Fallacy

Abstract

For some, decision making can be one of life's biggest challenges. Why do you suppose that is? After all, the fact that we are often faced with decisions means that we have choices and free will. We have the ability to make a difference. On the contrary, with decision-making comes consequences which can be range from simple to life changing. Regardless of the decision or nature of the decision, someone or something is likely to be rejected in some fashion and doors will close. In an effort to make better sound decision, it is important to understand the methodology behind making such decisions.

This paper will describe the Cost Benefit Model for decision-making. The first section of this paper will identify the concept and/or steps of the Cost Benefit Model while the second section will apply this method to a recent job-related decision.

The Cost Benefit Model for decision making is commonly referred to as the cost benefit analysis or cba. The basic concept of cba is to "find, quantify and add all positive factors. These are benefits. Then it identifies, quantifies, and subtracts all the negatives, the costs. The difference of the two indicates whether the planned action is advisable." (Reh, J. 2006). Sounds easy, right? The challenge is not the ability to add and subtract but ones ability to properly quantify each.

At ABC Co., I was faced with the decision to stay with incumbent screen printer or transfer our business to a new vendor. We had been doing business with the incumbent for 15 years; however we had always experienced some degree of quality and delivery issues. They were a local supplier and were competitively priced, but at what cost. Because the relationship with between the incumbent and the managers/owners of the company had developed into a friendship over time, it was imperative that I looked at every benefit and negative in detail before going to the board with my recommendation. Therefore, I developed a detailed cost analysis which included the information stated below.

Incumbent costs/benefits:

Incumbant Screen Printing: $1,500,000

Incoming Freight: $0

TOTAL AVERAGE COSTS: 1,500,000

Other costs/benefits:

Close in proximity - freight savings and speed to market

Able to go on press to check status of large projects w/o travel

Missing dates/customers - 2 within last 30 days

Lack of attention during busy season with sports teams

New Vendor costs/benefits:

Screen Printing guaranteed @ 15% discount - $1,275,000

Incoming Freight: $45,000

TOTAL AVERAGE COSTS: 1,320,000

TOTAL COST SAVINGS:

Other costs/benefits: $180,000

Guaranteed quality and delivery or its free

Vast printing capabilities including picture transfer at no additional cost

Will expedite samples for quality check at no additional costs

This is an example of the cost benefit