Chapter 9 Decision

Support Systems
Decision Support in Business
 Companies are investing in data-driven decision
support application frameworks to help them
respond to
 Changing market conditions
 Customer needs
 This is accomplished by several types of
 Management information
 Decision support
 Other information systems

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Levels of Managerial Decision
Making

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Information Quality
 Information products made more valuable by
their attributes, characteristics, or qualities
 Information that is outdated, inaccurate, or
hard to understand has much less value
 Information has three dimensions
 Time
 Content
 Form

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Attributes of Information Quality

Time Dimension
Time lines…Information should be provided when it is needed.
Currency….Information should be up to date when it is provided.
Frequency….Information should be provided as often as needed.
Time Period….Information can be provided about past,present,and future time periods.
Content Dimension
Accuracy….Information should be free from errors.
Relevance….Information should be related to the information needs of a specific recipient for a specific situation.
Completeness…All the information that is needed should be provided.
Conciseness… Only the information that is needed should be provided.
Scope….Information can have a broad or narrow scope, or an internal or external focus.
Performance…Information can reveal performance by measuring activities accomplished, progress made, or resources accumulated.
Form Dimension.
Clarity….Information should be provided in a form that is easy to understand.
Detail. Information can be provided in detail or summary form.
Order…..Information can be arranged in a predetermined sequence.
Presentation….Information can be presented in narrative, numeric, graphic or other terms.
Media……Information can be provided in the form of printed paper documents, video display, or other media.
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Decision Structure
 Structured (operational)
 The procedures to follow when decision
is needed can be specified in advance .Structured decisions
involve situations in which the procedures to follow, when a decision is need,can be specified in advance, The inventory reorder decisions that
most businesses face are a typical example.

 Unstructured (strategic)
 It is not possible to specify in advance
most of the decision procedures to follow. Most decision
related to long-term strategy can be thought of as unstructured.e.g.”What product lines should we develop over the next five years?’

 Semi-structured (tactical)
 Decision procedures can be pre-specified,
but not enough to lead to the correct
decision. e.g decisions involved in starting a new line of e-commerce services or making major changes to employee benefits
would probably range from unstructured to semistructured.Finally, decisions that are unstructured are those from which no procedures or rule
exist to guide the decision makers toward the correct decisions.

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Decision Support Systems
Management Information Decision Support
Systems Systems
Decision Provide information about the Provide information and
support performance of the organization techniques to analyze
provided specific problems
Information form Periodic, exception, demand, Interactive inquiries and
and frequency and push reports and responses
responses
Information Prespecified, fixed format Ad hoc, flexible, and
format adaptable format

Information Information produced by Information produced by

processing extraction and manipulation of analytical modeling of
methodology business data business data

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Decision Support Trends
 The emerging class of applications focuses on
 Personalized decision support
 Modeling
 Information retrieval
 Data warehousing
 What-if scenarios
 Reporting

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Business Intelligence Applications

The growth of corporate intranets and extranets, as well as web has accelerated the development and use of “executive class”
information delivery and decision support software tools by lower levels of management and by individuals and teams of business
professionals. In addition this dramatic expansion ah opened the door to the use of such business intelligence tools by the suppliers,
customer and other business stakeholders of a company for customer relations management, supply chain management and other e-
business application,
Today BI is considered a necessary and mission critical element in crafting and executing a firm’s strategy.

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Decision Support Systems
 Decision support systems use the following to
support the making of semi-structured business
decisions
 Analytical models
 Specialized databases
 A decision-maker’s own insights and judgments
 An interactive, computer-based modeling
process
 DSS systems are designed to be ad hoc,
quick-response systems that are initiated and
controlled by decision makers
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DSS Components

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DSS Model Base
 Model Base
 A software component that consists of
models used in computational and analytical
routines that mathematically express relations
among variables
 Spreadsheet Examples
 Linear programming Linear programming is a method to achieve the best outcome (such as maximum profit
or lowest cost) in a mathematical model whose requirements are represented by linear relationships.

 Multiple regression forecasting. multiple regression - a statistical technique that

predicts values of one variable on the basis of two or more other variables. multiple correlation example .. Following the Y and X components of this specific
operation, the dependent variable (Y) is the salary while independent variables (X) may include: scope of responsibility, work experience, seniority, and
education, among others. By matching the Y to the X, then the salary can be determined in a very objective manner.

 Capital budgeting present value NPV(net present value) is used in capital

budgeting to analyze the profitability of a projected investment or project.

