Decision Support Systems

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Decision

A decision involves the complete process of gathering and evaluating information about a situation, identifying a need for a decision, identifying or in other ways defining relevant alternative courses of action, choosing the "best", the "most appropriate" or the "optimum" action, and then applying the solution and choice in the situation.

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Factors Affecting DecisionMaking
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New technologies and better information distribution have resulted in more alternatives for management. Complex operations have increased the costs of errors, causing a chain reaction throughout the organization. Rapidly changing global economies and markets are producing greater uncertainty and requiring faster response in order to maintain competitive advantages. Increasing governmental regulation coupled with political destabilization have caused great uncertainty.

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What do Decision Support Systems Offer?
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Quick computations at a lower cost Group collaboration and communication Increased productivity Ready access to information stored in multiple databases and data warehouse Ability to analyze multiple alternatives and apply risk management Enterprise resource management Tools to obtain and maintain competitive advantage

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Decision Models

Strategic models Tactical models Operational models

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Integration of TPS, MIS, and DSS

In many organizations they are integrated through a common database Separation of DSS transactions in the database from TPS and MIS transactions may be important for performance reasons

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Computer-Based Information Systems

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Decision Making Levels

Strategic Tactical Operational High Decision Frequency Operational-level Strategic-level managers managers involved with involved with long-term daily decisions decisions Low

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Working Definition of DSS

A DSS is an interactive, flexible, and adaptable CBIS, specially developed for supporting the solution of a non-structured management problem for improved decision making. It utilizes data, it provides easy user interface, and it allows for the decision maker’s own insights DSS may utilize models, is built by an interactive process (frequently by end-users), supports all the phases of the decision making, and may include a knowledge component

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Decision Support Systems

Keen (1980) DSS apply “to situations where a ‘final’ system can be developed only through an adaptive process of learning and evolution”

Central Issue in DSS support and improvement of decision making

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Decision Support Frameworks
Type of Control

Type of Decision:
Structured
(Programmed)

Operational Control Managerial Control Strategic Planning Accounts receivable, accounts payable, order entry Production scheduling, inventory control Budget analysis, short-term forecasting, personnel reports Credit evaluation, budget preparation, project scheduling, rewards systems Investments, warehouse locations, distribution centers Mergers and acquisitions, new product planning, compensation, QA, HR policy planning R&D planning, technology development, social responsibility plans
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Semistructured

Unstructured (Unprogrammed)

Buying software, approving loans, help desk

Negotiations, recruitment, hardware purchasing
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Technologies for DecisionMaking Processes
Type of Decision Structured (Programmed) Semistructured Unstructured (Unprogrammed) Technology Support Needed MIS, Management Science Models, Transaction Processing DSS, KMS, CRM, SCM KMS, ES, Neural networks

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Characteristics and Capabilities of DSS
1. Provide support in semi-structured and unstructured situations, includes human judgment and computerized information 2. Support for various managerial levels 3. Support to individuals and groups 4. Support to interdependent and/or sequential decisions 5. Support all phases of the decision-making process 6. Support a variety of decision-making processes and styles (more)
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Cont……
7. Are adaptive 8. Have user friendly interfaces 9. Goal: improve effectiveness of decision making 10. The decision maker controls the decision-making process 11. End-users can build simple systems 12. Utilizes models for analysis 13. Provides access to a variety of data sources, formats, and types
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Decision makers can make better, more consistent decisions in a timely manner

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Handles large amounts of data from different sources Provides report and presentation flexibility Offers both textual and graphical orientation Supports drill down analysis Performs complex, sophisticated analysis and comparisons using advanced software packages Supports optimization and heuristic approaches

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Functions of DSS : which facilitates managerial decision making

“What-if” analysis

Makes hypothetical changes to problem and observes impact on the results Mangers can prepare themselves to face a dynamic business environment by developing a group of scenarios (best case , worst case etc.). Spreadsheet packages such as excel etc. have ‘what if’ application

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Cont…....
Model building
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Duplicates features of a real system It allows decision makers to identify most appropriate model for solving the problem A model builder uses a framework to identify variables like : demand , cost, profit etc. and analysis the relationship among these variables and identify assumptions if any.

