What does define a decision problem?


The decision making process in business management can be described as choosing among alternatives. The main steps are: problem definition, identification of decision criteria, allocation of weights to criteria, development and analysis of alternatives, and selection and implementation of alternatives.

A typical decision problem in forest products industries is the selection of equipment. For example, a manager is in the process of purchasing a computer numerical control (CNC) router for machining operations in the manager’s wood kitchen cabinet manufacturing plant. Some of the criteria that the manager might use are: price, number of axes, monthly maintenance costs, energy consumption, availability of service, brand recognition, optional equipment, safety, and productivity.  The weighting of the different machines available for purchasing are shown in the figure below. Notice that a score from 0 to 10 is assigned to each option on each decision criteria. The weights for each decision criteria are located on the top of the criteria’s name. For instance, for the criteria price and productivity the weight is 20 in each case. For number of axes, energy consumption, and optional equipment the weight is 5 for each case. In this example, the option Thermwood scores the highest with 82 points out of 100. 


For other cases where the level of complexity is higher, different tools might be required. For example, if the manager needs to optimize variables (minimization or maximization problems) a linear programming method might be a good tool. Sometimes a combination between quantitative and qualitative criteria can be achieved through the use of special tools such as the analytical hierarchy process (AHP). 

Overall, there are a large number of quantitative and qualitative tools that managers can use to make decisions