pricing policy. However, there exists no track record of its quality delivered.

The fourth company is Arita which is a local company of Malaysia and has low transportation costs associated because of its local location

The last option available is the VAT Company which is a French company. It offers good quality valves but the after sale services is disappointing.

The discussed factors have been elaborated in the value tree provided in the next section.

A decision which is required to be taken needs to be reasonable in both technical and commercial aspects. For this purpose, it is extremely important that certain criteria’s are finalised. The criteria’s tend to have immense decision power which act as a critical factor in order to get the valve and tank replaced.

The two most important attributes as defined by the team were costs and benefits. The attributes play a key role in the decision relating to the replacement of the compressor. The cost component can be further elaborated into maintenance cost, price of the product and cost of transportation (Taylor Jrand Love2014). These divisions can be simply weighed in order to compare it to the wide cost factor. Same is the case for benefits whereby the can be divided into after sale service support and the revenue generated. The production along with the orders made by the clients shall have a direct impact on the revenue generated. The after sales service support, on the other hand can be easily assessed properly if it is divided into training, warranty and a record of the history track. The illustrated value tree represents the considered attributes.

After the value tree was made, it is important to ensure that the attributes which were identified are appropriate for the decision making. The given factors would hel in making the case strong.

Table 1: Costs Associated with Five Valve Suppliers

Supplier	AVK	Encord	VAG	Arita	VAT
Price of the Product	40000	25000	20000	22000	15000
Installation and Maintenance Costs	10000	12000	9000	7000	5500
Transportation Costs	6000	8000	7000	5000	1500
Total	56000	45000	36000	34000	22000

Table 2: Direct Rating- Values for Valve decision problem

Supplier	Output of Production	Fulfilling Client Orders	Training	Record of the Tracks	Warranty
AVC	100	100	55	80	75
Encord	80	60	0	50	60
VAG	60	30	45	20	30
Arita	70	40	55	50	45
VAT	50	20	80	30	20

Table 3: Normalization of the Weights of Attributes

Attributes	Output of Production	Fulfilling Client Orders	Training	Record of the Tracks	Warranty	Total
Original Weight	100	80	50	30	20	280
Normalized Weights	36	28	19	19	7	100

Table 4: Aggregate Benefits for Supplier AVK

Attributes	Output of Production	Fulfilling Client Orders	Training	Record of the Tracks	Warranty	Total
Values	100	80	50	30	20
Normalized Weights	36	28	19	19	7	100
Value x Weight	3600	2800	1045	800	525	8770

Calculating the aggregate benefits = 8,770/100 = 87.70

Table 5: Aggregate Benefits for Supplier ENCORD

Attributes	Output of Production	Fulfilling Client Orders	Training	Record of the Tracks	Warranty	Total
Values	80	60	0	50	60
Normalized Weights	36	28	19	19	7	100
Value x Weight	2880	1680	0	500	420	5480

Calculating the aggregate benefits = 5,480/100 = 54.80

Table 6: Aggregate Benefits for Supplier VAG

Attributes	Output of Production	Fulfilling Client Orders	Training	Record of the Tracks	Warranty	Total
Values	60	30	45	0	30
Normalized Weights	36	28	19	19	7	100
Value x Weight	2160	840	855	200	210	4265

Calculating the aggregate benefits = 4,265/100 = 42.65

Table 7: Aggregate Benefits for Supplier Arita

Attributes	Output of Production	Fulfilling Client Orders	Training	Record of the Tracks	Warranty	Total
Values	70	40	55	50	45
Normalized Weights	36	28	19	19	7	100
Value x Weight	2520	1120	1045	500	315	5500

Calculating the aggregate benefits = 5,500/100 = 55.00

Table 8: Aggregate Benefits for Supplier VAT

Attributes	Output of Production	Fulfilling Client Orders	Training	Record of the Tracks	Warranty	Total
Values	50	20	80	30	20
Normalized Weights	36	28	19	19	7	100
Value x Weight	1800	560	1520	300	140	4320

