MANAGEMENT

INFORMATION
SYSTEM
UN IT - 3
LEARNING OBJECTIVES
• Identify the changes taking place in the form and use of decision support
system
• Identify the role and reporting alternatives of management information
systems
• Describe how online analytical processing can meet key information needs of
managers
• Explain the decision support system concept and how it differs from traditional
management systems
LEARNING OBJECTIVES
• Explain how the following information systems can support the
information needs of executives, managers, and business
professionals:
 Executive information systems
 Enterprise information portals
 Knowledge management systems

• Identify how neutral networks, fuzzy logic, genetic algorithms, virtual

reality, and intelligent agents can be used in business
• Give examples of several ways expert systems can be used in business
decision making situations
DECISION SUPPORT IN BUSINESSS
• To succeed in business today, companies need information systems that can
support the diverse information and decision making needs of their managers
and business professionals.
• Type of information required by decision makers in a company is directly
related to the level of management decision making and the amount of
structure in the decision situations they face.
• Even in today’s downsized organizations and flattened or non-hierarchical
organizational structures – levels of management decision making still exist,
but their shape, size and participants continue to change as today’s
organizational structure evolve.
Levels of managerial decision making
Information requirements of key decision-
making groups
• Senior management.
• Senior management is concerned with general yet timely information on changes in the
industry and society at large that may affect both the long-term and near-term future of the
firm, the firm’s strategic goals, short-term and future performance, specific bottlenecks and
trouble affecting operational capabilities, and the overall ability of the firm to achieve its
objectives.

• Middle management and project teams.

• Middle management is concerned with specific, timely information about firm performance,
including revenue and cost reduction targets, and with developing plans and budgets to
meet strategic goals established by senior management.
• This group needs to make important decisions about allocating resources, developing short-
range plans, and monitoring the performance of departments, task forces, teams, and
special project groups. Often the work of middle managers is accomplished in teams or small
groups of managers working on a task.
Information requirements of key decision-
making groups
• Operational management and project teams.
• Operational management monitors the performance of each subunit of the firm and manages
individual employees.
• Operational managers are in charge of specific projects and allocate resources within the project
budget, establish schedules, and make personnel decisions. Operational work may also be
accomplished through teams.

• Individual employees.
• Employees try to fulfill the objectives of managers above them, following established rules and
procedures for their routine activities.
• Increasingly, however, employees are granted much broader responsibilities and decision-making
authority based on their own best judgment and information in corporate systems.
• Employees may be making decisions about specific vendors, customers, and other employees.
• Because employees interact directly with the public, how well they make their decisions can directly
impact the firm’s revenue streams.
TYPES OF DECISIONS

• Decisions can be classified as

• structured
• semistructured,
• unstructured.

• Unstructured decisions are those in which the decision maker must provide judgment, evaluation, and
insights into the problem definition. Each of these decisions is novel, important, and nonroutine, and
there is no well-understood or agreed-on procedure for making them.
• Structured decisions, by contrast, are repetitive and routine, and decision makers can follow a definite
procedure for handling them to be efficient.
• Many decisions have elements of both and are considered semistructured decisions, in which only part
of the problem has a clear-cut answer provided by an accepted procedure.
• In general, structured decisions are made more prevalently at lower organizational levels, whereas
unstructured decision making is more common at higher levels of the firm.
SYSTEMS FOR DECISION SUPPORT
STAGES IN THE DECISION-MAKING
PROCESS
DECISION SUPPORT SYSTEM
• Decision support systems are computer-based information systems that
provide interactive information support to managers and business
professionals during the decision making process.
• Decision support systems use
1. Analytical models
2. Specialized databases
3. A decision makers own insights and judgements
4. An interactive, computer-based modeling process to support semi structured business decision

• Example: promotion expense, sales person compensation

DSS COMPONENTS
DSS COMPONENTS
• 1. Database of data used for query and analysis

• 2. A software system with models, data mining and other analytical tools.

• 3. A user interface.
DSS COMPONENTS
• 1. Database of data used for query and analysis

• The DSS Database is a collection of current or historical data from a number of applications or groups.

• It may be a small database residing on a PC that contains a subset of corporate. Database that has been downloaded on
possibly combined with external data.

• Alternatively, the DSS database may be a massive data warehouse that is continuously updated by major corporate
TPS.
DSS COMPONENTS
• 2. A software system with models, data mining and other analytical tools.

• The DSS software system contains the software tools that are used for data analysis.

• It may contain various OLAP tools, data mining tools or a collection of mathematical and analytical models that
easily can be made accessible to the DSS user.

• A model is an abstract representation that illustrates that components or relationships of a phenomenon.

• A model can be a physical model (air plane), mathematical model (equation) or a verbal model (procedure for writing
an order).

• Each Decision Support System is built for a specific set of purposes and makes different collections of models
available depending on those purposes.
DSS COMPONENTS
• A user interface.

