ANALYTICAL THINKING AND DECISION MAKING REPORT

Their applications and relevance in the business entity would be analysed. The report revolves around decisions with multiple alternatives and determining their importance and application in business operations. The report would apply the SMART decision analysis to evaluate the decision problems relating to the choice of suppliers of raw materials in the business. This would be accomplished by analysing the concept and identifying the possible outcomes and results, as well as the alternatives surrounding the sources of raw materials in an entity. The report would also examine the effectiveness of business decisions and how they influence business success and performance. 1 Importance of decision making in business. 2 Decision analysis. 1 Application in a business context. 0 DECISION-MAKING PROBLEM. 0 THE APPLICATION OF SMART TECHNIQUE TO THE CHOICE OF A RAW MATERIAL SUPPLIER PROBLEM.

People and businesses apply decision analysis to evaluate and measure the extent of their decisions. The concept involves a prescriptive measure, aimed at assisting people to make important and influential decisions in their lives. Decision analysis applies normative framework, together with a set of tools and procedures in helping those making decisions to analyse the outcomes of complex, hard decisions. Decision-making is a process that aims at making a logical choice from a variety of alternatives (Barton, Sutton and Watkins, 1989, 45). One intends to achieve the best outcomes from the made decision or choice. 1 Tactical decision-making. Tactical decision-making involves the making of informed decisions or choices as either a person, a group or an organization (Kirkwood, 1997, 10). It involved a critical analysis of the available multiple choices before making the effective final one.

Through strategic planning, a firm is able to design the organizational goals, aims and objectives. It also enables the organization to plan on its future forecasts, budgets, profits and growth strategies. On the other hand, strategic and informed decisions are very effective and profitable in business (Kirkwood, 1997, 17). First, decision-making enables the accomplishment of the firm’s goals and objectives. By planning and strategizing on the choices the management makes, the business is able to accomplish its desired output and set standards. The accomplishments cause increase in the firm’s profits, and ultimately its growth and development. Secondly, the decision-making concept as well enables the selection of the most effective alternatives. The decision-making as well enables businesses to make appropriate financial and investment decisions.

Upon the accomplishment of such choices, the business is able to generate more income, which enables growth and development of the entity. Lastly, decision-making increases the efficiency of the organization. It enables the management to decide on who to do what, when, how and why to be done. It also enables the business to decide on the most effective means to reach out to their customers. By applying this concept, businesses are able to delegate tasks to specific individuals, requiring accountability. Secondly, the businesses analyse how the presumed decision would enable accomplish the intended goal. In addition, the cost, effectiveness, quality, quantity, deadlines and frequencies of the decisions are analysed. The best out of the available alternatives is identified and recommended.

The concept would also emphasize on the accuracy and reliability of the analysed decisions. The periods enables businesses to meet its deadlines, like submission and publication of its annual reports. 0 DECISION-MAKING PROBLEM. The decision-making problem to be outlined in this paper is the choice of a raw material supplier (Ached, 2013, 435). Raw materials are important aspects of the production process of many business companies. They mainly refer to the basic substances, which are in their ordinary, semi-processed or modified state, that are used as inputs in the production process to produce finished products. The alternatives and attributes identified from the decision problem Various alternatives could be considered in relation to the outlined problem. The company was to choose among the following alternatives for it to be in a position to achieve its goals in relation to the identified problem; the major alternatives to considered included; (i).

Buying raw materials directly from the manufacturing company. (ii) The may also decide to purchase semi-finished goods. (iii) The company could also just decide to manufacture its raw materials for its production process. The problem attributes are usually used in the measurement of performance in relation to the identified objectives of the alternative under consideration. The SMART model is usually based on the linear additive model (Triantaphyllou 2000, 5). The meaning behind this is that the entire value of a particular alternative is usually determined by getting the total sum of the performance score of every attribute then multiplied by attribute’s weight. For us to be able to apply this model in solving raw material supplier problem, we shall have to follow the following steps; Stage 1: Identification of decision maker In our case, the decision maker is a procurement company that is in dilemma of making choice on the raw material supplier.

