Ch:3 Introduction To Various Information System

3.1 Business Information System:

The most common types of information systems used in business organizations are those designed
for electronic and mobile commerce, transaction processing, management information, and decision
support. In addition, some organizations employ special-purpose systems, such as virtual reality, that
not every organization uses. Together, these systems help employees in organizations accomplish
routine and special tasks—from recording sales, processing payrolls, and supporting decisions in
various departments, to providing alternatives for large-scale projects and opportunities.

 Electronic and Mobile Commerce

(2Marks) E-commerce involves any business transaction executed electronically between companies
(business-to-business, or B2B), companies and consumers (business-to-consumer, or B2C),
consumers and other consumers (consumer-to-consumer, or C2C), business and the public sector,
and consumers and the public sector. You might assume that e-commerce is reserved mainly for
consumers visiting Web sites for online shopping. But Web shopping is only a small part of the e-
commerce picture; the major volume of e-commerce—and its fastest growing segment—is business-
to-business (B2B) transactions that make purchasing easier for corporations. This growth is being
stimulated by increased Internet access, growing user confidence, rapidly improving Internet and
Web security, and better payment systems. For Example PayPal, an e-commerce payment system,
processes about $1.5 billion in e-commerce transactions annually. E-commerce also offers
opportunities for small businesses to market and sell at a low cost worldwide, allowing them to
enter the global market. Mobile commerce (m-commerce) refers to transactions conducted
anywhere, anytime. M-commerce relies on wireless communications that managers and
corporations use to place orders and conduct business with handheld computers, portable phones,
laptop computers connected to a network, and other mobile devices. Today, mobile commerce can
use cell phones to pay for goods and services. After an account is set up, text messages can be sent
and received using a cell phone to authorize purchases.

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Above figure provides a brief example of how e-commerce can simplify the process of purchasing
new office furniture from an office-supply company. In the manual system, a corporate office worker
must get approval for a purchase that exceeds a certain amount. That request goes to the
purchasing department, which generates a formal purchase order to procure the goods from the
approved vendor. Business-to-business e-commerce automates the entire process. Employees go
directly to the supplier’s Web site, find the item in a catalogue, and order what they need at a price
set by their company. If management approval is required, the manager is notified automatically. As
the use of e-commerce systems grows, companies are phasing out their traditional systems. The
resulting growth of e-commerce is creating many new business opportunities.

 Transaction Processing Systems ( 2 - 8 Marks )

Computers have been used to perform common business applications. Many of these early systems
were designed to reduce costs by automating routine business transactions. A transaction is any
business-related exchange such as payments to employees, sales to customers, or payments to
suppliers. Thus, processing business transactions was the first computer application developed for
most organizations. A transaction processing system (TPS) is an organized collection of people,
procedures, software, databases, and devices used to record completed business transactions. If you
understand a transaction processing system, you understand basic business operations and
functions.

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One of the first business systems to be computerized was the payroll system. The primary inputs for
a payroll TPS are the number of employee hours worked during the week and the pay rate. The
primary output consists of paychecks. Other routine applications include sales ordering, customer
billing and customer relationship management, and inventory control. Some automobile companies
use their TPSs to buy billions of dollars of needed parts each year through Internet sites. Because
these systems handle and process daily business exchanges, or transactions, they are all classified as
TPSs.

Enterprise systems help organizations perform and integrate important tasks, such as paying
employees and suppliers, controlling inventory, sending invoices, and ordering supplies. In the past,
companies accomplished these tasks using traditional transaction processing systems. Today, they
are increasingly being performed by enterprise resource planning systems.


Work flow system ( 2 Marks )

A workflow system is ruled based management software that directs, coordinates and monitors
execution of an interrelated set of task arranged to form a business process. The primary purpose of
workflow system is to provide employees with tracking, rooting, document imaging and other
capabilities designed to improve business process. Transactional workflow system holds the promise
of improving the productivity & dependability of business processes. The system streamlines the
reimbursement process by simplifying expense entries & automating the approval process.

3.1.1 Enterprise Resource Planning (7 Marks )

An enterprise resource planning (ERP) system is a set of integrated programs that manages the vital
business operations for an entire organization. An ERP system can replace many applications with
one unified set of programs, making the system easier to use and more effective. Although the
scope of an ERP system might different from company to company, most ERP systems provide
integrated software to support manufacturing and finance. In such an environment, a forecast is
prepared that estimates customer demand for several weeks.

