Polytechnic University of the Philippines

Sta. Mesa, Manila

College of Business Administration

MODULE 5: COMPUTER-AIDED
DECISION

Group 5 Members:

Gayanes, Karlos Lemon, Kathleen Maian

Gonzaga, Jolly Klarysse Lopez, Jerica

Gramata, Kristel Ann Ruth Malit, Don Fernan

Hona, Jet Raniel Mendoza, Reginald

Iglesias, Daisy Misa, Jonel

Joseph, Kimberly Ann Perlado, Jophil Ann

Labong, Philip

Submitted to: Dr. Marilou B. Mondana

Reporter: Mendoza, Reginald

Programmed Decisions

A routine or repetitive decision that can be handled by established business rules

or procedures. These types of decisions are often called for at certain points in a
standard process, and are decided based on recognized and easily identifiable factors.
Programmed decisions typically do not require much consideration or discussion, and
can generally be automated to ensure consistency and save time for decision-makers.

For example, production department follows a routine that managers order for
inventory when it reaches the re-order point. If there is sudden increase in demand for
the product, managers cannot wait for inventory to reach the re-order point to make
fresh orders. Orders are placed before this level is reached. Ordering inventory is, thus,
a problem of routine nature but ordering inventory before the re-order point is a routine.

In the situation, managers depend on pre-established criteria for taking

decisions. Various policies, schedules and procedures guide these decisions and,
therefore, policies and procedures should be as clear as possible. Since decisions are
based on pre-defined standards, they do not require much of brainstorming and are
taken normally by middle and lower-level managers.

Managers do not think of innovative ways to solve the routine problems.

Therefore, they can concentrate on important and crucial activities. These decisions
also involve some amount of certainty

Various types of programmed decisions are:

1. Organisational Decisions:

These decisions reflect use of authority and take in interest of the organisation
are organisational decisions.

For example, firing an employee because he does not conform to rules is an

organisational decision
2. Operational Decisions:

Operational decisions are taken as a matter of routine. They relate to daily

operations and aim to achieve short-term objectives of the firm. They are taken by
middle and lower- level managers within the framework of policies and procedures and
allow limited use of discretion by managers. Their impact is also limited and short-range
in nature.

These decisions affect part of the organisation and are based on pre-defined
policies and procedures. For instance, purchase of stationery and raw material are day-
to-day decisions which affect only the purchase department and are taken according to
pre-defined procedures defined for the purchase department.

3. Research Decisions:

These decisions reflect urgency of decision-making. Decisions which involve

regular survey of the market.

For example, decision to allocate funds to Research and Development for product
designing

4. Opportunity Decisions:

These decisions reflect foresightedness. Managers forecast opportunities to

promote organisational growth. It is the decision to grow and diversify (market
penetration and market development)

For example, decision to enter into new markets even when the company is making
profits in the existing market.

Reporter: Gayanes, Karlos

OPERATIONS RESEARCH

Operations research (OR) is an analytical method of problem-solving and

decision-making that is useful in the management of organizations. In operations
research, problems are broken down into basic components and then solved in defined
steps by mathematical analysis.

HISTORY.

1936

Early in 1936 the British Air Ministry established Bawdsey Research Station, on
the east coast, near Felixstowe, Suffolk, as the centre where all pre-war radar
experiments for both the Air Force and the Army would be carried out. Experimental
radar equipment was brought up to a high state of reliability and ranges of over 100
miles on aircraft were obtained.

1937

The first of three major pre-war air-defense exercises was carried out in the
summer of 1937. The experimental radar station at Bawdsey Research Station was
brought into operation and the information derived from it was fed into the general air-
defense warning and control system.

1938

In July 1938 a second major air-defense exercise was carried out. Four
additional radar stations had been installed along the coast and it was hoped that Britain
now had an aircraft location and control system greatly improved both in coverage and
effectiveness.

1939

In the summer of 1939 Britain held what was to be its last pre-war air defence
exercise. It involved some 33,000 men, 1,300 aircraft, 110 antiaircraft guns, 700
searchlights, and 100 barrage balloons. This exercise showed a great improvement in
the operation of the air defence warning and control system. The contribution made by
the OR team was so apparent that the Air Officer Commander-in-Chief RAF Fighter
Command (Air Chief Marshal Sir Hugh Dowding) requested that, on the outbreak of
war, they should be attached to his headquarters at Stanmore in north London.
1940

On May 15th 1940, with German forces advancing rapidly in France, Stanmore
Research Section was asked to analyses a French request for ten additional fighter
squadrons (12 aircraft a squadron - so 120 aircraft in all) when losses were running at
some three squadrons every two days (i.e. 36 aircraft every 2 days). They prepared
graphs for Winston Churchill (the British Prime Minister of the time), based upon a study
of current daily losses and replacement rates, indicating how rapidly such a move would
deplete fighter strength. No aircraft were sent and most of those currently in France
were recalled.

