Using Economic Decision-Making Tools in Continuous Improvement

1.1 Decision-Making

Most of the companies use economic analysis to make a decision based on main criteria which are about the economic aspects such as overall benefits of investments (Frank et al., 2013). Other criteria must be considered such as strategy which deals with the company mission and quality which is related to service and product excellence. Evaluating only the overall benefits of investments can lead to an inappropriate decision. There are two reasons, firstly the investment may negatively affect the company strategy and secondly the investment may not meet the customer needs or the quality requirements. Thus, an inappropriate decision related to an investment can lead to major problems such as affecting the long term profit or organization goals.

Decision making could be involved in equipment selection, technology selection and make or buy decision (Frank et al., 2013). In general, decision-making tool is a tool that decides which alternative of investment is better for an organization. In the middle of last century, the idea of decision making has been introduced by Chester Barnard to the business world (Buchanan & O’Connell, 2006). Later, some other concepts were discovered such as managerial decision making because managers usually were responsible for decision-making to select the best alternative. Recent studies provide more complex approaches such as Axiomatic Design and Fuzzy Multi-criteria Analysis (Frank et al., 2013). However, these approaches are difficult to implement in the industries because of their complexity.

1.2 Continuous Improvement

According to the high competition between companies or organizations about producing high quality products or services with lower prices, companies and organizations are moving to apply the concept of continuous improvement.

In the 1980s, the concept of continuous improvement was used widely and at that time Deming was the father of quality (Sanchez & Blanco, 2014). Deming’s 14 principles are major methods to implement total-quality management. In principle 5, Deming focuses on improvement where it should be constant and forever. Also, Juran initiated the trilogy which is related to quality plan and focuses on improvement and controlling in continuous loop. According to Sanchez & Blanco (2014), it is worthwhile to mention that both Toyota system and ISO 9000 supported the idea of continuous improvement through the concept of total quality management. For some companies to survive economically, they need to be ISO certified where this certification becomes mandatory for such companies that want to work with clients. One of the ISO 900-2015 requirements deals with continuous improvement. In section 10, it provides information about PDCA which means plan, do, check, and act for processes that are related to continuous improvement. To meet the customer needs, firms extend their effort to work with quality-oriented programs such as Lean Six Sigma, Total Quality Management and Kaizen.

1.3 Originality

All the recent research focused on either economic decision-making tools or continuous improvement and there is no literature combining both concepts and apply them simultaneously. Using economic decision-making tools in conjunction with continuous improvement is a challenging approach but not impossible. There are a lot of factors that affect decision making but no literature shows that continuous improvement could positively affect decision making and vice versa.

1.4 Objective

The objective of this research paper aims to explore the main aspects of using economic decision-making tools in conjunction with continuous improvement. Aspects such as climate change or future risks and uncertainty should be either monetarized or follow a well-defined strategy. Economic decision making is a key element in selecting alternatives but on its own, it is not sufficient to have the green light to select one alternative. The use of the concept of strategic planning which is related to continuous improvement must be considered. Furthermore, this study will examine the relationship between the two concepts and discover the hidden issues which should be considered as a major effect to the organizations or firms’ growth.