The ERP system checks what is already available in finished product inventory to meet the projected
demand. Manufacturing must then produce inventory to eliminate any shortfalls. In developing the
production schedule, the ERP system checks the raw materials and packing materials inventories and
determines what needs to be ordered to meet the schedule. Most ERP systems also have a
purchasing subsystem that orders the needed items. In addition to these core business processes,
some ERP systems can support functions such as customer service, human resources, sales, and
distribution.

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The primary benefits of implementing an ERP system include easing adoption of improved work
processes and increasing access to timely data for decision making.

3.2 Management Information Systems: (2 – 8 Marks )

A management information system (MIS) is an organized collection of people, procedures,

software, databases, and devices that provides routine information to managers and decision
makers. An MIS focuses on operational efficiency. Marketing, production, finance, and other
functional areas are supported by MISs and linked through a common database. MISs typically
provides standard reports generated with data and information from the TPS.

MISs were first developed in the 1960s and typically use information systems to produce Managerial
reports. In many cases, these early reports were produced periodically—daily, weekly, monthly, or
yearly. Because of their value to managers, MISs have proliferated throughout the management
ranks. For instance, the total payroll summary report produced initially for an accounting manager
might also be useful to a production manager to help monitor and control labour and job costs.

3.2.1 Inputs of the Management Information System: ( 8 Marks )

Data that enters a management information system originates from both internal & external
sources.
The most significant internal source of data for the management information system is the
organizations various transaction processing systems. One of the major activities of the
transaction processing system is to capture & store the data resulting from on going
business transaction. With every business transactions, various transactions processing
systems application make changes to & update the organization database or the
management information system.

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External sources of data can include customers, suppliers, competitors and stockholders
whose data is not already captured by the transaction processing system, as well as other
sources such as an internet.

The management information system uses the data obtained from these sources and
processes it into information more usable to managers, primarily in the form of
predetermined reports.

3.2.2 Outputs / Reports of the Management Information System: ( 7 Marks )

The output of most management information system is a collection of reports that are
distributed to managers.
These reports can be:

1) Schedule Reports
2) Key Indicator Reports
3) Demand Reports
4) Exception Reports
5) Drill Down Reports

1. Schedule Reports: ( 2 Marks )

These reports are produced periodically, or on a schedule (predetermined time), such as
daily, weekly, monthly, yearly. E.g. a production manager could use a weekly summary
report that lists total payroll costs to monitor and control labour and job costs. A
manufacturing report produced once a day to monitor the production of a new product is
another example of scheduled reports. Other schedule can help managers control customer
credit the performance of sales representatives inventory levels and more.

2. Key Indicator Reports:

It summarizes the previous day’s critical activities and is typically available at the beginning
of each workday. These reports can summarize inventory levels, production activity, sales
volume and the like. Key indicator reports are used by managers & executives to take quick
corrective action on significant aspects of the business.

3. Demand Reports: ( 3 Marks )

These are developed to give certain information of the manager’s request. In other words,
these reports are produced on demand.

E.g. an executive may want to know the production of a particular item; a demand report
can be generated to give the requested information. Other example of demand reports
include reports requested by executives to show the hours worked by particular employee
total sales to date for a product and so on.

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4. Exception Reports: ( 2 Marks )

These are the reports that are automatically produced when a situation is unusual or
requires management action.

E.g. a manager might set a parameter that generates a report of all inventory items with
fewer than the equivalent of five days of sales on hand.

This unusual situation requires prompt action to avoid running out of stock on the item. The
exception report generated by this parameter would contain only items with fewer than five
days of sales in inventory. As with key indicator reports, exception reports are most often
used to monitor aspects important to an organization success. In general, when an
exception report is produced a manager or executive takes an action.

5. Drill Down Reports: ( 3 Marks )

Drill down reports provides increasingly detailed data about a situation. Though the use of
drill down reports, analysis can see data at a high level first, then at a more detailed level
and then at a very detailed level.

3.2.3 Characteristics of MIS : ( 7 Marks )

1. Provide Reports with Fixed & Standard Formats:

For e.g, scheduled reports for inventory control may contain the same types of information placed in
the same locations on the reports. Different managers may use the same report for different
purposes.

2. Produce Hard - Copy & Soft - Copy Reports:

Some management information system reports are printed on paper and considered hard - copy
reports. Most output soft - copy using visual displays on computer screen. Soft - copy output is
typically formatted in a report like fashion.

3. Use Internal Data Stored in the Computer System:

Management information system reports use primarily internal sources of data that are contained in
computerized. Some management information systems use external sources of data about
competitors, the market place & so on. The internet is a frequently used source for external data.