1941 onward

In 1941, an Operational Research Section (ORS) was established in Coastal

Command which was to carry out some of the most well-known OR work in World War
II.

PROCESS OF OPERATIONS RESEARCH

Step I: Observe the problem environment

This step includes different activities; they are conferences, site visit, research,
observations etc. These activities provide sufficient information to the O.R. specialists to
formulate the problem.

Step II: Analyze and define the problem

This step is analyzing and defining the problem. In this step in addition to the
problem definition the objectives, uses and limitations of O.R. study of the problem also
defined. The outputs of this step are clear grasp of need for a solution and its nature
understanding.

Step III: Develop a model

This step develops a model; a model is a representation of some abstract or real

situation. The models are basically mathematical models, which describes systems,
processes in the form of equations, formula/relationships. The different activities in this
step are variables definition, formulating equations etc. The model is tested in the field
under different environmental constraints and modified in order to work. Sometimes the
model is modified to satisfy the management with the results.

Step IV: Select appropriate data input

A model works appropriately when there is appropriate data input. Hence,

selecting appropriate input data is important step in the O.R. development stage or
process. The activities in this step include internal/external data analysis, fact analysis,
and collection of opinions and use of computer data banks. The objective of this step is
to provide sufficient data input to operate and test the model developed in

Step V: Provide a solution and test its reasonableness

This step is to get a solution with the help of model and input data. This solution
is not implemented immediately, instead the solution is used to test the model and to
find there is any limitations. Suppose if the solution is not reasonable or the behavior of
the model is not proper, the model is updated and modified at this stage. The output of
this stage is the solution(s) that supports the current organizational objectives.

Step VI: Implement the solution

At this step the solution obtained from the previous step is implemented. The
implementation of the solution involves so many behavioural issues. Therefore, before
implementation the implementation authority has to resolve the issues. A properly
implemented solution results in quality of work and gains the support from the
management.

Repoter: Iglesias, Daisy

UNPROGRAMMED DECISIONS

These decisions are taken in unstructured situations which reflect novel, ill-
defined and complex problems. The problems are non-recurring or exceptional in
nature. Since they have not occurred before, they require extensive brainstorming.
Managers use skills and subjective judgment to solve the problems through scientific
analysis and logical reasoning.

Subjective judgment is based on assessment of the situation. In objective

judgment (in case of programmed decisions), past experience forms the basis for
decision-making. These decisions involve fair degree of uncertainty since outcomes of
decisions are not always known. These decisions are based on partial ignorance as the
alternatives and their outcomes cannot be known in advance. They are taken in the
context of changing, dynamic environmental conditions. These decisions are taken by
top-level managers. As we move up the organisational hierarchy, the need for taking
non-programmed decisions increases.

For example, increase in advertising expenditure, effective salesmanship,

upgraded technology, quality controls, brand image and reasonable prices are expected
to increase sales and profits. If, despite all this, profits are declining, it requires
immediate decision-making and such decisions are non-programmed decisions.

Non-programmed decision features are;

 Situations for Non-programmed decisions are unique, ill-structured.

 Non-programmed decisions are one-shot decisions.

 Handled by techniques such as judgment, intuition, and creativity.

 A logical approach to deal with extraordinary, unexpected, and unique problems.

 Managers take heuristic problem-solving approaches in which logic; common

sense and trial and error are used.

Different types of non-programmed decisions are:

(1) Personal decisions-decisions taken for personal interests are personal decisions,
For example, firing an employee because he does not conform to rules is an
organisational decision but firing due to personal enmity is a personal decision.
(2) Strategic decisions- Decisions that relate to long-term goals of the company define
relationship of the organisation with the environment and are risky in nature. These
decisions affect the whole or major part of the organisation and contribute directly to
organisational objectives. They are taken by top-level managers. Decisions to update
the technology, launch a new plant or change the policies are strategic decisions.

Strategic decisions involve three important elements:

(a) Result element:

It specifies the result (objective) to be achieved through the decision.

(b) Action element:

It specifies the action to be taken to achieve the result.

(c) Commitment element:

It specifies the dedication, loyalty and commitment with which people who are
responsible for taking action to achieve results are involved in making the decisions.

(3) Crisis intuitive decisions- Decisions made under situations of crisis or emergency,
for example, Decision to increase production of medicines because of earthquake or
war is a crisis-intuitive decision.

(4) Problem-solving decisions- Problem solving is the act of defining a problem;

determining the cause of the problem; identifying, prioritizing and selecting alternatives
for a solution; and implementing a solution.