The company will have to consider various alternatives to enable it to achieve the multi-objectives that related to the problem under consideration. Using this SMART model, the organization had to identify the following alternatives in relation to the decision problem under concern; A. The organization considered the option of buying the raw materials directly from the producing company. The outcomes of this alternative were mainly considered in terms of the opportunity cost for this alternative, consequences that were likely to be faced by the company as a result of selecting this alternative and the cost in relation to assuming this alternative. B. The company may also had the alternative of buying the semi-finished product in order to continue with the conversion into the finished goods instead of buying raw materials from a specified supplier.

The Company could also decide to outsource the services of another company to help in the production of the required goods. Here the cost of procuring a different company to help in the production of the required goods will be the major consideration to be made by this company. Profits were also of major concern. Table 1 Letter to represent an alternative The alternative represented A Buying raw materials directly from producing company B Buying semi-finished goods C Manufacture/make raw materials D Trade in finished goods E Outsource manufacturing services Stage 4: identification of the criteria to be used in the evaluation of the identified alternatives. The company used this stage to identify some of the criteria that could be based on to enable it to evaluate the identified alternative to the decision problem in question.

Equip. cost. This was used in the evaluation of the alternatives by outlining the expenses on the technology and equipment used in the production process. The installation cost was also analysed. For instance, the expense to be incurred in the incorporation of the appropriate information system for the production process and installation of the required machines and equipment. This stage enabled the procurement company to assign values to each of the identified criteria to be used in the evaluation of the available alternatives. The company was able to rank the alternatives based on the values assigned to the criteria to be used in the evaluation process. Individual members involved in the process were then required to give their individual judgments on the results obtained from the ranking.

In this stage, cost and benefit criteria were the major attributes that were used by the company to analyse the alternatives in the following way; Table 2 Alternatives Criteria Benefits Transportation cost Rental cost Tech. Equip cost Electricity cost Total costs $ $ $ $ $ $ A 500 200 400 400 100 1100 B 400 200 300 300 50 850 C 100 0 350 450 150 950 D 500 150 300 50 0 500 E 300 200 250 50 0 500 Ranking based on benefit criteria 100 A 80 D 60 B 40 E 20 C 0 Ranking based on transportation cost 100 A 80 B 60 40 E 20 D 0 C Ranking based on based on rental cost 100 A 80 D 60 C 40 B 20 E 0 Ranking based on Tech. The weighted average of the assigned values was as given below; Table 5 Attribute Weight Normalized weight (100% Benefits 100 33 Transportation cost 70 23 Rental cost 50 17 Tech. Equip. cost 20 6 Electricity cost 60 20 SUM 300 100 Table 6 Attributes Weighted average Alternative A B C D E Benefits 33 100 60 20 80 40 Transportation cost 23 100 80 0 20 40 Rental cost 17 100 40 60 80 20 Tech.

Equip. Cost 6 100 40 80 0 20 Electricity cost 20 80 60 100 20 0 Aggregate benefits 96 52 52 40 24 Stage 8: provisional decision Alternatives Benefits of alternatives ($) costs ($) Benefits (weighted) A 500 1100 96 B 400 850 52 C 100 950 52 D 500 500 40 E 500 500 24 The procurement company selected alternative D as it had the highest benefits and the reduced amount of costs to be incurred. But when the benefit value was decreased from 0. 33 to 0. 11, there were changes which were identified in attribute’s rank. The weighted value of the transportation cost was noticed to be higher compared to others thus assuming the first position in the rank. With this, alternative A was considered the best when compared to others. The raw material supplier was the major decision problem that was under consideration by the procurement company. SMART decision analysis proved to be an efficient model in decision making by enabling the company to arrive at information decision (Triantaphyllou, 2000, 15).

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