4. Allow End Users to Develop Their Own Custom Reports:

Although analysts & programmers may be involved in developing & implementing complex
management information system reports that require data from many sources & users are
increasingly developing their own simple programs to query dbase & produce basic reports.

5. Require User Requests for Reports Developed by System Personal:

When information system personnel develop and implements management information system
reports, a formal request to the information system department may be required. If a manager, for
example wants a production reports to be used by in his or her department a formal request for the
report is often require.

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3.2.4 Functional Aspects of The Management Information System:

1) Financial Management Information System: ( 7 Marks )

A financial management information system provides financial information not only

executives but also for people who need to make better decisions on a daily basis. Finding
opportunities and quickly identifying problems can mean the difference between a
business’s success and failure. The financial management information system performs
following functions.

 Integrates financial and operational information from multiple sources, including the
internet, into a single management information system.
 Provide easy access to data for both financial and non-financial users, often through
use of the corporate internet to access corporate web pages of financial data and
information.
 Makes financial data available on a timely basis to shorten analysis turnaround time.
 Enable analysis of financial data along multiple dimensions such ad time, geography,
product, plant and customer.
 Analysis historical and current financial activity.
 Monitors and controls the use of funds over time.

* Profit/Loss and Cost Systems:

Two specialized financial functional systems are profit/loss and cost systems, which
organized revenue and cost data for the company. Revenue and expense data for various
departments is captured by the transaction processing system and becomes a primary
internal source of financial information for the management information system.
Many departments within an organization are profit centers, which mean they track total
expenses and net profits. Other departments may be revenue centers, which mean they
track total expenses and net profits. Other departments may be revenue centers which are
divisions within the company that primarily track sales or revenues such as a marketing or
sales department. Other departments are cost centers which are used for manufacturing or
research and development.

* Auditing:
Auditing involves analyzing the financial condition of an organization and determining
whether financial statements and reports produced by the financial management
information system are accurate. Auditing can reveal potential fraud such as credit card
fraud. It can also reveal false or misleading information.

* Internal Auditing:
It is performed by individual within the organizations. E.g. financial department of a
corporation may use a team of employees to perform an audit. It is conduct to see how well
the organization is doing in terms of meeting established company goals and objectives.

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* External Auditing:
It is performed by an outside group like an accounting or consulting firms. The purpose of an
external audit is to provide an unbiased picture of the financial condition of an organization.

2) Manufacturing Management Information System: ( 7 Marks )

The subsystems and output of the manufacturing management information system monitor
and control the flow of materials, products and services through the organization. The
objective the manufacturing management information system is to produce products that
meet customer needs from the raw materials provided by suppliers to finished goods &
services delivered to customers at the lowest possible cost. The activities of the
manufacturing management information system subsystems support value added business
processes. As raw materials are converted to finished goods, the manufacturing
management information system monitors the process at almost every stage.

* Design & Engineering:

During the early stages of product development engineering departments are involved in
many aspects of design. The size & shape of parts, the way electrical components are
attached to equipment, the placement of control on a product. In some cases Computer
Assisted Design (CAD) assists this process which help salesmen selects the right colors, styles
and configurations. CAD can be used to determine how a product will respond to various
conditions.

* Master Production Scheduling:

The overall objective of master production scheduling is to provide detailed plans for both
short term and long range scheduling of manufacturing facilities. Master production
scheduling software packages can include forecasting techniques that attempt to determine
current and future demand for products and services. Master production scheduling
package can determine the best way to engage the manufacturing facility and all its related
equipment. Most programs also perform sensitivity analysis which allows a manager to
determine how the production schedule would change with different assumptions
concerning demand forecasts or cost figures.

The production schedule is critical to the entire manufacturing process. Information

generated from this application is used with all aspects of production and manufacturing.
Inventory control, labour force planning, product delivery and maintenance programs
depend on information generated from the master production schedule.

* Inventory Control:

An important key to the manufacturing process is inventory control. Great strides have been
made in developing cost effective inventory control program and software packages that
allow automatic reordering, forecasting, generation of shop documents and reports,
determination of manufacturing costs, analysis of budgeted costs versus actual cost and the
development of master manufacturing schedulers resources requirements and plans.

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One method of determining how much inventory to order is called the Economic Order
Quantity (EOQ). This quantity is determined in such a way as to minimize the total inventory
cost. Reorder Point (ROP) which is a critical inventory quantity level.

Some inventory items are dependent on one another. This technique is called Material
Requirement Planning (MRP). The basic goal of MRP is to determining when finished
products are needed, then to work backward in determining deadlines & resources needed
to complete the final product on schedule. Manufacturing resource planning refers to an
integrated companywide system based on network scheduling that enables people to run
their business with a high level of customer service and productivity while lowering the cost
and inventory.

