A decision tree is a project administration tool based on a tree-like structure used for effective decision-making and predicting the potential outcomes and consequences when there are several courses of action. These decisions are usually related to costs, resources, and utilities.
They sometimes come across several choices and have to evaluate several outcomes associated with these choices. Decision trees are composed of a number of branches that lead toward several results and subsequent outcomes. Project team members face different consequences related to the management of the project.
The four vital components that constitute a decision tree are:
As described earlier, the decision tree can be used for managing decisions and making efforts to improve undertaking management. Following are the steps that describe how to utilize a decision tree in a undertaking:
Let us illustrate the decision tree with a suitable example.
In the first phase, the contractor has to assess a number of options available for outsourcing material for the building of a power plant. In this decision, our main problem is related to the building project procurement method. These options include outsourcing from the overseas seller or a US-based seller.
Now there are some potential outcomes associated with each option. Both options of US and overseas sellers have their own risks and benefits. The overseas seller would be more feasible in terms of costs but it wouldn’t facilitate the service of personal inspection due to travel expenses. The US-based seller would allow the option of personal inspection but it is an expensive option.
Here, the EV or Expected Value formula can be used to predict the monetary benefit or loss. Now comes the stage of analyzing the results of each choice. In the example, a US-based seller would have a success chance of 80% and there would be a profit of almost $100,000 (EV score is equal to 80,000). The overseas seller has a chance of 50% success and would result in a $15,000 loss. Based on the probability of success, the contractor would have to go with the decision of a US-based seller.
For example, this category can be a simple ‘yes’ or ‘no’ condition. There can be no in-between decision and every decision would belong to predefined categories. Categorical Variable Decision Tree : In this type of decision tree, varying target decisions are placed into different categories.
Continuous Variable Decision Tree : This type of decision tree tends to make the decision based on the collected information. For example, in a building undertaking, the cost of the foundation can be estimated from the drawing and available information.
The decision tree instrument can be used to spot the potential growth opportunities available in the undertaking based on the information collected. 1. This information and data related to the undertaking can be used to modify or mold the strategy that would be effective for future undertakings.
Furthermore, as described in the above example, the decision tree can be implemented to aid with the procurement strategies. 2. The decision tree can also be used in the matter to decide if the construction manager/undertaking manager must outsource or produce the substance. It can be used to decide if we must choose the local buyers or overseas options.
The decision tree is used for the strategic administration of the project. These tools can be used to satisfy the constraints of the project like standard, cost, and time. 3.
4. A decision tree can also be used for identifying the hazards and mitigating them. This tree analysis can be used to identify all the risks that can be ignored and the ones which cannot be ignored. There are some uncertainties which do not affect the overall scope of the undertaking and can be ignored.
This instrument can help in undertaking management for various fields including construction. The decision tree is a value management approach and tends to produce a customer-oriented final product. This management instrument is strongly recommended for any kind of decision-making in the construction undertaking.
A decision tree is a management tool, based on a tree-like framework, used for effective decision-making and predicting their potential outcomes and consequences. These decisions are usually related to costs, resources, and utilities.
Decision node : This component of the decision tree represents the choice we have to make that would act as an effective solution during the undertaking. These four vital components constitute a decision tree: 1. 2. Branches : They represent the viable choices and establish a connection with nodes. 3 . Chance nodes : They stand for non-guaranteed outcomes. 4. End nodes : They usually make the end of the decision tree and stand for the final outcome.
There are two types of decision trees in administration: 1. Categorical variable decision tree 2. Continuous variable decision tree