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12 views19 pages

CH6 - DecisionSupportSystems

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ralphbsaade
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PART II

4- Decision Support Systems

Section I: Decision Support in Business

To succeed in business, including e-business and


e-commerce, companies need information systems
that can support the diverse information and
decision-making needs of their managers and
business professionals.
/36
1- Introduction:

- Information, Decisions, and Management


The levels of managerial decision making that must be supported
by information technology in a successful organization are:
• Strategic Management.

A board of directors and an executive committee of the CEO


and top executives develop overall organizational goals,
strategies, policies, and objectives as part of a strategic
planning process.

They also monitor the strategic performance of the


organization and its overall direction in the political, economic,
and competitive business environment.
• Tactical Management.

Increasingly, business professionals in self-directed teams as well


as business unit managers develop short- and medium-range
plans, schedules, and budgets and specify the policies, procedures
and business objectives for their subunits of the company.

They also allocate resources and monitor the performance of their


organizational subunits, including departments, divisions, process
teams, project teams, and other workgroups.

• Operational Management.

The members of self-directed teams or operating managers develop


short-range plans such as weekly production schedules.

They direct the use of resources and the performance of tasks


according to procedures and within budgets and schedules they
establish for the teams and other workgroups of the organization.
- Information Quality
Information that is outdated, inaccurate, or hard to understand would not
be very meaningful, useful, or valuable to you or other end-users.
It is useful to think of information as having the three dimensions of time,
content and form.

A summary of
attributes of
information
quality
- Decision Structure

Decisions made at the operational management level tend to be more


structured, those at the tactical level more semi-structured, and those at
the strategic management level more unstructured.

Structured decisions involve situations where the procedures to follow


when a decision is needed can be specified in advance.

The inventory reorder decisions faced by most businesses are an


example.

Unstructured decisions involve decision situations where it is not possible


to specify in advance most of the decision procedures to follow.

For example, decisions involved in starting a new line of e-


commerce services or making major changes to employee benefits
would probably range from unstructured to semi-structured.
2- Management Information Systems

An MIS produces information products that support many of the day-to-


day decision-making needs of managers and business professionals.

For example, sales managers rely heavily on sales analysis reports to


evaluate differences in performance among salespeople who sell the
same types of products to the same types of customers.
- Management Reporting Alternatives

Four major reporting alternatives are provided by such systems:

• Periodic Scheduled Reports. Examples: daily or weekly sales analysis


reports and monthly financial statements.

• Exception Reports. Reports are produced only when exceptional


conditions occur. For example, a credit manager can be provided with a
report that contains information only on customers who exceed their
credit limits.

• Demand Reports and Responses. Information is available whenever a


manager demands it.
For example, Web browsers and database management software
(DBMS) query languages and report generators enable managers to
obtain reports as a result of their requests.

• Push Reporting. Information is pushed to a manager's networked


workstation.
3- Decision Support Systems

DSS are designed to be ad hoc, quick-response systems that are initiated and
controlled by business decision makers.

Comparing decision support systems and management information systems


Example

Sales managers typically rely on management information systems to


produce sales analysis reports.
These reports contains sales performance figures by product line,
salesperson, sales region, and so on.

A decision support system, on the other hand, would also interactively show
a sales manager the effects on sales performance of changes in a variety of
factors ( such as promotion expense and salesperson compensation).
4- Using Decision Support Systems

Using a decision support system involves four basic types of


analytical modeling activities.

- What-If Analysis

In what-if analysis, an end-user makes changes to variables, or


relationships among variables, and observes the resulting changes in the
values of other variables.
- Sensitivity Analysis

Sensitivity Analysis is a special case of what-if analysis. Typically, the value


of only one variable is changed repeatedly, and the resulting changes on
other variables are observed.
Some DSS packages automatically make repeated small changes to a
variable when asked to perform sensitivity analysis.

- Goal-Seeking Analysis

Goal-Seeking Analysis reverses the direction of the analysis done in what-if


and sensitivity analysis.
Instead of observing how changes in a variable affect other variables, goal-
seeking analysis (also called how can analysis) sets a target value (a goal)
for a variable and then repeatedly changes other variables until the target
value is achieved.
- Optimization Analysis

Optimization analysis is a more complex extension of goal-seeking


analysis.
Instead of setting a specific target value for a variable, the goal is to find
the optimum value for one or more target variables, given certain
constraints.

- Data Mining for Decision Support

Data mining's main purpose in knowledge discovery leading to decision


support.
Data mining software analyzes the vast stores of historical business data
that have been prepared for analysis in corporate data warehouses.
Data mining attempts to discover patterns, trends, and correlations hidden
in the data that can give a company a strategic business advantage.
Decision Support System Example
Like the brain, it learns to recognize patterns and relationships in the data it
processes.
For example, a neural network can be trained to learn which credit
characteristics result in good or bad loans. At that point, it would be trained
enough to begin making credit evaluations of its own.
5- Executive Information Systems

The first goal of executive information systems was to provide top


executives with immediate and easy access to information about a firm's
critical success factors (CSFs), that is, key factors that are critical to
accomplishing an organization's strategic objectives.

- Features of an EIS

In EIS, information is presented in forms tailored to the preferences of the


executives using the system.
A business user can quickly discover the direction in which key factors
are heading and the extent to which critical factors are deviating from
expected results.
6- Enterprise Portals and Decision Support

Don’t confuse portals with the executive information systems that have
been used in some industries for many years.

Portals are for everyone in the company, and not just for executives.
You want people on the front lines making decisions using browsers
and portals rather than just executives using specialized executive
information system software.
- Enterprise Information Portals

An enterprise information portal (EIP) is a Web-based interface and


integration of intranet and other technologies that gives all intranet users
and selected extranet users access to a variety of internal and external
business applications and services.

For example, internal applications might include access to e-mail, project


web sites, and discussion groups; human resources Web self-services;
customer, inventory and other corporate databases; decision support
systems; knowledge management systems.

External applications might include industry, finance, and other internet


news services; links to industry discussion groups; and links to customer
and supplier internet and extranet web sites.

Enterprise information portals are typically tailored or personalized to the


needs of individual business users or groups of users.
Enterprise information portals can also help avoid excessive surfing by employees
across company and Internet Web sites by making it easier for them to receive or find
the information and services they need, thus improving the productivity of a company's
workforce.
7- Knowledge Management Systems

Knowledge management systems is the use of information technology to help


gather, organize, and share business knowledge within an organization.

For many companies, enterprise information portals are the entry to corporate
intranets that serve as their knowledge management systems. That's why such
portals are called enterprise knowledge portals by their vendors.

Enterprise knowledge portals play an essential role in helping companies use


their intranets as knowledge management systems to share and disseminate
knowledge in support of business decision making by managers and business
professionals.

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