Decision Making & Information Systems

• Good decision-making and problem-solving skills are the key to developing effective information and decision support systems

• Define the stages of decision making • Discuss the importance of implementation and monitoring in problem solving

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• The management information system (MIS) must provide the right information to the right person in the right fashion at the right time

• Explain the uses of MISs and describe their inputs and outputs • Discuss information systems in the functional areas of business organizations
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• Decision support systems (DSSs) are used when the problems are unstructured

• List and discuss important characteristics of DSSs that give them the potential to be effective management support tools • Identify and describe the basic components of a DSS
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• Specialized support systems, such as group support systems (GSSs) and executive support systems (ESSs), use the overall approach of a DSS in situations such as group and executive decision making

• State the goals of a GSS and identify the characteristics that distinguish it from a DSS • Identify the fundamental uses of an ESS and list the characteristics of such a system
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Decision Making and Problem Solving: Decision Making as a Component of Problem Solving
• Decision-making phase: first part of problem-solving process
• Intelligence stage: potential problems or opportunities are identified and defined • Design stage: alternative solutions to the problem are developed • Choice stage: requires selecting a course of action
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Figure 10.1: How Decision Making Relates to Problem Solving

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Decision Making as a Component of Problem Solving (continued)
• Problem solving: a process that goes beyond decision making to include the implementation stage • Implementation stage: a solution is put into effect • Monitoring stage: decision makers evaluate the implementation

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Programmed Versus Nonprogrammed Decisions
• Programmed decisions
• Decision made using a rule, procedure, or quantitative method • Easy to computerize using traditional information systems

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Programmed Versus Nonprogrammed Decisions (continued)
• Nonprogrammed decisions
• Decision that deals with unusual or exceptional situations • Not easily quantifiable

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Optimization, Satisficing, and Heuristic Approaches
• Optimization model: a process to find the best solution, usually the one that will best help the organization meet its goals • Satisficing model: find a good—but not necessarily the best—problem solution • Heuristics: commonly accepted guidelines or procedures that usually find a good solution

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An Overview of Management Information Systems: Management Information Systems in Perspective
• A management information system (MIS) provides managers with information that supports effective decision making and provides feedback on daily operations • The use of MISs spans all levels of management

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Figure 10.3: Sources of Managerial Information

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Inputs to a Management Information System
• Internal data sources (TPSs and ERP systems and related databases; data warehouses and data marts; specific functional areas throughout the firm) • External data sources (Customers, suppliers, competitors, and stockholders whose data is not already captured by the TPS; the Internet; extranets)

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Outputs of a Management Information System
• Scheduled report: produced periodically, or on a schedule • Key-indicator report: summary of the previous day’s critical activities • Demand report: developed to give certain information at someone’s request • Exception report: automatically produced when a situation is unusual or requires management action • Drill-down reports: provide increasingly detailed data about a situation
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Characteristics of a Management Information System
• Fixed format, standard reports • Hard-copy and soft-copy reports • Uses internal data • User-developed reports • Users must request formal reports from IS department

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Functional Aspects of the MIS
• Most organizations are structured along functional lines or areas • MIS can be divided along functional lines to produce reports tailored to individual functions

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Figure 10.5: MIS is an integrated collection of functional information systems

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Financial Management Information Systems
• Financial MIS: provides financial information to all financial managers within an organization • Profit/loss and cost systems • Auditing • Uses and management of funds

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Figure 10.6: Overview of a Financial MIS

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Manufacturing Management Information Systems
• The manufacturing MIS subsystems and outputs monitor and control the flow of materials, products, and services through the organization • Design and engineering • Master production scheduling and inventory control • Process control • Quality control and testing
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Figure 10.7: Overview of a Manufacturing MIS

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Marketing Management Information Systems
• Marketing MIS: supports managerial activities in product development, distribution, pricing decisions, and promotional effectiveness • Marketing research • Product development • Promotion and advertising • Product pricing
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Figure 10.10: Overview of a Marketing MIS

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Human Resource Management Information Systems
• Human resource MIS: concerned with activities related to employees and potential employees of an organization • Human resource planning • Personnel selection and recruiting

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Human Resource Management Information Systems (continued)
• Training and skills inventory • Scheduling and job placement • Wage and salary administration • Outplacement

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Figure 10.13: Overview of a Human Resource MIS

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Other Management Information Systems
• Accounting MIS: provides aggregate information on accounts payable, accounts receivable, payroll, and many other applications • Geographic information system (GIS): capable of assembling, storing, manipulating, and displaying geographic information

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Figure 10.4

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Figure 10.4 cont’d

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Functional Aspects of the MIS

Functional Areas
• • • • Finance Manufacturing Marketing Human Resources

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MIS is an integrated collection of functional systems, each supporting particular functional areas.

