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Decision Tree

In: Business and Management

Submitted By perrtorian
Words 1184
Pages 5
Decision Trees The Decision Tree module in Excel OM (and in POM for Windows) acts differently than all other modules because rather than creating a table of data it creates a graphical tree. We will use Example 3 in Chapter A5 from Heizer & Render’s Operations Management textbook for our example. After selecting the Decision Tree Module the screen will appear as in Figure 1 below.

Figure 1: The Initial Decision Tree Screen

Notice the Decision Tree Creation Window on the right. This is used to perform all of the work of constructing the tree. The initial screen has 1 starting node (Node 1) which can be seen in cell A6. The first step is to add branches from this node. The default setting is to Add 2 Decision branches. The type of branch is selected by the choice of “Add” buttons that is selected and the number of branches is selected by the textbox/scrollbar combination. For this example, there are three options – Purchase CAD, Hire Engineers or Do Nothing. Therefore we will change the number of branches to 3 and click on the “Add Decisions” button. This yields the screen as displayed in Figure 2.

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Figure 2: The First Three Branches

At this point the data can be entered into the shaded green cells. For decision branches, the data consists of the name of the branch and possibly a profit or cost. If the branch is at the end of the tree then the profit gets entered. If the branch is not at the end then any intermediate profits or costs can be entered. Costs are entered as negative numbers. We will display the data in the next screen. We have entered the data as displayed in Figure 3.

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Figure 3: The First Three Branches with Data

The names have been entered and the costs have been entered as negative numbers. Notice that the costs were placed on the far right side of each branch.…...

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