HCS 410: DECISION SUPPORT SYSTEMS

CHAPTER 1: OVERVIEW OF DECISION SUPPORT SYSTEMS

1.1. Introduction
Today, at the turn of the 21st century, many managers are using computers,
business databases, and models to help make decisions. This is a positive change
in behavior, and some evidence indicates the use of computers to support
management decision making is entering a new and more sophisticated stage. The
novelty of managers using computers is wearing off, and, more importantly, the
capabilities of our support systems are beginning to match the expectations of
managers. Decision Support Systems (DSS) are now both a business necessity
and an opportunity to gain competitive advantage. This chapter tries to build on
these positive changes and provide an overview of computerised decision support
systems.

1.2. Definition of Decision Support Systems

(a) Decision Support Systems (DSS) are a specific class of computerised
information systems that supports business and organisational decision-
making activities. A properly designed DSS is an interactive software-
based system intended to help decision makers compile useful information
from raw data, documents, personal knowledge, and/or business models to
identify and solve problems and make decisions.

Typical information that a decision support application might gather and present
would be:
(i) An inventory of all of your current information assets (including legacy and
relational data sources, cubes, data warehouses, and data marts).
(ii) Comparative sales figures between one week and the next.
(iii) Projected revenue figures based on new product sales assumptions.
(iv) The consequences of different decision alternatives, given past experience
in a context that is described.

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 (b) A DSS is a computer program application that analyses business data and
presents it so that users can make business decisions more easily. It is an
“informational application” and is different from an “operational
application” that collects the data in the course of normal business
operation. A DSS may present information graphically and may include an
expert system or artificial intelligence (AI). It may be aimed at business
executives or some other group of knowledge workers.

(c) DSS is an interactive computer-based system or subsystem intended to help

decision makers use communications technologies, data, documents,
knowledge and/or models to identify and solve problems, complete
decision process tasks, and make decisions. DSS is a general term for any
computer application that enhances a person or group’s ability to make
decisions. Also, DSS refers to an academic field of research that involves
designing and studying DSSs in their context of use. In general, DSSs are a
class of computerised information system that supports decision-making
activities.

(d) A DSS is an umbrella term used to describe any computer application that
enhances the user’s ability to make decisions. More specifically, the term is
usually used to describe a computer-based system designed to help
decision-makers use data, knowledge and communications technology to
identify problems and make decisions to solve those problems.

1.3. Classification of Decision Support Systems

1.3.1. Using relationship with the user as criterion
(a) A Passive DSS is a system that aids the process of decision making, but
that cannot bring out explicit decision suggestions or solutions.
(b) An Active DSS, on the other hand, can bring out such decision suggestions
or solutions.
(c) A Cooperative DSS allows the decision maker (or its advisor) to modify,
complete, or refine the decision suggestions provided by the system, before
sending them back to the system for validation. The system again

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 improves, completes, and refines the suggestions of the decision maker and
sends them back to him/her for validation. The whole process then starts
again, until a consolidated solution is generated.

1.3.2. Using the mode of assistance as the criterion

(a) Communications Driven DSS – is a type of DSS that enhances decision-
making by enabling communication and sharing of information between groups
of people. At its most basic level a C-D DSS could be a simple threaded e-mail,
and at its most complexes level it could be a web-conferencing application or
interactive video. A C-D DSS will exhibit at least one of the following
characteristics:
(i) Supports coordination and collaboration between two or more people;
(ii) Facilitates information sharing;
(iii) Enables communication between groups of people;
(iv) Supports group decisions.

(b) Data-Driven DSS – are a form of support system that focuses on the
provision of internal (and sometimes external) data to aid decision making.
Most often this will come in the form of a data warehouse – a database
designed to store data in such a way as to allow for its querying and analysis
by users. Data-driven DSS emphasises analysis of large amounts of structured
data. These systems include: real-time equipment monitoring, inventory
reorder, and monitoring systems.

(c) Document-Driven DSS – A document-driven DSS integrates a variety of

storage and processing technologies to provide complete document retrieval
and analysis. Examples of documents that would be accessed by a document-
driven DSS are policies and procedures, product specifications, catalogs, and
corporate historical documents, including minutes of meetings, corporate
records, and important correspondence. A search engine is a powerful
decision-aiding tool associated with a document-driven DSS.

While data-driven DSSs rely on data that is already in a standardised format that
lends itself to database storage and analysis, a document-driven DSS makes use

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of data that cannot easily be standardised and stored. The three primary forms of
data used in document-driven DSSs are:
(i) Oral – i.e. transcribed conversations;
(ii) Written – i.e. reports, memos, e-mail and other correspondence;
(iii) Video – i.e. TV commercials and news reports.

None of these formats lend themselves easily to standardised database storage and
analysis, so managers require DSS tools to convert them into data that can be
valuable in the decision making process. Document-driven DSS is the newest
field of study in Decision Support Systems. Examples of document-driven tools
can be found in internet search engines, designed to sift through vast volumes of
unsorted data through the use of keyword searches

(d) Knowledge-Driven DSS – are systems designed to recommend actions to

users. Typically, knowledge-driven systems are designed to sift through large
volumes of data, identify hidden patterns in that data and present
recommendations based on these patterns. They use business rules that already
exist in the knowledge bases.