* Just-in-time Inventory and Manufacturing:

High inventory levels on the factory floor means higher cost, the possibility of damage & an
effective manufacturing process. Thus, one objective of a manufacturing management
information system is to control inventory to the lowest levels. One way to do this is to
adopt the JIT approach.

With this approach inventory and materials are delivered just before they are used in a
product. Although JIT has many advantages, it also renders firms more vulnerable to process
disruptions. The JIT manufacturing approach requires better coordination and cooperation
between suppliers & manufacturing companies, substantially reducing inventory costs.

* Process Control:

Managers can use number of technologies to control & streamline the manufacturing
process E.g. the computer can be used to directly control manufacturing equipment using
systems called Computer Assisted Manufacturing (CAM). CAM systems have the ability to
control drilling machines, assembly lines, & more. Some of them operate quietly are easy to
program have self diagnostic routines to test for difficulties with the computer system or
the manufacturing equipment.

* Quality Control & Testing:

The manufacturing organizations are placing more emphasis on quality control, a process
that ensures that the finished product meets the customer’s needs. For continues process,
control charts are used to measure weight, volume temperature or similar attributes. When
the manufacturing operation is not continuous, sampling plans can be developed that allow
the producer or consumer to accept or reject one or more products.

Whether the manufacturing operation is continuous or discrete, the results from quality
control are analyzed closely to identify opportunities fro improvements. Information
generated from quality control program can also be used to design better products.

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3) Marketing Management Information System: ( 7 Marks )

A marketing management information system supports managerial activities in product

development distribution, pricing decision, promotional effectiveness & sales forecasting.
Subsystems for the marketing management information system include marketing research
product development, promotion & advertising & product pricing. These subsystems & their
output help marketing managers & executives increase sales, reduce marketing expenses &
develop plans for future products & services to meet the changing needs of customers.

* Marketing Research:
The purpose of marketing research is to conduct a formal study of the market & customer
preferences. Marketing research can identify prospects as well as the features that current
customers really want in a goods or services. Once entered into the marketing management
information system, data collected from marketing research projects is manipulated to
generate reports on key indicators like customer satisfaction and total service calls. Reports
generated by marketing management information system help manager be better informed
to help the organization meet its performance goals.

* Promotion & Advertising:

One of the most important functions of any marketing effort is promotion & advertising.
Product success is a direct function of the type of advertising and sales promotion done. The
size of promotion budget & the allocation of this budget to the various promotional
campaigns are important factors in deciding on the type of campaign that will be launched.

* Product Pricing:
Product pricing is another important & complex marketing function. Retail price, wholesale
price and price discounts must be determined. A major factor in determining pricing policy
is analysis of the demand curve which attempts to determine the relationship between price
and sales.

Computer program can help determine price elasticity and various pricing policies, such as
supply and demand curves for pricing analysis. Sales analysis is also important to identify
products, sales personnel & customers that contribute to profit and loss that do not. Several
reports can be generated to help marketing managers’ make good sales decision. These
reports show which products are doing well & which ones need improvement or should be
discarded altogether.

4) Human Resource Management Information System: ( 7 Marks )

The human resource management information system is also known as personnel

management information system, is concerned with activities related to employees and
potential employees of the organizations. Because the personnel function relates to all
other functional areas in the business, the human resource management information
system plays a valuable role in ensuring organizational success. Some activities performed
by this management information system are work-force analysis and planning; hiring; &
training; job & task assignment etc. human resource subsystems & output range from the

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determination of human resource needs & hiring through retirement & out placement.
Most medium sized and large organization has computer system to assist with human
resource planning; hiring; training & skills inventory and wages & salary administration.
Outputs of the human resource management information system include reports such as
human resource planning reports, job application review profiles, skill inventory reports and
salary surveys.

* Human Resource Planning:

One of the first aspects of any human resource management information system is
determining personnel needs. The overall purpose of this management information system
subsystem is to put the right number & kinds of employees in the right jobs when they are
needed. Effective human resource planning requires defining the future number of
employees needed & anticipating information future supply of people for these jobs.

* Personnel Selection & Recruiting:

If the human resource plans reveals that additional personnel are required, the next logical
step is recruiting & selection o personnel. This subsystem performs one of the most
important & critical functions of any organization especially in service organizations where
employees can define the company’s success. Management information systems can be
used to help rank & select potential employees for every applicant, the results of interviews,
tests and company visits can be analyzed by the system & printed. This report called a job
applicant review profile, can assists corporate recruiting teams in find selections.

