Decision Analysis System Modeling Using Spreadsheets Data Research Paper

Excerpt from Research Paper :

Decision Analysis System Modeling

Using Spreadsheets"


"Data Decision Analysis System Modeling Using Spreadsheets."

Spreadsheet is one of the most popular software packages on the planet. Daily, million of business people, students and individuals use spreadsheet program to build models to assist in solving decision problems they face on their work activities. Thus, employers generally look for individuals having experience and skills with spreadsheets. Typically, spreadsheets assist in developing varieties of management techniques in modeling environment. More importantly, spreadsheets assist in developing models and make decision within a business environment.

Within the present contemporary business environment, many business managers face daunting tasks to make effective decisions. With the fast-paced and dynamic changes within a competitive business environment, business people are often faced with extremely complex business alternatives. Evaluation of the alternatives and choosing the best option from these alternatives has become a daunting task for business people. Thus, one of the most effective methods to evaluate and analyze alternatives in order to make effective decision is to use electronic spreadsheets. The electronic spreadsheet assists in building computer models to arrive at solution to decision problem business people face.

Objective of this paper is to evaluate the use of spreadsheet in data and decision analysis in system modeling.

"Data and Decision Analysis in System Modeling Using Spreadsheets"

Within the last past few decades, million of business people have realized that the most effective method to analyze and evaluate data is to use an electronic spreadsheet. A spreadsheet package is computer software package used to design, analyze data and assist in making an effective decision. In a real accounting world, a spreadsheet is generally useful to show all the costs, taxes, income and other financial data for manager to analyze when making a decision. A spreadsheet is collection of cells that displays values on the computer screen. Typically, an electronic spreadsheet generally organizes data in rows and columns and a user can manipulate data using a formula such as average, sum or maximum. A spreadsheet package is appropriate for building a decision support system. Using a spreadsheet, a user could develop tables and charts from a large data set to assist a decision maker to choose an appropriate option from wide varieties of options. (Ragsdale, 2010).

On the other hand, a computer model is a set of logical assumption and mathematical relationships implemented with a computer to make decision. One of the benefits of electronic spreadsheet is to analyze decision problems using model. The electronic spreadsheet provides the most convenient and effective method to analyze computer models. Presently, most business people would probably rate electronic spreadsheet as the most effective analytical tool apart from using brain. Using a spreadsheet model, (a computer model developed from a spreadsheet), business professionals will be able to analyze alternative decisions and choose the best option for implementation. (Lin, & Nagalingam, 2000).

On the other hand, decision analysis is a systematic and logical way to address a wide variety of problem that involves a decision-making in an uncertain environment. However, making effective decision has become challenging because a business manager will need to collect large volume of data and analyze the data to arrive at an effective decision. Given the large volume of data to analyze to make a business decision, businesses often face a daunting task to analyze data manually. The electronic spreadsheet has become analytical and easy-to-use tool to analyze data to make business decision.

Using electronic spreadsheet, a business manager could develop a model in a less expensive method and this will assist a manager to evaluate the alternatives and choose the best from the alternatives. Using this strategy, a business will be able to avoid a costly mistake when making a business decision. Moreover, a model delivers information to make effective decision on timely basis. A model also assists business managers to examine things that would be impossible to examine in a real world basis. (Ragsdale, 2010).

More benefit derived from a spreadsheet is that it could assist a business manager to analyze data using mathematical and statistical tool readily available in a spreadsheet. Moreover, a spreadsheet assists in displaying data chart and graphs to assist in visual presentation of data analysis. Despite the importance of the spreadsheet to build model, many people are still using the manual method to create and analyze model. Moreover, spreadsheets assist business managers to achieve the following goals:

Communication: A spreadsheet is used for business purpose primarily to communicate business information to managers.

Reliability: The output that a spreadsheet generates is correct and consistent assisting a business manager to make an effective decision-making.

Auditability: A spreadsheet assists managers to generate different output from the model to verify and understand results.

Modifiability: A well-designed spreadsheet will assist a business manager to make decision in a dynamic environment.

This paper discusses the technique that could be employed to solve problem and making decision using model technique.

Problem-solving Technique using Model

This section discusses the problem solving process to enhance greater understanding on the strategy to employ from mathematical model to assist managers to make effective decision. The first step in the problem-solving process is to identify the problem. Identification of the problem is very critical to save time, effort and money. Identification of the problem involves gathering a lot of information and the strategy will assist in identifying the root cause of the problem.

The next step is to formulate the model that will assist in addressing the problem. However, the formulation of a spreadsheet model is the next, and this need to be implemented accurately to assist in a problem solving process. Thus, the next step is to use model itself to analyze problems to evaluate and generate the solutions. The spreadsheet is particularly useful in analyzing the mathematical model. Using the spreadsheet model, an organization will enjoy the following benefits:

First, a business manager will be able to use spreadsheet model to make a decision on a product mix for most manufacturing companies producing a variety of products. Production of each product will require certain amount of labor and raw materials. In these categories of product, the amount of profits a company will generate varies. Using the optimization model with spreadsheet, a manager of such manufacturing company will be able to make decision on how many of the product category should be manufactured at minimum costs to maximize profits as well as satisfying demand at minimum costs. (Lin, & Nagalingam, 2000).

A spreadsheet model will also assist manufacturer of printed circuit board to determine the drilling order that minimizes the total distance drill must move. It is essential to realize that drills have thousands of holes in them to accommodate various electrical components. To manufacture these drills, there is a need to program a computer to control the drill machine to save costs and time since the process involves the repeating hundred of thousands process to complete each drill. A mathematical optimization model using a spreadsheet will assist a manager to make effective decision on the method to assemble the drilling order to minimize the drill distance to save the drilling time and costs.

More importantly, a spreadsheet will assist a business manager to make decision on routing and logistics. Typically, many retail stores have warehouses around the country, and they are required to supply each warehouse with merchandise. Generally, there is a fluctuation on the amount of product in each store. Thus, the company will need to ship merchandise to each store and transport the merchandise from one location to the other. A business manager will be able to save large amount of money using the mathematical model to arrive at a least costly method to transport the goods from one location to the other. Using the spreadsheet tool, a business manager will be able to determine the shortest route to transport the goods from one location to the other. A company will be able to save time costs using this technique.

Additionally, spreadsheet could be used for financial planning. Typically, an electronic spreadsheet has become a convenient and excellent tool for financial and business planning. With inclusion of more powerful features such as financial, and statistical functions, which include Solver, Goal Seek, Solver, Pivot Table, and Data Table, spreadsheets are continuously being used for Monte-Carlo stimulation and optimization analysis to address a complex business challenges. More importantly, business managers are continuously using spreadsheet as their Enterprise Resource Planning (ERP)" system to make an informed decision.

This paper uses the capital budgeting example to show the method spreadsheet could assist a business manager to make business decision. Capital budgeting is an investment decision making that assists a business manager to make decision whether to pursue a project or not. (Evans, 2010). Using a hypothetical data, the paper has been able demonstrate how the spreadsheet could assist a business manager to make an investment decision. A company with initial investment of $55,000 is intending to determine whether to investment…

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