For example, decision to drop a product line because it is unprofitable is a problem-

solving decision.
Reporter: Perlado, Jophil Ann

ARTIFICIAL INTELLIGENCE (AI)

Artificial intelligence (AI) is an area of computer science that emphasizes the

creation of intelligent machines that work and react like humans. Some of the activities
computers with artificial intelligence are designed for include:

 Speech recognition
 Learning
 Planning
 Problem solving

Artificial intelligence is a branch of computer science that aims to create intelligent

machines. It has become an essential part of the technology industry.

Research associated with artificial intelligence is highly technical and specialized.

The core problems of artificial intelligence include programming computers for certain
traits such as:

 Knowledge
 Reasoning
 Problem solving
 Perception
 Learning
 Planning
 Ability to manipulate and move objects

Knowledge engineering is a core part of AI research. Machines can often act and
react like humans only if they have abundant information relating to the world. Artificial
intelligence must have access to objects, categories, properties and relations between
all of them to implement knowledge engineering. Initiating common sense, reasoning
and problem-solving power in machines is a difficult and tedious task.
 Robotics is also a major field related to AI. Robots require intelligence to handle
tasks such as object manipulation and navigation, along with sub-problems of
localization, motion planning and mapping.

From SIRI to self-driving cars, artificial intelligence (AI) is progressing rapidly. While
science fiction often portrays AI as robots with human-like characteristics, AI can
encompass anything from Google’s search algorithms to IBM’s Watson to autonomous
weapons.

Artificial intelligence today is properly known as narrow AI (or weak AI), in that it is
designed to perform a narrow task (e.g. only facial recognition or only internet searches
or only driving a car). However, the long-term goal of many researchers is to create
general AI (AGI or strong AI). While narrow AI may outperform humans at whatever its
specific task is, like playing chess or solving equations, AGI would outperform humans
at nearly every cognitive task.

HOW CAN AI BE DANGEROUS?

Most researchers agree that a super intelligent AI is unlikely to exhibit human

emotions like love or hate, and that there is no reason to expect AI to become
intentionally benevolent or malevolent. Instead, when considering how AI might become
a risk, experts think two scenarios most likely:

The AI is programmed to do something devastating: Autonomous weapons are

artificial intelligence systems that are programmed to kill. In the hands of the wrong
person, these weapons could easily cause mass casualties. Moreover, an AI arms race
could inadvertently lead to an AI war that also results in mass casualties. To avoid being
thwarted by the enemy, these weapons would be designed to be extremely difficult to
simply “turn off,” so humans could plausibly lose control of such a situation. This risk is
one that’s present even with narrow AI, but grows as levels of AI intelligence and
autonomy increase.

The AI is programmed to do something beneficial, but it develops a destructive

method for achieving its goal: This can happen whenever we fail to fully align the AI’s
goals with ours, which is strikingly difficult. If you ask an obedient intelligent car to take
you to the airport as fast as possible, it might get you there chased by helicopters and
covered in vomit, doing not what you wanted but literally what you asked for. If a super
intelligent system is tasked with an ambitious geo engineering project, it might wreak
havoc with our ecosystem as a side effect, and view human attempts to stop it as a
threat to be met.

As these examples illustrate, the concern about advanced AI isn’t malevolence

but competence. A super-intelligent AI will be extremely good at accomplishing its
goals, and if those goals aren’t aligned with ours, we have a problem. You’re probably
not an evil ant-hater who steps on ants out of malice, but if you’re in charge of a
hydroelectric green energy project and there’s an anthill in the region to be flooded, too
bad for the ants. A key goal of AI safety research is to never place humanity in the
position of those ants.

AI ON HUMAN RESOURCES

It seems counterintuitive to discuss artificial intelligence and human resources in

the same conversation. After all, how could any organization have an HR staff without
humans? The reality is that HR may be the next frontier for AI systems that are
transforming businesses at a rapid pace.

A new white paper from Works Applications, the largest HR software provider in
Japan, offers some insights into how AI can transform HR departments now and in the
years to come. In short, the report concludes that the future isn’t about HR staff being
replaced by robots, but AI freeing up workers to focus on higher-level tasks. Questions
remain, however, about how quickly AI can be implemented into HR departments and
precisely how it can help each organization.

Emphasis on Efficiency

Imagine HR staff freed from the drudgeries of data entry or repeatedly answering
the same inquiries from employees. In its report, The Future of HR, Works Applications
notes that there has always been a natural urge by companies to free workers from
repetitive tasks. Consider the fact that many companies will publish “Frequently Asked
Questions,” or FAQs to avoid the need for staff to answer the same inquiries over and
over. Artificial intelligence can offer a souped-up version of the FAQ, with more
comprehensive responses and even chatbots that can provide answers.