* Training & Skills Inventory:

Some jobs, such as programming, equipment repair & tax preparation, require very specific
training. Other jobs may require general training about the organizational, culture,
orientation, dress standards & expectation of the organization. Today, many organizations
conduct their own training with the assistance of information system & technology.

* Scheduling & Job Placement:

Scheduling people & jobs can be relatively straightforward or extremely complex. For some
service companies, scheduling &job placement are based on which customer walk through
the door. Determining the best schedule for flights & airline pilots, the placement of military
recruits to jobs and the truck delivers and equipments that should be used to transport
materials across the country require good computer program. Employee schedules are
developed for each employee showing their job assignments over the next week or month.
Job placements are often determined based on skill inventory reports, which show which
employee might be nest suited to particular task or job.

* Wage & Salary Administration:

The last of the major human resource management information system subsystem involves
determining wages, salaries & benefits including medical payments, saving plans ans.

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Retirement accounts, huge data such as industry averages for positions can be taken from
the corporate database & manipulated by human resource management information
system to provide wage information & reports to higher levels of management. These
reports are called salary surveys can be used to compare salaries with budget plans, the cost
of salaries versus sales & the wages required for any one department or office. The report
help show backup of key positions in the company wage & salary administrator also entails
designing retirement program for employee.

 Other Management Information System:

In addition to finance, manufacturing, marketing and human resource management

information system some companies have other functional management information
system.

1. Accounting Management Information System: -

An accounting management information system performs a number of important activities,
providing aggregate information on accounts, accounts receivable, payrolls & many other
applications. The organization’s transaction processing system captures accounting data
which is also used by most other functional information system.

2. Geographic Information System (GIS):-

A geographic information system (GIS) is a computer system capable of assembling, storing,

manipulating & displaying geographically referenced information that is data identified
according to their location. A GIS enables users to pair predawn maps or map outlines with
tabular data to describe aspects of a particular geographic region.

For example sales managers may want to plot total sales for each country in the states they
serve. Using GIS, they can specify that each county be drawn with a degree of shading that
indicates the relative amount of sales.

3.2.2. Development process of MIS:

STEPS IN DEVELOPING MIS

Preliminary
Investigation

Requirements System Other stages

Analysis Design

Fig: Process of Developing MIS

O

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 Preliminary Investigation :
In this phase, the organization needs to critically measure its current system in order
to justify the cost and time involved before deciding on having a new MIS. The facilitator
needs to clarify the MIS need not always include computers. However, if there are
computers the work gets faster.

 Requirements Analysis
The organiser discusses the methods and means of establishing the information
needs to be addressed by MIS. Further, the mechanisms for gathering information from
primary and secondary sources are to be determined by organizations. A critical factor is
establishing MIS needs of primary and secondary users.

 System Design
The organiser explains basics of a MIS system clarifying the inputs, the processing
and the outputs. While inputs include information provided by front-line workers, the
outputs could be various types of reports, including those sent periodically to funders. The
procedures define how and in what format the information will be inputted and by whom
and at what intervals. The storage could be manual or electronic or both. Design specifies
the operational parameters at a drawing board stage. One of the inputs for MIS could be
information from a client database.

 Other stages
It needs to be specified that these steps need to be personalised to one's own
situation. In the gaining stage, hardware is procured after appraisals and cost analysis. Draw
attention to the need to ensure compatibility between what is being acquired and what is
already available within the agency. The implementation step is a crucial one consuming
considerable amount of time in MIS development. Here the application development is
done customized to the agency's needs. The procedure and user manuals are developed
and personnel are oriented in using MIS. The software is installed once it is tested and
debugged.

 Knowledge Management System

In addition to TPSs, MISs, and DSSs, organizations often rely on specialized systems. Many
use knowledge management systems (KMSs), an organized collection of people, procedures,
software, databases, and devices to create, store, share, and use the organization’s
knowledge and experience.

 Artificial Intelligence

Robotics is an area of artificial intelligence in which machines take over complex, dangerous,
routine, or boring tasks, such as welding car frames or assembling computer systems and
components. Vision systems allow robots and other devices to “see,” store, and process
visual images. Natural language processing involves computers understanding and acting on
verbal or written commands in English, Spanish, or other human languages. Learning
systems allow computers to learn from past mistakes or experiences, such as playing games
or making business decisions, and neural networks is a branch of artificial intelligence that

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allows computers to recognize and act on patterns or trends. Some successful stock,
options, and futures traders use neural networks to spot trends and improve the
profitability of their investments.