Calculating the aggregate benefits = 4,320/100 = 43.20

Table 9: Summary of Aggregate Benefits for Valve and Tanks Supplier Problem

	Output of Production	Fulfilling Client Orders	Training	Record of the Tracks	Warranty	Aggregate Benefit
Weight	36	28	19	10	7
AVC	100	100	55	80	75	87.7
Encord	80	60	0	50	60	54.8
VAG	60	30	45	20	30	42.65
Arita	70	40	55	50	45	55.00
VAT	50	20	80	30	20	43.20

For the analysis, only the valve of benefits has been calculated that too for the revenue and after sales customer service support. However, the relationship between the given factors and the costs associated with each supplier has not been stated. The given figure trades the costs against the benefits to find out the correlation of cost with the different valves of benefit with respect to after sales service and revenue. According toÁvila et al. (2016), the suppliers who are higher in the given chart and towards the right are preferred more.

Applications and Objectives of Decision Making

From the given analysis, it can be clearly witnessed that AVK is the best supplier with the highest set value of the benefits. On the other hand, Arita and VAT are also good because of the low cost aspect. Supplier Encord and VAG are quite low with respect to benefits and are deemed to be dominated and they tend to underperform in the analysis related to decision making.  Hence, AVK, VAT and Arita are worth considering. They are not dominating and contain a higher priority.

The primary purpose of Sensitivity Analysis is to help in the study of the manipulated weights with respect to certain attributes. This tool is generally used when the weights are varying and thus, the benefit’s robustness is analysed. The given figure reflects the sensitivity analysis with respect to varying weights.

From the analysis, it can be stated that the Arita is the second highest benefit provider till the point the weight is placed on 62. After this point Encord carries higher benefit comparatively. However, when the weight is placed on 0, AVK has the highest number of benefits at 67. It can be noted that irrespective of the changing weights, AVK is the only when which has the highest benefits. When the revenue is placed on 100, it shows 100 values of benefits.

Therefore, the decision making team which was formed can state with utmost confidence that AVK is the most reasonable and efficient frontier in comparison to all other suppliers or alternatives (Adomaviciusand Kwon2015). The outcome of the SMART Analysisfavours AVK which should be the ultimate choice of the company for its valve and tank problems of Southern Industrial Gases valve and tank replacement.         

The purpose of process of decision-making helped in identifying significant kind of attributes that are classified in priority group. It helps in providing framework of SMART as this is easy for assessment and to understand essential cost and benefit attributes in an effective manner.

The SMART analysis helps in providing opportunities for considering wide range of factors that are involved in decision problem. The attributes are taken into proper consideration to analyse the issues and this create huge impact on it as well. The different attributes are analysed in order to carry vital amount of weight age for decision problem such as wherein the total costs of the alternatives are summed up from different cost of transportation, product price and maintenance costs and the costs are helpful in replacing the medical air valves.

The analysis of SMART consists of limitations that include human factor influences the decision making and the input of different attributes can be affected by decision makers with different expectations and perceptions. In decision-making problem of Southern Industrial Gases, the weights and values allocated for the attributes are affected by preferences of decision makers. The other limitation is complexity and time of process of analysis. In the decision problem, analysis took time to compute normalized weights along with benefits that is aggregated.

Furthermore, apart from SMART, there can be different attributes that could have induced as the different perspectives could have been understood effectively. In this, it is difficult to understand the attributes that are chosen are not operational and redundant in nature.

Different Methodologies and Techniques for Decision-Making Analysis

Conclusions

Therefore, it can be concluded that analytical thinking and models of decision are essential in organizations. The module has helped in analysing the knowledge on decision-making theory wherein decision-making plays an essential part in making right kind of decisions.

The problem relating to decision helps in involving the replacement of medical valves in Southern Industrial Gases due to high costs along with impact of benefits. The sensitivity analysis has been performed that helped in analysing the different cost effectiveness and after sales services in an effectual manner. This has concluded that AVK is the optimum selection for the decision-making problem that has been outlined in an effectual manner.

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