“The benefit of using these AI systems are simple—they can gather, process and
analyze data much faster than humans,” Works Applications says.

And the application of AI for HR is clear: freeing workers to focus their energies
on broader, strategic HR work, rather than spending their days neck-deep in data.

The Implementation Challenge

Surveys suggest that some HR managers are still not on board with the
technology, or are just too small to need it. A 2017 survey from the Human Resources
Professional Association revealed that 52 percent of respondents said they were
unlikely to adopt AI in their departments within five years.

Consulting firm Deloitte observes that HR is one area of business where AI

implementation is lagging: Just 22 percent of “high-performing” HR organizations have
implemented AI technologies; that number drops to 6 percent among low-performing
organizations.

“It’s time for HR to step up,” Deloitte warns.

The growth of AI overall may eventually mean HR departments have no choice.

Corporate spending on AI systems is projected to top $47 billion by 2020.

Going Deeper

In the short term, it appears that the chief role of AI in HR is to bring efficiency.
But that just scratches the surface of what AI could eventually impact. Artificial
intelligence can also help with recruiting, assist in employee retention efforts and serve
as a consultant on workforce strategy. Consider how AI could help in recruiting and
retaining talent. Using data on current employees and applicants, an AI system could
issue recommendations on candidates, saving a company time and money.
 “An AI system in HR can suggest the type of people that would fit well in a new
position,” Works Applications says. “The system can help HR try to fit personality types,
skills and education with a particular position in the company. HR can also use AI for
succession planning for higher-level positions.”

HR experts said it’s still important for humans to remain engaged in the hiring
process. This is especially true if the organization is looking to change the makeup of its
staff. The ability of AI to free up HR staff to engage in higher level work can transform
the department into a full-fledged strategic consultant. HR staff will now analyze data
rather than collect it, and be a partner with other departments that need guidance. “HR
will be better positioned to effectively manage their current workforce,” says Richard
Harris, Global Strategic HR Development Director at Works Applications America. “It’s
developing new strategies and having the time to develop those strategies that add
value.”

Reporter: Gonzaga, Jolly Klarysse

Mathematics and Decision Making

Decisions shape our lives. Mathematics rationalizes the sifting of information and
the balancing of alternatives inherent in any decision. Mathematical models underlie
computer programs that support decision making, while bringing order and
understanding to the overwhelming flow of data computers produce. Mathematics
serves to evaluate and improve the quality of information in the face of uncertainty, to
present and clarify options, to model available alternatives and their consequences, and
even to control the smaller decisions necessary to reach a larger goal.

Mathematical areas like statistics, optimization, probability, queuing theory,

control, game theory, modeling and operations research --- a field devoted entirely to
the application of mathematics in decision making --- are essential for making difficult
choices in public policy, health, business, manufacturing, finance, law and many other
human endeavors. Mathematics is at the heart of a multitude of decisions, including
those that generate electric power economically, make a profit in financial markets,
approve effective new drugs, weigh legal evidence, fly aircraft safely, manage complex
construction projects, and choose new business strategies.

Models of Complex Systems

The costs of the policy decisions surrounding global warming are high politically
and financially. Policy makers must work through a chain of issues: Is global warming
real? Is it caused by automotive and industrial emissions? If so, which ones? Which
remedial strategies will be effective? What is their true cost? Individual manufacturers
whose products are among the suspected pollutants face parallel decisions at the
corporate level.

Specialized mathematical models link the effects of selected atmospheric

pollutants to predictions of global temperature change. They are the basis for the
growing scientific consensus that observed increases in the average temperature of the
earth are unlikely to be the consequence of natural variation alone. Similar models can
also be used to simulate and evaluate remedial strategies. The mathematical tools of
modeling, simulation, and risk analysis validate the cause and effect relationship upon
which policy decisions are based, and they permit the evaluation of the effects of
alternate courses of action. In addition, chaos theory is providing new lenses through
which to view the behavior of such complicated systems.

Complex decisions arise in more tangible settings as well, such as choosing

among the interrelated options that govern the process of building a complex system
like an office building or an aircraft. Which sequence of tasks chosen now will best
advance completion of the project? Which are potential bottlenecks? Operations
Research uses critical path analysis to identify the vital tasks so that each subunit is in
place at the right time at minimum cost: no battles are lost for want of the proverbial nail.

Complexity is aggravated by uncertainty. For example, decisions about dynamic

control of traffic in telephone and computer networks are made more difficult by the
uncertain patterns of demand. In a simpler form, a bank faces a similar dilemma in
deciding how many tellers to hire: how should resources be allocated to maintain
adequate service (shorter lines) when only the random characteristics of customer
arrival times are known? Queuing theory provides guidance for these kinds of decisions.