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Applications of Statistics and
Modeling
 Supply Chain: simulate and optimize
put on improve

supply chain flows, reduce inventory, reduce

stock-outs
 Pricing: identify the price that maximizes
yield or profit
income

 Product and Service Quality: detect quality

problems early in order to minimize them
 Research and Development: improve
quality, efficacy, and safety of products and
services
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Management Information
Systems
 The original type of information system
that supported managerial decision making
 Produces information products that support
many day-to-day decision-making needs
 Produces reports, display, and responses
 Satisfies needs of operational and tactical
decision makers who face structured
decisions
 For example, sales managers rely heavily on sales analysis reports to evaluate differences in performance among sale people who sell the
same types of products to the same types of customers. They have a pretty good idea of the kinds of information about sales result(by product
line, sales territory ,customer, salesperson and so on)that they need to manage sales performance effectively

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Management Reporting Alternatives
 Periodic Scheduled Reports
 Prespecified format on a regular basis such periodic scheduled
reports are daily or weekly sales analysis reports and monthly financial statements.

 Exception Reports
 Reports about exceptional conditions
 May be produced regularly or when an
exception occurs. e.g a credit manager can be provided with a report that contains only information on
customers who

 Demand Reports and Responses

 Information is available on demand. e.g web browsers,DBMS query
languages and report generators enable managers at PC workstations to get immediate responses or to find and obtain customized reports as a
result of their requests for the information they need.Thus,managers do not have to wait for periodic reports to arrive as scheduled.

 Push Reporting
 Information is pushed to a manager’s networked
computer thus,many companies are using webcasting software to broadcast selectively reports and other information to the
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networked PCs of managers and specialists over their corporate intranets.
Online Analytical Processing
 OLAP
 Enables managers and analysts to examine
and manipulate large amounts of detailed and
consolidated data from many perspectives
 Done interactively, in real time, with rapid
response to queries
 OLAP involves analyzing complex relationships among thousands or even millions of data items stored in data marts,data warehouses, and
other multi dimensional databases to discover patterns,trends,and exception conditions.
 OLAP session takes place online in real time, with rapid responses to a manger's or analyst’s queries.so that the analytical or decision-making
process is undisturbed.

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Online Analytical Operations
 Consolidation

Aggregation of data
Consolidation involve which can involve simple roll-ups or complex groupings
involving interrelated data.

 Example: data about sales offices can be

rolled up to the district level, and the district level, data can be rolled up to provide a
regional-level perspective.

 Drill-Down
 OLAP can also go in the reverse direction and automatically display detailed data that comprise consolidated data.This process is called drill-
down.For example,the sales by individual products or sales reps that make up a region’s sales totals could be easily accessed.

 Display underlying detail data

 Example: sales figures by individual product
 Slicing and Dicing
 Slicing and dicing refers to the ability to look at the database from different viewpoints.One slice of the sales database might show all sales of a
product type within regions.Another slice might show all sales by sales channel within each product type.Slicing and dicing is often performed
along a time axis to analyze trends and find time-based patterns in the data.

 Viewing database from different viewpoints

 Often performed along a time axis
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Geographic Information Systems
 DSS uses geographic databases to construct
and display maps and other graphic displays
 Supports decisions affecting the geographic
distribution of people and other resources
 Often used with Global Positioning Systems
(GPS) devices
 Many compnaies are using GIS technology along with GPS to help them choose new retail store location, optimize distribution routs or analyze
demographic their target audiences.

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Data Visualization Systems
 Represents complex data using interactive,
three-dimensional graphical forms
(charts, graphs, maps)
 DVS Tools helps users interactively sort,
subdivide, combine, and organize data while it is
in its graphical form,
 Figure 9.14 is an example of airline flight analysis by a data visualization system.

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Using Decision Support Systems
 Using a decision support system involves an interactive analytical
modeling process
 Decision makers are not demanding pre-specified information
 They are exploring possible alternatives
 What-If Analysis
 Observing how changes to selected variables affect other
variables,what if cut advertising by 10 percent?what would happen to sale,?
 Sensitivity Analysis
 Observing how repeated changes to a single variable affect
other variables,lets cut advertising by 100 $ repeatedly so we can see its relationship to sale.
 Goal-seeking Analysis
 Making repeated changes to selected variables until a chosen
variable reaches a target value,lets try increases in advertising until sales reach $1 million.
 Optimization Analysis
 Finding an optimum value for selected variables, given certain
constraints.whats the best amount of advertising to have,given our budget and choice of media.

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