Tools to Aid Decision Making
Quantitative tools are the use of mathematical and other scientific means for solution. These tools assist in finding the optimum solution to the problem. Under this technique, various elements of problems and their inter-relationship are presented in the form of a model. The following are the tools to aid decision making:-
- Linear programming- In this tool, mathematical equations are employed to describe the systems in the form of the linear relationship between variables. It is appropriate when an objective must be met within a set of constraints. It is extremely useful for maximizing profit and minimizing cost.
- Simulation- In this technique, related variables and their inter-relationship are put into a system to find out the outcome. It is more useful in varying complex situations characterized by diverse constraints and opportunities. This technique is used in the decision making of large organizations that require more resources.
- Payoff matrix- In the payoff matrix, the probability of different alternatives and their expected values are taken into consideration. Probability ranges from subjective judgement, intuition, and historical data. The expected value of an alternative course of action is the sum of all possible values of outcomes from that action multiplied by their respective probabilities.
- Decision tree- In a decision tree, managers are graphical tool to study alternative solution available. It is like payoff matrix because alternatives are evaluated by calculating the expected value. However, it is most appropriate when a number of decisions are to be made in sequence.
- Queuing model- Queuing model is used to optimize the waiting lines in the organization so that better service can be provided to the customers. Its main objective is to achieve an optimal balance between the cost of increasing service and amount of time during which individuals, machines or materials must wait for service.
- Game theory- Game theory intends to predict how a competitor will react with various activities that an organization undertakes. Its primary objective is to develop a rational procedure for selecting a strategy.
- Accounting tools- In the financial decision process accounting tools play important roles. In this technique, managers collect, analyze and interpret financial information and data.
Therefore the tools to aid decision making are given above.
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