Reporter: Joseph, Kimberly Ann

Testing and Evaluation provides a systematic method to study a program,

practice, intervention, or initiative to understand how well it achieves its goals. It helps
determine what works well and what could be improved in a program or initiative.

Testing is a mechanism to assure quality of a product, system, or capability

(e.g., right product, built right). To be effective, testing cannot occur only at the end of a
development. It must be addressed continuously throughout the entire life cycle.

Evaluation is a process that critically examines a program. It involves collecting

and analyzing information about a program’s activities, characteristics, and outcomes.
Its purpose is to make judgments about a program, to improve its effectiveness, and/or
to inform programming decisions (Patton, 1987).

Control and Optimization

Includes developing rules, guidelines, procedures, limits or other protocols for

directing the work and processes of employees and departments. While optimization is
another important factor which helps an individual of making the best or most effective
use of a situation or resource.

Control is one of the managerial functions

like planning, organizing, staffing and directing. It is an important function because it
helps to check the errors and to take the corrective action so that deviation from
standards are minimized and stated goals of the organization are achieved in a desired
manner.
Optimization is an act, process, or methodology of making something (such as a
design, system, or decision) as fully perfect, functional, or effective as possible;
specifically : the mathematical procedures (such as finding the maximum of a function)
involved in this.
Reporter: Malit, Don Fernan

Financial and Economic Analysis

Financial and economic analyses have similar features. Both estimate the net-
benefits of a project investment based on the difference between the with-project and
the without-project situations. However, the financial analyses of the project compare
benefits and costs to the enterprise, while the economic analyses compare the benefits
and costs to the whole economy.

While financial analysis uses market prices to check the balance of investment
and the sustainability of project, economic analysis uses economic price that is
converted from the market price by excluding tax, profit, subsidy, etc. to measure the
legitimacy of using national resources to certain project. Financial and economic
analyses also differ in their treatment of external effects (benefits and costs), such as
favorable effects on health.

Mutual funds can include investments in derivatives such as currency repurchase

options, financial instruments whose prices are tied to prices of other commodities in the
market. Both the value and the hedging structure of many derivatives are decided by
models of economic behavior. Stochastic differential equations are the language of
those models because they express naturally the market's intrinsic uncertainty. They
lead to valuation formulas that balance risk and expected return.

Game theory, a discipline that was given its modern form by the mathematician
John von Neumann, models markets in which the actions of competing parties influence
one another while each acts in its own self-interest. The 1994 Nobel prize in economics
was shared by John Harsanyi and the mathematicians John Nash and Reinhard Selten
for their introduction of several different concepts of market equilibria, situations in
which each player is in an optimum position relative to its competitors. These
perspectives provide deeper insights into price structures than simple supply and
demand, thereby guiding investment and capital expenditure decisions.
 Analyzing a different competitive setting, a political scientist and a mathematician
have recently extended the age-old technique for dividing a piece of cake between two
individuals - -- one cuts, the other chooses --- to fair division among many parties when
economics and other complex forces are at work. Such disputes might center on
dividing cities and natural resources at the close of a multi-nation war. The theoretical
solution of the underlying mathematical problem, that of fair, envy-free division among
many parties, might lead eventually to tools that heads of state could apply to deciding
disputes like the division of territory in Bosnia.

Mathematics at the Core

Mathematics shows many faces as it works in these diverse settings. Statistics

measures the quality of information. Optimization finds the best alternative. Probability
quantifies and manages uncertainty. Control automates decision making. Modeling and
computation build the mathematical abstraction of reality upon which these and many
other powerful mathematical tools operate. Mathematics is indeed the foundation of
modern decision making.

Reporter: Labong, Philip

Expert System

In artificial intelligence, an expert system is a computer system that emulates the

decision-making ability of a human expert.[1] Expert systems are designed to solve
complex problems by reasoning through bodies of knowledge, represented mainly as if–
then rules rather than through conventional procedural code.[2] The first expert systems
were created in the 1970s and then proliferated in the 1980s.[3] Expert systems were
among the first truly successful forms of artificial intelligence (AI) software.

Expert systems were introduced by the Stanford Heuristic Programming Project

led by Edward Feigenbaum, who is sometimes termed the "father of expert systems";
other key early contributors were Bruce Buchanan and Randall Davis.

Problem Domain VS. Knowledge Domain

 An expert’s knowledge is specific to one problem domain – medicine, finance,
science, engineering, etc.

The expert’s knowledge about solving specific problems is called the knowledge
domain.

The problem domain is always a superset of the knowledge domain.

