Serita A Riggens
Quantitative Applications in Decision-Making
Central Michigan University
Instructor: Dr. Howard E Van Auken
August 11, 2010
Society’s use of Quantitative Methods
The use of quantitative models in real-world decision making is a practice that has become the norm in society. Decision makers have searched continually for ways to reduce or eliminate the uncertainties in the decision making process. For decades, the use of quantitative techniques in the decision making process have proven to assist users in improving the process by quickly delivering tools and other useful information used by organizations and have resulted in more economical decisions. “Quantitative analysis has been in existence since the beginning of recorded history, but it was Frederick W. Taylor who in the 1900’s pioneered the principles of the scientific approach to management”. (Render, Stair & Hanna, 2009) The use and success of quantitative methods during World War II and other military endeavors quickly became popular in business and various other industries. In today’s society, quantitative models are consistently applied to a variety of issues involving government, politics, business, economics, education and healthcare. Although quantitative models are essential, the use of quantitative models is only one important step within the quantitative analysis process used by managers to solve complex problems.
According to the text, quantitative analysis is a scientific approach that can be applied to the managerial decision making process (Render, Stair & Hanna, 2009). The use of quantitative analysis can greatly reduce speculative factors and allows users to transform raw data and statistics into valuable information. Although some qualitative factors may be necessary in the decision making process, the quantitative methods are essential because of the substance added to numerical or statistical values produce by qualitative methods. The quantitative analysis approach provides users specific steps to follow. The process involves:
1. Determining and properly stating the problem
2. Developing a model (models are usually mathematical but also can be schematic, physical or scaled models)
3. Acquiring data and input
4. Developing a solution
5. Testing the solution
6. Analyzing the results
7. Implementing the results (Render, Stair & Hanna, 2009)
The quantitative analysis process can be used in its entirety regardless of the quantitative model used. The quantitative models that are most commonly used throughout our society today are decision analysis, regression modeling, forecasting and probability.
Decision analysis provides an analytical and systematic approach to the process of decision making. Decision analysis is modeled after the “decision theory,” by which alternatives are also defined to ensure the decision being made is the most advantageous. Users are able to analyze all available opportunities and weigh the potential outcomes of good versus bad decisions based on the problem or situation defined as well as the current conditions of the organization and market. The decision analysis technique calls for users to identify alternative solutions, list potential outcomes or states of nature, list the payoffs or profits for each alternative choose a mathematical decision model and apply the model to the decision. Although the decision analysis technique can be applied to any problem or situation, the technique has most recently been widely used by large corporations, manufacturers and construction companies, in making decisions to hire contractors, start new lines or build new warehouses.
Within the construction management industry, the decision analysis technique has been implemented to assist contractors in optimizing his or her position during the bidding...