 Expert Systems ( 2 Marks )

Expert systems give the computer the ability to make suggestions and function like an
expert in a particular field, helping enhance the performance of the user. The unique value
of expert systems is that they allow organizations to capture and use the wisdom of experts
and specialists. Therefore, years of experience and specific skills are not completely lost
when a human expert dies, retires, or leaves for another job. Expert systems can be applied
to almost any field or discipline. They have been used to monitor nuclear reactors, perform
medical diagnoses, locate possible repair problems, design and configure IS components,
perform credit evaluations, and develop marketing plans for a new product or investment
strategy. The collection of data, rules, procedures, and relationships that must be followed
to achieve value or the proper outcome is contained in the expert system’s knowledge
base.

 Virtual Reality ( 2 Marks )

Virtual reality is the simulation of a real or imagined environment that can be experienced
visually in three dimensions. For example the virtual reality game. Originally, virtual reality
means the user becomes fully immersed in an artificial, computer-generated 3-D world. The
virtual world is presented in full scale and relates properly to the human size. Virtual reality
can also refer to applications that are not fully immersive, such as mouse-controlled
navigation through a 3-D environment on a graphics monitor, stereo viewing from the

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monitor via stereo glasses, stereo projection systems, and others. A variety of input devices,
such as head-mounted displays, data gloves, joysticks, and handheld wands, allow the user
to navigate through a virtual environment and to interact with virtual objects. Directional
sound, tactile and force feedback devices, voice recognition, and other technologies enrich
the immersive experience. Because several people can share and interact in the same
environment, virtual reality can be a powerful medium for communication, entertainment,
and learning.

3.3 Decision Support System ( 2 – 7 Marks )

• A decision support system is an organized collection of people, procedures, software,
database and devices used to support problem specific decision making and problem
solving.
• DSS has powerful analytic capabilities to support managers during the process of arriving
at a decision.
• The focus of decision support system is on decision making effectiveness.
• A decision support system supports & assists all aspects of problem specific decision
making.
• A decision support system can provide immediate assistance in solving complex problem
not supported by a management information system.
• Decision Support Systems offer the potential to generate higher profits, lower costs, and
better products and services.
• DSS should be designed, developed and used to help an organization achieve its goals
and objectives.
• In addition because of the inherent flexibility of decision support system, managers at all
levels can use.

 Types of DSS:

There are two types of DSS:

1) Model-driven DSS
2) Data-driven DSS

1) Model-driven DSS
Model-driven DSS were primarily stand-alone systems isolated from major organizational
information systems that used for some type of model to perform “what-if” and other kinds
of analysis.
Such systems were often developed by end-user divisions or groups not under central
information system control. Their analysis capabilities were based on a strong theory or
model combined with a good user interface that made the model easy to use.

2) Data -driven DSS

It analyze large pools of data found in major organizational systems.
They support decision making by allowing user to extract useful information that was
previously buried in large quantities of data.

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Often data from transaction processing system (TPS) are collected in data warehousing for
this purpose. Online analytical processing(OLAP) and determining can then be used to
analyze the data.
Companies are starting to build-driven DSS to mine customer data gathered from their web
sides as well as data from enterprise system.

 Characteristics of Decision Support System: - ( 7 Marks )

Decision support systems have a number of characteristics that allow them to effective
management support tools.

1. Handle Large Amount of Data from Different Sources: -

For instance, advanced database management system & data warehouses have allowed
decision makers to search dbases for information when using a decision support system,
even when some data sources reside in different dbases stored in different computer
system or network.

2. Provide Report & Presentation Flexibility: -

Managers can get the information they want, presented in a format that suits their needs.
Furthermore output can be presented on computer screens or produced on printers,
depending on the needs & desires of the problem solver.

3. Offer both Textual & Graphical Orientation: -

Today’s decision support systems can producer text, tables, line drawings, pie chart & more.
By using their preferred orientation, managers can use decision support system to get a
better understanding of a true situation if require & to convey this understanding to other.

4. Support Drill-Down Analysis: -

A manager can get more levels of detail when needed by drilling down through data. For
example a manager can get more detailed information for a project if needed. Here he can
view the overall project cost or drill-down & see the cost for each project phase, activity &
task.

5. Perform Complex, Sophisticated analysis & Comparisons Using Advanced Software

Packages:
Marketing research surveys for example can be analyzed in a verity of ways using analysis
program that are part of decision support system. Many of the analytical programs
associated with decision support system are actually stand alone program. The decision
support system provides minas of bringing these further.