The Future of Business Decision-Making with AI

With no Terminator nor Replicant looming in the periphery, there really is no

danger to artificial intelligence, only potential. Arguably, there shouldn’t even be the
more practical scare of losing people’s jobs to machines. Experts say that AI can
actually enhance people’s jobs and allows them to work more efficiently.

And surely, this rings true with respect to decision-making. When decision-
makers and business executives have reliable data analyses, recommendations and
follow-ups through artificial intelligence systems, they can make better choices for their
business and employees. You don’t just enhance the work of individual team members.
AI also improves the competitive standing of the business.

The gap lies in developing artificial intelligence systems that could deal with the
enormous amount of data currently available. According to Gartner, a marketing
research organization, today’s data is set to balloon to up to 800% by 2020. With this,
you get about 80% of unstructured data, made up of images, emails, audio clips and the
like. At this point, there is nothing – neither human nor artificial intelligence – that can
sift through this amount of data, in order to make it useable for business.

According to IBM’s Dr. Kelly: ““This data represents the most abundant, valuable
and complex raw material in the world. And until now, we have not had the means to
mine it.” He believes that it is companies involved in genomics and oil that will find the
means to min this resource.
 He delves further on the future of AI and analytics: “In the end, all technology
revolutions are propelled not just by discovery, but also by business and societal need.
We pursue these new possibilities not because we can, but because we must.”

Reporter: Hona, Jet Raniel

General Benefits of Computer Simulation

1. Allows Experimentation without Disruptions to Existing Systems

– Simulation allows a model to be developed and compared to the system
to ensure it accurately reflects current operation. Any desired modifications can
be made to the model first, the impact on the system examined, and then a
decision to implement the changes in the real world system can be made.
2. Concept can be Tested Prior to Installation
- A computer simulation will allow concepts to be tested prior to the
installation of new systems. This testing may reveal unforeseen design flaws and
give designers a tool for improvement.
3. Detection of Unforeseen Problems or Bug
- By discovering these problems prior to installation, debug time and
rework costs can be avoided. In addition, improvements to system operation may
be discovered.
4. Gain in Knowledge on System
- A primary benefit of the simulation of process is an increase in overall
system knowledge. At the start of a simulation project, especially in modeling of
complex systems, knowledge is often dispersed among many different people.
Each individual is an expert in his or her particular area.
5. Speed in Analysis
- After a model has been developed, it is possible to run the stimulated
system at speeds much greater than would be attainable in the real world. With
many simulation languages, multiple experiments can be set up and run, adding
to the time savings.
6. Forces System Definition
 - In order to produce a valid, working model of a system, it is important all
aspects of that system be known. If incorrect or incomplete definitions exist, the
model will be inaccurate and should not be used as an analysis tool.
7. Enhances Creativity
- Having a simulation on hand can enhance creativity in a design of a
system. For instance, an engineer may conceive two possible solutions for a
particular problem on the factory floor. Without any means of analyzing possible
courses of action, the more conservative one will be chosen.

Reporter: Lemon, Kathleen Maian

GENERAL LIMITATIONS OF COMPUTER SIMULATION

Simulation is not a perfect cure-all that works in every case to remove every risk
from uncertain decisions. It has limitations and disadvantages. Some of these follows:

EXPENSIVE - The creation of a computer model often can be an expensive method of

analysis. Although lower priced simulation packages are available, most large scale
modeling efforts represent a major investment in training, sofrware, hardware, analysis,
and development time.

TIME CONSUMING - Modeling does not always produce quick answers to questions. In
most cases, data collection, model development, analysis, and report generation will
require considerable amounts of time. The simulation process can be sped up through
two (2) methods: reduction of detail (scaling) and by using generic code libraries. By
reducing the level of detail, general concept questions can be answered much faster.
However caution should be exercised when using this approach. Model accuracy can
also be affected by eliminating key details. In situations where many similar simulations
will be run, a generic simulation, or code library can be created. This reusable resource
will prevent reinventing the wheel for each simulation project. This is the main idea
behind the use of simulators.

YIELDS ONLY APPROXIMATE ANSWERS - Discrete event simulation relies on the

use of random number generators to provide model input. Since the input has a random
element, some uncertainty is also associated with the output. In order to produce
meaningful results, statistics must be used as a tool for interpreting output. All outputs
are estimates of the true behavior of the system. It is important to recognize this fact
and treat simulation results as close approximations and use statistical testing to draw
conclusions.