(e) Model-Driven support systems incorporate the ability to manipulate data to

generate statistical and financial reports, as well as simulation models, to aid
decision-makers. Model-based decision support systems can be extremely
useful in forecasting the effects of changes in business processes, as they can
use past data to answer complex ‘what-if’ questions for decision makers.
Model-driven DSS use data and parameters provided by decision makers to
aid them in analyzing a situation. Decisions are arrived at by constructing
models from available data but they are not usually data intensive. Very large
databases are usually not needed for model-driven DSS, but data for a specific
analysis may need to be extracted from a large database.

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(f) Spreadsheet-based DSS – model-driven and data-driven DSSs can be built
using spreadsheets which offer decision-makers easy to understand
representations of large amounts of data. Additionally, spreadsheet data is
arranged in such a way as to make it easy to convert the data into
visualisations to further aid decision-makers.

(g) Web-based DSS – any type of DSS can be web-based. The term simply
describes any decision support system that is operated through the interface of
a web browser, even if the data used for decision support remains confined to
a legacy system such as a data warehouse.

1.3.3. Using scope as the criterion

(a) Enterprise-wide DSS – are systems that are linked into large data
warehouses, and offer decision support to managers at all levels of an
enterprise. They will typically be basic, general use systems that can perform a
wide variety of functions.
(b) Desktop DSS – are much smaller applications designed to be run from a
desktop PC. While these systems may well be linked into a data warehouse or
other large volume of data, they will typically be more limited in scope.

1.4. Decision Support Systems Architecture

DSS architecture is concerned about conception of the structure, model and
behaviour of a system which is to be developed. Architecture is essentially a
framework for organising our thoughts about something. It identifies the major
elements to be considered in developing and using something. The general
architecture of houses identifies such important elements as a plumbing system,
an electrical system, an air-treatment system, and a system of rooms. It also
identifies relationships among these elements. Similarly, the architecture of
decision support systems can be described by a generic framework that identifies
essential elements of a DSS and their interrelationships. These elements are
various kinds of systems that are configured in a certain way.

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 Figure 1: DSS Architecture

1.4.1. Database component

It contains data from various sources, including internal data from the
organisation, the data generated by different applications, and the external data
mined form the Internet, etc. The decision support systems database can be a
small database or a standalone system or a huge data warehouse supporting the
information needs of an organization. To avoid the interference of decision
support system with the working of operational systems, the DSS database
usually contains a copy of the production database.

1.4.2. Model component

The function of this system is to fetch the data from DBMS and transform that
data into information which helps for proper decision making. It should also
provide proper assistance to the user for model development.

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Some of the commonly used models are as follows:-
(a) Statistical Models: They contain a wide range of statistical functions, such as
mean, median, mode, deviations etc. These models are used to establish,
relationships between the occurrences of an event and various factors related
to that event. It can, for example, relate sale of product to differences in area,
income, season, or other factors. In addition to statistical functions, they
contain software that can analyze series of data to project future outcomes.
(b) Sensitivity Analysis Models: These are used to provide answers to what-if
situations occurring frequently in an organization. During the analysis, the
value of one variable is changed repeatedly and resulting changes on other
variables are observed. The sale of product, for example, is affected by
different factors such as price, expenses on advertisements, number of sales
staff, productions etc. Using a sensitivity model, price of the product can be
changed (increased or decreased) repeatedly to ascertain the sensitivity of
different factors and their effect on sales volume. Excel spreadsheets is often
used for making such analysis.
(c) Optimisation Analysis Models: They are used to find optimum value for a
target variable under given circumstances. They are widely used for making
decisions related to optimum utilisation of resources in an organisation.
During optimisation analysis, the values for one or more variables are changed
repeatedly keeping in mind the specific constraints, until the best values for
target variable are found. They can, for example, determine the highest level
of production that can be achieved by varying job assignments to workers,
keeping in mind that some workers are skilled and their job assignment cannot
be changed. Linear programming techniques and Solver tool in Microsoft
excel are mostly used for making such analysis.
(d) Forecasting Models: They use various forecasting tools and techniques,
including the regression models, time series analysis, and market research
methods etc., to make statements about the future or to predict something in
advance. They provide information that helps in analyzing the business
conditions and making future plans. These systems are widely used for
forecasting sales.
(e) Backward Analysis Sensitivity Models: Also known as goal seeking
analysis, the technique followed in these models is just opposite to the

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 technique applied in sensitivity analysis models. In place of changing the
value of variable repeatedly to see how it affects other variables, goal seeking
analysis sets a target value for a variable and then repeatedly changes other
variables until the target value is achieved. To increase the production level by
40 percent using the backward sensitivity analysis, for example, first, the
target value for the production level can be set and then the required changes
to made in other factors, such as the amount of raw material, machinery and
tools, number of production staff, etc., to achieve the target production level.

1.4.3. Communications component

These include network and communications technologies to facilitate
collaboration, communication and decision making. Communications
technologies are central to supporting decision-making. Technologies include:
LANs, WANs, Internet, ISDN, and Virtual Private Networks. Tools used include
whiteboards, Video conferencing, and Bulletin Boards.

1.4.4. User interface component

It is an interactive graphical interface which makes the interaction easier between
the DSS and its users. It displays the results (output) of the analysis in various
forms, such as text, table, charts or graphics. The user can select the appropriate
option to view the output according to his requirement.

1.4.5. User
The managers or their staff specialists to explore decision alternatives can use a
decision support system. Such end users can also develop decision support
system.

1.5. Components of DSS

DSS components may be classified as:
(a) Inputs: factors, numbers, and characteristics to analyse.
(b) User Knowledge and Expertise: inputs requiring manual analysis by the
user.
(c) Outputs: transformed data from which DSS “decisions” are generated.
(d) Decisions: results generated by the DSS based on user criteria.