6. Support Optimization Satisfying & Heuristic Approaches: -

By supporting all types of decision making approaches, a decision support system gives the
decision maker a great deal of activity in getting computer support for decision making
activities. The process of making hypothetical changes to problem data & observing the

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impact on the results can be used to control inventory with what-if analysis a manager can
make changes to problem data.

7. Simulation: -
It is the ability of the decision support system to duplicate the feature of a real system. In
most cases, probability or uncertainty is involved. For example the mean time between
failure & the mean time to repair key components of a manufacturing line can be
calculated to determine the impact on the number of products that can be produced each
shift. Engineers use this data to determine which components need to be reengineered to
increase the mean time between failures and which components need to have an ample
supply of spare parts to reduce the mean time to repair.

8. Goal Seeking Analysis: -

It is a process of determining the problem data require for a given result. For example a
financial manager is considering an investment with a certain monthly net income. Further
more the manager might have a goal to earn a return of 9% on the investment. Goal
seeking allows the manager to determine what monthly net income is needed to have
return of 9%.

 Capabilities of Decision Support System: -

The capabilities of a DSS are as follows:
1. Support for Problem Solving Phases: -
 Every organization needs effective decision making to reach its objective and goals.
 These phase include intelligence part means identify the problem, design part means
to develop alternate solution, choice means to select best of them and implement it
and monitoring.
 A specific decision support system might support only one or a few problem solving
phases.

2. Support for Different Decision Frequencies: -

Decision can range on continues from one-of-kind or repetitive decisions.
• One-of-kind decisions:
It is handled by an ad hoc decision support system.
An ad hoc decision support system is concerned with situations or decisions that come up
only a few times during the life of organization. for e.g a company might be faced with a
decision on whether to build a new manufacturing facility in another area of the country.
• Repetitive Decisions:
An institutional decision support system handles situations or decisions that occur more
than ones, usually several times a year of more.

An institutional decision support system is used repeatedly & refined over the years.

3. Support for Different Problem Structures: -

There are two types of problem structure:

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• Highly structured problems:

Highly structured problems are straightforward requiring known facts & relationship

• Semistructured problems:
semistructured or unstructured problems on the other hand are move complex.

4. Support for Various Decision Making levels: -

Decision support system can often help for managers at different levels within the
organization.

There are three types of managers:

• Operational-level managers:
They can get assistance with daily and routine decision-making, made for frequently.

• Tactical level managers:

Tactical level decision makers can be supported with analyzer tools that assist in proper
planning and control.
• Strategic level managers:

At the strategic level decision support system can help managers by providing analysis for
long-term decisions required by the internal and external infrastructure.

 Components of DSS

DSS has basically three components:

1. Database
2. A Model Base
3. Dialogue Manager (User interface)

1) DATABASE

At the core of decision support system is a database & model base.

It captures the data that can be used with other components of DSS to make decisions.

The DSS database is a collection of current and historical data from a number of application
or groups.

It may be small database residing on a pc that contains a subset of corporate data that has
been downloaded & possibly combined with external data.

Alternatively, DSS database may be a massive data warehouse that is continuously updated
by major organizational TPS.

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The DBMS allows managers and decision makers to perform qualitative analysis on the
company’s vast stores of data in databases, data warehousing (repository of data) and data
marts (subsets of data warehousing).

A DBMS can also connect to external databases to give managers and decision makers even
more information and decision support.

The combination of internal and external database access can give key decision makers a
better understanding of the company and its environment.

2) MODEL BASE
The model is an abstract representation that illustrates the components or relationships of a
fact.

Each DSS is build for specific set of purposes & will make different collection of models
available depending on those purposes. To coordinate different models MMS (Model
Management Software) is often used.

A model can be a physical, a mathematical model (such as an equation) or a verbal model

(such as a description of a procedure for writing an order).

Depending on the needs of the decision makers, one or more these models can be used:

1. Financial Model: -
It provides cash flow, internal rate of return and other investment analysis spreadsheet
programs such as excel is often used for this purpose.
In addition more sophisticated financial planning and modeling programs can be employed.
Some organization develops customized financial models to handle the unique situation and
problems faced by the organization.

2. Statistical Analysis Model: -

It can provide summary statistics trend projections, hypothesis testing and more.
These programs are available on both personnel & mainframe system. Many software
packages including SPSS & SAS provide outstanding statistical analysis for organization of all
sizes.
These statistical problems can compute averages, standard deviation, correlation &
coefficient and regression analysis; do hypotheses testing. Some statistical programs also
have the ability to produce graphic displays that reveal the relationship between variables
or quantities.