DIFFICULT TO EVALUATE - Validation is the process of making sure the computer

model accurately represents the system being studied. When the system does not yet
exist, this can become a formidable task. The opinions of experts and intuition must be
relied on as a means of insuring the model runs in the same way the system will.
Whenever judgment and opinion are being used, the possibility of error exists. It often is
better to take a conservative point of view and make sure the system's predicted
operation is no better than expectations for actual operation. Additionally, the human
element in computer simulation can be difficult to accurately capture and model.

ACCEPTED AS GOSPEL - Another problem that can occur over the course of a
simulation study is the tendency of users to accept output as gospel. Simulation is a tool
used by humans and is subject to any error that a person can make. Output reports
should always be subject to rigorous review by the data user. Not only should statistical
testing be employed, but common sense should be used as a mechanism for
acceptance. Many times problems can be detected by thinking through the process
being simulated and the formulation of opinions on what should happen. If output data
doesn't appear to be in line with expectations it should be investigated more closely. In
this way, a problem may come to light.

Reporter: Lopez, Jerica and Misa, Jonel

Group Think
 A type of conformity in which group withhold different or unpopular views in order
to give the appearance of agreement.

A psychological drive for consensus at any cost that suppresses the

disagreement and prevent appraisal alternative in cohesive decision making

A deterioration of mental efficiency, reality, testing and moral judgment

resulting from in-group pressure", Robbins& Coulter (2002)
Cohesive Group

The degree to which members are attracted to one another and share the group
goals. It is the "interpersonal glue" that makes members of a group stick together

Structural Faults

Insulation - Binding and filling of the group

Lack of Impartial Leadership - Directive, subjective and impartial

Lack of decision making- No procedure for developing and evaluating

alternatives

Homogenous members - Tendency to avoid conflict and to demand conformity

Provocative context

External threat

Low Self-esteem from previous failure

Concurrence Seeking

These conditions cause members to prefer concurrence or consensus in

decisions and to fail to evaluate one another's suggestions critically. That is the
tendency of group think.

Group think symptoms

Over-estimation of the group

Illusion of invulnerability - Group members feel they are above criticism. This
symptoms leads to excessive optimism and risk taking
 Belief in own morality - Group members feel they are moral in their actions and
therefore above reproach or blame. This symptom leads the group to ignore the ethical
implications of their decisions.

Closed-mindedness

Collective rationalization - Group members make up explanations for their

decision to make them appear rational and correct. Members discount warnings and do
not reconsider their assumptions. The results are that other alternatives are not
considered, and there is an unwillingness to reconsider the groups.

Stereotyping of out-group - Competitors are stereotype as evil or stupid. This

leads the group to underestimate its opposition

Uniformity Pressure

Self-Censorship - members do not express their doubts about the course of

action. This prevents critical analysis of the decision

Illusion of unanimity - group members believe there is unanimous agreement

on the decision. Silence is misconstrued as consent.

Direct pressure - peer pressure. Any member who express doubt or concerns
are pressure by other group members, who question their loyalty

Mine guards - some members take it upon themselves to protect the group
negative feedback. Group members are thus shielded from information that might lead
them to question their actions.

Symptoms of defective decision making

Incomplete survey of alternatives

Incomplete survey of objectives

Failure to examine list of preferred choice

Poor information search

 Selective information bias

Failure to workout contingency plan

Reporter: Gramata, Kristel Anne Ruth

Ringi System

The Ringi system is a traditional way of managerial decision-making in Japan.

For example, when Japanese executives discuss the subject of decision-making, they
use the term ringi seido, i.e. the ringi system. Traditional characteristics of Japanese
management come from the early industrialization era during the Meiji Restoration, but
the ringi system was used even before the industrialization. This is a good example of
the sustainability of traditional characteristics in Japanese approach to management.
This sustainability should be taken into consideration when discussing the expected or
suggested future changes in Japanese approach to management. Under traditional ringi
system, authority and responsibilities for each level of management are not clearly
defined. There is no policy guidelines specified by top management, and each decision
must be treated without reference to an overall policy. All but the most routine decisions
must be submitted to top management for final approval. The system is based on
decision-making by group participation and consensus. The responsibilities for the
decision-making are highly diffused and cannot be associated with an individual person.
For example, when a project fails, sanctions are not taken against those who proposed
and performed it. All the responsibility is on the top management who adopted it.