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Cont..
Goal-seeking analysis
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Determines problem data required for a given result It is the process of determining the input values required to achieve a certain goal for example house buyers determine the monthly payment they can afford and calculate the number of such payments required to pay the desired house.

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Cont…
Risk analysis

it allows mangers to access the risks associated with various alternatives. Decisions can be classified as low medium and high risk.

Graphical analysis
 

help managers to quickly digest large volumes of data and visualize the impact various courses of action. They recommend the use of graph when:  Seeking a quick summary of data  Detecting trends over time  Forecasting activities  Comparing various patterns etc

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DSS Parts

User
 

Someone who makes decisions Could be you Operating system Easy to use Internal & external

System software
 

Data

Decision models – three basic types

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Capabilities of a DSS (1)

Supports
 

Problem solving phases Different decision frequencies
How many widgets should I order?

Merge with another company?

low Frequency
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high

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Capabilities of a DSS (2)

Highly structured problems

Straightforward problems, requiring known facts and relationships. Complex problems wherein relationships among data are not always clear, the data may be in a variety of formats, and are often difficult to manipulate or obtain
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Semi-structured or unstructured problems

Goal Seeking Example
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You know the desired result You want to know the required input(s) Example:

Microsoft Excel’s “Goal Seek” and “Solver” functions

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Excel demo

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Components of a DSS

Model management software (MMS)

Coordinates the use of models in the DSS Provides decision makers with access to a variety of models Allows decision makers to easily access and manipulate the DSS
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Model base

Dialogue manager

Database

Model base

DBMS

MMS

Access to the internet, networks, and other computer systems

External database access

External databases

Dialogue manager

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Model Base

Model Base

Provides decision makers with access to a variety of models and assists them in decision making Financial models Statistical analysis models Graphical models Project management models
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Models
   

Advantages and Disadvantages of Modeling

Advantages
     

Less expensive than custom approaches or real systems. Faster to construct than real systems Less risky than real systems Provides learning experience (trial and error) Future projections are possible Can test assumptions Assumptions about reality may be incorrect Accuracy of predications often unreliable Requires abstract thinking
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Disadvantages
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Group Decision Support System

Group Decision Support System (GDSS)

Contains most of the elements of DSS plus software to provide effective support in group decision-making settings

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Databases

Model base

GDSS processor

GDSS software

Access to the internet and corporate intranet, networks, and other computer system

Dialogue manager

External database access

External databases

Users

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Characteristics of a GDSS (1)
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Special design Ease of use Flexibility Decision-making support
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Delphi approach (decision makers are geographically dispersed) Brainstorming Group consensus Nominal group technique
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Characteristics of a GDSS (2)
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Anonymous input Reduction of negative group behaviour Parallel communication Automated record keeping Cost, control, complexity factors

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Group Results Matrix

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Components of a GDSS and GDSS Software
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Database Model base Dialogue manager Communication capability Special software (also called GroupWare) E.g., Lotus Notes

people located around the world work on the same project, documents, and files, efficiently and at the same time
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GDSS Alternatives
high

Decision frequency

Local area Wide area decision network decision network

Decision room low close

Teleconferencing

distant

Location of group members
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Decision Room

Decision Room

For decision makers located in the same geographic area or building Use of computing devices, special software, networking capabilities, display equipment, and a session leader Collect, coordinate, and feed back organized information to help a group make a decision Combines face-to-face verbal interaction with technology-aided formalization
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Wide Area Decision Network

Characteristics
  

Location of group members is distant Decision frequency is high Virtual workgroups

Groups of workers located around the world working on common problems via a GDSS

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Discussion Questions
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Name and discuss the five common functions of most organizations. Discuss the roles of the three kinds of management in a corporation. What are the four most common computer-based information systems? Describe the different reports and their roles in managerial decision making. What is the difference between an office automation system and a knowledge work system?

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