•Financial statements •Uses and managements of funds •Financial stats for control •Quality Control reports •Process Control reports •JIT reports •Production Schedule •CAD output •Sales by customer •Sales by salesperson •Sales by product •Pricing report •Total service calls •Customer satisfaction •Benefit reports •Salary surveys •Scheduling report •Job applicant profiles •Needs and planning report 33

Figure 10.5

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An Overview Of Decision Support Systems
• A DSS is an organized collection of people, procedures, software, databases, and devices used to support problemspecific decision making and problem solving • The focus of a DSS is on decision-making effectiveness when faced with unstructured or semistructured business problems

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Characteristics of Decision Support Systems
• Handle large amounts of data from different sources • Provide report and presentation flexibility • Offer both textual and graphical orientation • Support drill-down analysis

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Characteristics of Decision Support Systems (continued)
• Perform complex, sophisticated analysis and comparisons using advanced software packages • Support optimization, satisficing, and heuristic approaches
• Simulation • What-if analysis • Goal-seeking analysis
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Capabilities of a Decision Support System
• Support all problem-solving phases • Support different decision frequencies • Support different problem structures • Support various decision-making levels

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The DSS Focuses on Semistructured Problems

Computer Solution

Manager + Computer (DSS) Solution

Manager Solution

Structured

Semistructured

Unstructured

DEGREE OF PROBLEM STRUCTURE
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Peter Keen Believes That a DSS Should:
1. Assist in solving semistructured problems 2. Support, not replace, the manager 3. Contribute to decision effectiveness, rather than efficiency

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A DSS Model
Environment
Individual problem solvers Other group members

Report writing software

Mathematical Models

GDSS GDSS software software

Database

Decision support system Environment
Legend:
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Figure 10.15: Decision-Making Level

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Table 10.3: Comparison of DSSs and MISs

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Table 10.3: Comparison of DSSs and MISs (continued)

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Components of a Decision Support System
• Model base: provides decision makers access to a variety of models and assists them in decision making • Database • External database access • Access to the Internet and corporate intranet, networks, and other computer systems • Dialogue manager: allows decision makers to easily access and manipulate the DSS and to use common business terms and phrases
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Figure 10.16: Conceptual Model of a DSS

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Group Support Systems
• Group support system (GSS)
• Consists of most elements in a DSS, plus software to provide effective support in group decision making • Also called group support system or computerized collaborative work system

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Characteristics of a GSS That Enhance Decision Making (continued)
• Anonymous input • Reduction of negative group behavior • Parallel communication • Automated record keeping

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Executive Support Systems
• Executive support system (ESS): specialized DSS that includes all hardware, software, data, procedures, and people used to assist senior-level executives within the organization

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Executive Support Systems in Perspective
• Tailored to individual executives • Easy to use • Drill-down capabilities • Support need for external data

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Executive Support Systems in Perspective (continued)
• Can help when uncertainty is high • Future-oriented • Linked to value-added processes

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Capabilities of Executive Support Systems
• Support for defining an overall vision • Support for strategic planning • Support for strategic organizing and staffing • Support for strategic control • Support for crisis management

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Summary
• The decision-making phase of the problem-solving process includes three stages: intelligence, design, and choice • A management information system (MIS) provides managers with information that supports effective decision making and provides feedback on daily operations • A financial MIS provides financial information to all financial managers within an organization

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Summary (continued)
• The manufacturing MIS subsystems and outputs monitor and control the flow of materials, products, and services through the organization • A marketing MIS supports managerial activities in product development, distribution, pricing decisions, and promotional effectiveness • A human resource MIS is concerned with activities related to employees and potential employees of an organization

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Summary (continued)
• A DSS is an organized collection of people, procedures, software, databases, and devices used to support decision making and problem solving • A group support system (GSS) consists of most elements in a DSS, plus software to provide effective support in group decision making • An executive support system (ESS) is a specialized DSS that includes all hardware, software, data, procedures, and people used to assist senior-level executives within the organization
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Review
• • • • • The decision making process. MIS provides feedback on daily operations. 5 types of MIS reports. MIS is used in functional units of an organization. DSS supports problem-specific non-programmed decision making.

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Summary (continued)
• We are indeed in the information age. • All businesses must coordinate their use of IT, information, and people (The MIS Challenge). • The many forces shaping business today include:
• • • • • • Globalization Competition Information as a key resource The virtual workplace and telecommuting Electronic commerce Knowledge worker computing.

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Summary (continued)
• Businesses are using information technology (IT) in three ways:
• to support information-processing tasks • as an enabler of innovation • as a collapser of time and space

• Information is also a key resource in business today. The value of information can be defined according to its dimensions:
• Time (when) • Content (what) • Form (how)
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Summary (continued)
Finally, people are the most important resource in any organization. As an information-literate knowledge worker, you have 5 charges: 1.Define what information you need 2.Know how and where to obtain information 3.Understand the meaning of information 4.Act appropriately based on information 5.Use information legally and ethically
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