All entries for Sunday 10 March 2013

March 10, 2013

Decision Tree

To help us decide which production site to get, we used Decision Tree Analysis. Decision tree can be a very helpful tool as it projects the outcomes for all possible options. It gives the user an overview of the various stages that could follow a particular decision. The branches of the decision tree should be used to signify the probability of an outcome, and simple calculations can be made to work out the expected benefits or payoffs associated with various options. Finally, the option with the highest expected payoff should be chosen.

After using decision tree, I now appreciate it more as it gives a complete and comprehensive picture. All the different pathways are considered. This is important as we often make the costly mistake of missing small details when making a decision. Moreover, it is really helpful when you have a complicated decision with many stages (for example when you have to make follow on decisions if the project is not as successful as you expected it to be). By using probability, it allows the user to consider the risk factors and uncertainty and still make a good decision.

However, I have also learnt that you should be extra careful and meticulous when drawing the tree. The graphical representation should be neat and thouroughly checked in order to confirm that all the details are considered. Hence, it is not such a straightforward task. It does require time and effort. Nonetheless, if it's done appropriately, it can greatly aid the user to make a robust decision.

March 2013

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