Decision trees and the Delphi Procedure

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Decision trees and the Delphi Procedure

You are the head of the company IT department.  In response to complaints from the Board, the CIO has instructed you to “do something” about the inventory control system.  After much heated discussion, the two of you have decided that “doing something” boils down to a choice between two alternatives:

Alternative 1:  Buy a new inventory control system, plus training, from a third party  The total cost would be $10,000.  After polling your experts (using a Delphi procedure), you’ve determined there are three plausible outcomes;  “Great benefit,” “Some benefit,” and “No benefit,” defined as follows.

A “great benefit” would yield an increase in productivity of $15,000, but the likelihood of achieving it is only 40%.  “Some benefit” would increase productivity by $10,000, and the likelihood of achieving it is 50%.  “No benefit,” of course, means no increase in productivity at all.

Alternative 2:  Buy refresher training aimed at increasing staff productivity using the existing inventory control system, at a cost of only $4,000.  As before, there are three possible outcomes.  “Great benefit” would be worth $8,000, but is only 40% likely.  “Some benefit” would be worth $4,000, but is only 30% likely.  And “No benefit,” of course, means just that.

Which alternative should you choose?  Explain your decision process in detail.

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