3. Graphical Model: -

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These are software packages that assist decision makers’ decision making in designing,
developing & using graphic displays of data & information PC programs that can perform
this type of analysis.

4. Project Management Model: -

These are used to handle and coordinate large project; they are also used to identify critical
activities and tasks that could delay or jeopardize an entire project if they are not completed
in time & cost effectively. Some of these programs can also determine the best way to
speed up a project by using additional resources, including cash, labor & equipment. This
allows managers to keep tight control over projects of all size & types.

3) DIALOG MANAGER
The dialogue manager allows users to interact with the decision support system to obtain
information.
It assists with all aspects of communications between the user & the hardware and software
that constitute the decision support system.
Upper-level decision makers are often less interested in where the information come from
or how it was gathered than that the information is both understandable & accessible.

 GROUP DECISION-SUPPORT SYSTEMS (GDSS)

The DSS focuses primarily on individual decision making, however so much work is
accomplished in groups within organizations that a special category of systems called group
decision support system(GDSS).
It has been developed to support group and organizational decision making.

WHAT IS A GDSS ?

GDSS is an an interactive computer based system to facilitate the solution of unstructured

problems by a set of decision makers working together as a group.

The decision support system approach has resulted in better decision making for all levels of
individual users.

COMPONENTS OF GDSS

GDSS consists of three basic elements :

i) Hardware
Hardware refers to the conference facility itself, electronic hardware, such as electronic
display boards, as well as audio-visual, computer and networking equipment.

II) Software tools

There are specific GDSS software tools for supporting group meeting.

III) People

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All the decision makers in GDSS meeting are the people of the GDSS.

 Characteristics of Group Decision Support System:

The following are the characteristics of the group decision support system:

1. Special Design:
The group decision support system approach acknowledges that special procedure devices
and approaches are needed in group decision making settings. These procedures must
faster, creative thinking, effective communication and group decision making technique.

2. Ease of Use:
Like an individual decision support system, a group decision support system must be easy to
learn and use. Systems that are complex and hard to operate will seldom be used. Many
groups have less tolerance that does individual decisions makers for poorly developed
systems.

3. Flexibility:
Two or more decision makers working on the same problem may have different decision
making styles and preferences. Each managers makes decisions in a unique way, an effective
group decision support system not only has to support the different approaches that
managers perspectives into a common view of the task at hand.

4. Decision Making Support:

A group decision support system can support different decision making approaches
including the Delphi approach in which group decision makers are geographically dispersed
throughout the country or the world. This approach encourages diversity among group
members and fosters creativity and original thinking in decision making. By this each
decision makers to be encouraged to give feedback.

5. Anonymous Input:
Many group decision support systems allow anonymous input, where the person giving the
input is not known to other group members. For example some organizations use a group
decision support system to help rank the performance of managers. Anonymous input
allows the group decision makers to concentrate on the merits of the input without
considering who gave it. In other words input given by a top-level manager is giving the
same consider action as input from lower-level employees to other members of the group.

6. Reduction of Effective Group Behaviour:

One key Character of any group decision support system is the ability to eliminate group
behavior that is counter productive or harmful to effective decision making. In some group
settings dominant individuals can take over the discussion which can prevent other member
of the group from presenting creative alternative.

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7. Parallel Communications:
With traditional group meeting people must take turns addressing various issues. One
person normally tasks at a time with group decision support system it’s possible for every
group member to address issue or make comments at the same time by entering them to
PC or workstation.

8. Automated Record Keeping:

Most group decision support system have the ability to keep detailed records of a meeting
automatically. Each comment that is meeting into a group member’s PC or workstation can
be anonymously.

 Group Decision Support System Alternatives:

Group decision support system can take on a number of alternative network configurations
depending on the needs of group.

1. The Decision Room:

This is ideal for situation in which decision makers are located in the same building or
geographic are and decision makers are occasional users of group decision support system.
The decision room alternative combines face-to-face verbal interaction with the client.

2. The Local Area Decision Network:

The local area decision network can be used when group members are located in the same
buildings or geographic area and under conditions in which group decision making is
frequent.

3. The Teleconferencing Alternative:

The teleconferencing alternative is used for situations in which the decision frequency is low
and location of group member is distant. Using long distance communication technology
there decisions rooms are electronically connected in teleconference and video conference.
This provides high degree of flexibility.

4. The Wide Area Decision Network:

The wide area decision network is under for situations in which the decision frequency is
high and the location of group member is distant. This group decision support system
alternative allows people to work in virtual work groups where teams of people located
around the world can work on common problem.

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