Though rewards go downward, sanctions do not. There has been a lot of

criticism of the ringi system in recent years in both the Western countries, and in Japan.
Criticism focuses on the time consumption during the ringi procedure. Some managers
even call this procedure as “management by stamps”. This criticism is, at least in some
cases, the result of misunderstanding or lack of information. For better understanding
we should describe the procedure as it works in a real situation. The procedure has not
substantially changed since its earliest years. Because of that, the procedure can be
described as an integral part of the modern management system in a large Japanese
business company or the Government bureau.
 The word ringi in reality consists of two parts. Rin means submitting a proposal to
the superior or boss and receiving approval. The second part, gi, means deliberations
and decisions. The procedure itself could be described the following way: It usually
starts at the lower level of management. Even if the initiator is a higher-level manager,
however, in almost every case he or she will give the idea to his or her subordinate(s)
and let him (them) propose it. There are at least three good reasons for that. First, the
first-line managers, as it is believed, are closer to the problem, and because of that,
they have more information about it. Second, it has to start at the managerial level
because decision-making is a typical managerial activity. Third, this is the way how the
lower level managers can demonstrate their managerial skills to their superiors. This is
important from each manager’s internal career ambitions point of view. Even if it
sometimes doesn’t look so, Japanese managers in general are very competitive. The
image of a brilliant young manager is the best “ticket” to get a top management position
faster. In their day-to-day managerial work, lower-level managers in a large Japanese
company are confronted with a number of problems that should be resolved in order to
run the business activities effectively and efficiently. But from the managerial point of
view the process of problem solving is in reality the decision-making process. Since
their authority and responsibilities are not clearly specified, and they receive no policy
guidelines from their superiors, these lower-level managers must refer all but a few
routine decisions to top management. In doing so, however, the lower-level managers
are asked to follow a certain procedure. He or she must draft a document that is known
in Japan as a ringisho. This is usually a printed form in which managers fill in their
ideas. They must describe the matter to be decided and their recommendation as what
is suggested to be done. For proper understanding of the ringi procedure we should
remember that it is not a suggestion as to what decision is to be made or what
alternatives are to be considered. The ringisho is presented in such a way as to seek
top management’s approval on a specific recommendation of a subordinate. When the
formal ringisho is ready, it must be circulated among various sections and departments
that will be affected by the decision. The organizational units whose cooperation will be
necessary in the decision implementation are involved as well. Manager of each
involved unit evaluates the ringisho proposal, and if acceptable, indicates his or her
approval. The indication of the approval is done by a manager’s personal seal - not by a
signature. This is the reason why some managers call the procedure as “management
by stamps”. In case the proposal is not acceptable, it doesn’t get the approval, and after
that it is postponed or cancelled. This sometimes happens as a result of the habatsu
informal group activities that will be described later in the text. If approved step-by-step,
the ringisho proposal slowly works its way up to top management, and eventually
reaches the president. When the president approves the ringisho by affixing his or her
seal, the decision is final. The ringi document is then returned to the original. drafter for
implementation. For example, in case of a business company practice, the procedure
usually starts at the section level. It is important to know that the ringi procedure as
described starts as an informal procedure. In a section of a department a middle level
manager presents a good idea, let say about the company’s product promotion. The
idea is then presented to the section head. After that, the section head calls a meeting
of his or her section. The purpose of the meeting is to discuss the idea. If considered as
a good idea in the end of discussion, the group judges that they will need the overall
support of the company. The section head reports this to the department head and they
discuss the idea together. If the department head takes it as a good idea, a local
consensus in the particular section has been reached. Remember please, consensus in
the section. To get the agreement and consensus in the department is the next step.
This is done through the meetings with the heads of other sections. When successfully
done, the department head initiates meetings with the other department heads to get
the overall consensus. The participants in such a meeting are the heads of
departments, section heads, and sometimes also the participants heads. If they need an
opinion of specialists from the specific field, they are involved as well. At the same time,
the initiator and his or her colleagues, under the leadership of the section head are
involved in what would be called an “organizational politics” in the West. They run about
formally and informally from section to section and from department to department to
prepare the necessary documentation. The procedure is still informal up to the moment
when the department head has got an informal agreement and support from the other
departments. After that the formal document ringisho that is mentioned on the above is
prepared and starts its circulation. As it is clear from the description, to get an approval
requires the peers’ support as well. This is another side of a Japanese collectivism in
management. Japanese managers are known as hard-working people who leave their
home early morning and come back home late in the evening. That is true, however,
they usually do not come from the office but from informal meetings where they discuss
and seek the support for their proposal. That is true especially in case of the higher
importance decisions. There are a number of prior consultations that will take place with
those who are supposed to be affected by the decision. People who are in a position to
influence the process are present as well. In formal meetings and by informal means the
participants exchange their views. Sometimes bargaining will take place as well. It is
only after a consensus is reached that the ringisho is prepared and circulated among
executives for their formal approval. Even in these cases, however, the initiative of
coordination and consultation usually rests with lower levels of management. The role of
the president in the decision-making procedure is also interesting. The approval is, of
course, necessary but the president’s decision is usually based on the approval of the
rest of executives. In practice, if the proposal reaches the president’s office, there is a
really high probability that it will be approved.