Week 11_ SeeGod Meregini_ Choice on meeting my vehicular needs

Problem Recognition/Evaluation

The use of my current car was recently discussed by my wife and me for a possible change, or additional purchase.

A root cause analysis on the reason behind this change initiative is shown below:

·         There is an increasing requirement in mobility due to additional work and business needs.

·         There is also increasing cost of doing business.

I was faced with a decision to find out if I really needed to make changes in my mobility carriage and manage cost spent

Development of Feasible Alternatives/Solutions

Three proposals and do nothing compose the list of feasible alternatives (choices) in this decision problem. A total of five (5) attributes were judged sufficient for the purposes of discriminating among the alternatives.

The alternatives are:

·         Alternative 1 Renting a car adhocly.

This would involve getting a rented car anytime workloads or business needs are higher than what the current vehicle can satisfactorily perform.

·      Alternative 2  Buying additional car on mortgage terms

This involves using a bank to purchase a car by obtaining loan and paying back in terms as specified by the bank. This method would also involve paying interest rates.

·         Alternative 3 Buying additional car without mortgage terms

This involves out rightly purchasing a car without any mortgage arrangement and payback terms

·         Alternative 4 Do nothing

This would involve not doing anything and staying without additional vehicular support.

The list of attributes used was:

Cost   

Fulfillment of additional workloads

Financial assistance need

Effect on other projects

Change satisfaction

Probable Outcomes of Alternatives / Solutions.

I made sure each attribute captured a unique part of the decision problem and all attributes would be sufficient for the purpose of selecting the best alternative. Most importantly, the attributes selected was such that differences in values assigned to each attribute was meaningful in distinguishing among feasible alternatives.

I gathered data by talking to bank officials, car hiring companies, and some friends that accomplished some of the alternatives listed above.

A summary of information gathered is shown below assuming the use of the car would be for 4 years

Attribute	Renting a car	Buying with mortgage	Buying without mortgage	Do nothing
Cost	$60,200 (at $70/day*20days*43mts)	$40,000	$32,000	$10,000
Fulfillment of additional workloads	Medium	High	High	Low
Financial assistance needs	Low	High	Medium	None
Positive Effect on other projects	Medium	Low	None	High
Change satisfaction	Low	High	Medium	None

 Table 1 showing summary information of attributes and alternatives

Selection Criteria in determining the solution

1.    Additional workloads must be sufficiently taken care of

2.    The cost of implementing the change must not be burdensome i.e. too expensive.

3.    Change implementation must create high satisfaction.

Analysis and Comparison of the alternatives

In comparing the alternatives, ranking of the attributes was done such that relative weights were assigned with higher numbers signifying greater importance. Normalization of these relative ranking was also done.

I also considered the fact that since the partial contributions of all attributes for a particular alternative are unequal because of varying importance rankings, I would use an additive weighting technique.

This involves converting the attribute value to a nondimensional form and multiplying the result with the normalized relative weight for the attribute to arrive at a weighted score for the attribute. The weighted scores of all attributes are then summed to arrive at an overall score for each alternative.

I considered this an appropriate method because it includes both the performance ratings and importance weights for each attribute when evaluating the alternatives.

Below is a quantitative analysis of the alternatives

Attribute	Ordinal ranking	Relative ranking=Ordinal ranking +1	Normalized weight
Cost	4	5	5/20=0.25
Fulfillments of additional workloads	5	6	6/20=0.30
Financial assistance need	3	4	4/20=0.20
Effect on other projects	1	2	2/20=0.10
Change satisfaction	2	3	3/20=0.15

Sum = 20                     Sum =1.00

Fig 1.showing ordinal and relative ranking including the normalized weights of each attributes

An ordinal ranking is simply an ordering of attributes from the most preferred to the least preferred.

Relative rank =ordinal ranking + 1.  Scale of 1 to5. A rank of 5 is best.

Attribute	Value	Rating Procedure	Dimensionless Value
Cost	10,000	60,200-cost/60,200-0	1.000
	32,000		0.562
	40,000		0.402
	60,200		0.000
Fulfillment of additional workloads
None	1	Relative rank-1/3	0.00
Low	2		0.33
Medium	3		0.67
High	4		1.00
Financial assistance need
None	1	Relative rank-1/3	0.00
Low	2		0.33
Medium	3		0.67
High	4		1.00
Effect on other projects
None	1	Relative rank-1/3	0.00
Low	2		0.33
Medium	3		0.67
High	4		1.00
Change satisfaction
None	1	Relative rank-1/3	0.00
Low	2		0.33
Medium	3		0.67
High	4		1.00

Fig 2 showing nondimensional scaling of attributes

This means standardization of attribute values by converting them to nondimensional form.

The Additive Weighting Technique

	Renting a car		Buying additional with mortgage		Buying without mortgage		Do nothing
Normalized weight	Performance	Weight value	Performance	Weight value	Performance	Weight value	Performance	Weight value
0.25	0.000	0.00	0.402	0.10	0.562	0.14	1.000	0.25
0.30	0.67	0.20	1.00	0.30	1.00	0.30	0.33	0.10
0.20	0.33	0.07	1.00	0.20	0.67	0.13	0.00	0.00
0.10	0.67	0.07	0.33	0.03	0.00	0.00	1.00	0.10
0.15	0.33	0.05	1.00	0.15	0.67	0.10	0.00	0.00
0.00	#N/A	#N/A	#N/A	#N/A	#N/A	#N/A	#N/A	#N/A
0.00	#N/A	#N/A	#N/A	#N/A	#N/A	#N/A	#N/A	#N/A
		0.383		0.784		0.674		0.450
				^winner^

Fig 3 showing calculation of normalized weights for each attributes and calculation of scores for each alternative.

Selection of Preferred Alternative

Based on the above quantitative analysis and criteria, I recommended that ALTERNATIVE 2 – buying a car with mortgage terms be selected. This alternative also satisfied all selection criteria.

Performance Monitoring/Post Evaluation

This would be monitored by constantly evaluating

·         The maintenance cost of buying the car with mortgage

·         The effectiveness in fulfilling additional workload needs.ie reduced time loss in meeting business needs.

·         The cost of doing the business i.e. inflow vs. outflow.

References

Sullivan, W. G., Wicks, E.M., & Koelling, C.P. (2009). Decision Making Considering Multiattributes. In M.J. Horton (Ed.), Engineering economy (15^th ed.) (chapter 14) (pp. 551-568). New Jersey, NJ: Pearson Education, Inc.

Sullivan, W. G., Wicks, E.M., & Koelling, C.P. (2009). Engineering Economy and the Design Process. In M.J. Horton (Ed.), Engineering economy (15^th ed.) (chapter 1.3) (pp 7). New Jersey, NJ: Pearson Education, Inc.

AACE International Education Board. (2006).Investment decision making. In J.K.Hollmann (Ed), Total cost management framework – A process for applying the skills & knowledge of cost engineering (1^st ed) (chapter 3.3.1.1) (pp.55-56). Morgantown, West Virginia: AACE International.