Group Members

Group Members        

Asif Rafique Zeeshan Sajid Omer Ali Amjad Shahbaz idrees Asif Khalid Asif Jamil Faraz Naeem

Organizations O rg a n iza tio n s Profile Pro file • Brightco manufacturing produces signal products for 

• Highways • Railways • Marine

Problem statement (Q!) • Brightco co. is unable to decide which product it should produce under the limited manufacturing capacity • Earn profit along avoiding the unfavorable market situation • The Brightcomust decide the best alternative

What is decision Tree

3 Reasons to Chose decision Tree

Defending argument • By applying this technique we can see that the best option is to develop a new product. It is worth much more to us to take our time and get the product right, than to rush the product to market. And it's better just to improve our existing products than to be unsuccessful a new product, even though it costs us less.

Dropped

p e d f rom t h e D e c i s i o n p r o c e s s so t he n et yi pp

Alternative Actions

Marine product

% Unsuccessful

$200,000

Process A

High

0.3

$(500,000) $(200,000) $(700,000)

of success High 0 . 3

Process B 30% Marginal successful

$600,000 $(200,000) $400,000

Medium 0.4

Low 0.3

50% chances arine Product

$1500,000 $(200,000) $13,00,000

$50,000 $(200,000) $(150,000)

$1,000,000 $(200,000) $800,000

Medium 0 . 4

Low 0 . 3

$700,000 $(200,000) $500,000

$400,000 $(200,000) $200,000

Calculation of EMV Process-A = (0.3)(13,00,000) + (0.4)(400,000) + (0.3)(-700,000) = 390,000 + 160,000 - 210,000 = 340,000

Process- B = (0.3)(800,000) + (0.4)(500,000) + (0.3)(200,000) = 240,000 + 200,000 + 60,000 = 500,000

EMV Final EMV (Marine)

 

= (0.2)(-200,000) + (0.5)(500,000) + (0.3)(-150,000) = -40,000 + 250,000 – 45,000 = 165,000 

•

Highways Reflectors

10% Unsuccessful

Idea scrap value $300,000

$600,000 $(300,000) 300,000

Medium 40% or (0.4) Existing 20% Marginally successful 0.4

Sold idea 0.6 Low 60% or (.6) ghways Reflectors 100,000 High

$200,000 $(300,000) ($100,000) $800,000 $(300000) $(150000) $3500000 $600,000 $(150,000) $(300,000) 150,000

yield 50%

Process X Low yield

70% Successful Process y

50%

High yield 30% Low

yield 70%

1,100,000 (150000) (300,000) 650,000 400,000 (150,000) (300,000) (50,000)

Calculation of EMV (highways) Process – X = (0.5)(350,000) + (0.5)(150,000) = 175,000 + 75,000 = 250,000

Process – Y = (0.3)(650,000) + (0.7)(-50,000) = 195,000 - 35,000 = 160,000

Yield analysis

EMV for Existing Production EMV=(0.4)(300000)+(0.6)(-100000)  =120000+(-60,000)  =60,000 EMV for marginal Success EMV=(0.4)60000+(0.6)(100,000)  =24,000+60,000  =84,000 



Final Highway = (0.1)(-300,000) + (0.2)(84,000) + (0.70) (250,000) = (-)30,000 + 16,800 + 175,000 = 161,800 

Recommendation   

We recommend that the company should produce the MARINE Signal Kit to be sold through marine products distributors because it has high expected monetary value.

Strengths of decision tree • Decision trees are able to generate understandable rules. • Decision trees perform classification without requiring much computation. • Useful for operational decision making

Weaknesses of decision analysis • • Real time data is not available • We use probabilities to solve the problem which are only estimations. • We mostly use qualitative data to make decision

Risk-taker Or Risk-avoider 

If Brightco’s manufacturing company is a risk-taker, they should go with the decision tree planning.

 

If they are risk avoider ten they should go for real time data rather than using probabilities.