• The DSS user interface permits easy interaction between users of the system and the DSS Software tools.

• A graphic, easy-to-use, flexible user interface supports the dialogue between the user and DSS.

• The DSS users can be manages or employees with no patience for learning a complex tool. So the interface must be
relatively intuitive.

• Many DSS today are being built with web-based interfaces to take advantages of the Web’s ease of use, interactivity
and capabilities for personalization and customization.
Types of Decision – Support Systems:

• There are two types,

• Model – Driven DSS:
• Model – driven DSS were primarily stand alone systems isolated from major corporate information systems
that used some type of model to perform ‘what-if’ and other kind of analyses.
• The analysis capabilities were based on a strong theory or model combined with a good user interface that
made the model easy to use.

• Data- Driven DSS:

• These systems analyze large pools of Data found in major corporate systems.
• They support decision making by enabling users to extract useful information that was previously buried in
large quantities of data.
• Often data from TPS are collected in data warehouses for this purpose. OLAP & data mining can be used to
analyze the data.
• Companies are standing to build data-driven DSS to mine customer data gathered from their websites as well
as from enterprise systems.
Types of Analytical modeling activities in DSS

• 1) What-if analysis

• 2) Sensitivity analysis

• 3) Goal seeking analysis

• 4) Optimization analysis
Types of Analytical modeling activities in DSS

 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.

• This type of analysis would be repeated until the manager was satisfied with what the results revealed about the effects of
various possible decisions.

 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.

 So sensitivity analysis is really a case of what – if analysis involving repeated changes on the only one variable at a time.

 Typically sensitivity analysis is used when decision makers are uncertain about assumptions made in estimating the value of
certain key variables.
Types of Analytical modeling activities in DSS

 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 variables affect other variables, goal seeking analysis, sets a target value for a
variable and then repeated changes that other variables until the target value is achieved.

 Optimization analysis:
• It 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.
• Then one or more other variables are changed repeatedly, subject to the specified constraints, until the best values for
the target variables are discovered.
• Optimization, typically, is accomplished by special-purpose software packages for optimization techniques such as
linear programming or by advanced DSS generators
APPLICATIONS OF DSS
EXECUTIVE INFORMATION SYSTEMS
• Executive Information Systems are information systems that combine many of the features of management information
systems and decision support systems.

• But the main focus of Executive Information System is meeting the strategic information needs of top management.

• Thus, 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.

• In an EIS, information is presented in forms tailored to the preferences of the executives using the system.

• For example, most executive information systems stress the use of a graphical user interface and graphical displays that can
be customized to the information preferences of executives using the EIS.

• Other information presentation methods used by an EIS include exception reporting and trend analysis.

• The ability to drill down, which allows executives to quickly retrieve displays of related information at lower levels of detail,
is another important capability.
Typical Status reporting Facilities
 Drill down:

• The purpose of drill down to offer executives the highest level of summary data with an over view of the performance of each
components may be highlighted, and immediate sublevel report obtained; supported by more detailed schedules.

• Executives can continue to select successive level until the required level of detail has been reached.

• Exception reporting:

• Exception reporting may be considered the opposite of drill down, instead of starting with aggregate information and later digging for
details, look for details against user defined levels of acceptability.

• Exception reporting is normally done by highlighting those items that are unacceptable in a negative colour (for example, red) and those
doing well against the target in a positive colour (for example, green).

 Trend Analysis:

 Trend analysis refers to finding out the direction in which a given set of numbers is moving.

 When an executive finds a variance, he wants to know whether it is a one – off anomaly or a more serious recurring problem.

 Using an EIS, any data may be automatically compared graphically or numerically against past and projected trends to ascertain the
reasons for the variance.
 EXPERT SYSTEM(KNOWLEDGE
MANAGEMENT SYSTEM)

• An expert System is a knowledge based information system that uses its knowledge about a
Specific, Complex application area to act as an expert Consultant to end users.

• Expert systems provide answers to questions in a Very Specific Problem area by making
human like inferences about knowledge Contained in a specialized knowledge base.

• They must also be able to explain their reasoning Process and Conclusions to a user.

• So expert systems can provide decision Support to end users in the form of advice from an
expert Consultant in a Specific Problem area.
 EXPERT SYSTEM
• Components of an Expert system:

• i) Knowledge base.

• ii) Software resources

 EXPERT SYSTEM
• •Knowledge base:

• The knowledge base of expert system Contains

• 1) Facts about the Specific Subject area

• 2) Heuristics that express the reasoning procedures of an expert on the Subject.

 EXPERT SYSTEM
• •Software Resources:

• An expert system software Package contains an inference engine and other Programs for refining knowledge and
Communicating with users.

• The inference engine Program processes the knowledge related to a Specific Problem. It then makes associations and
inferences resulting in recommended Courses of action for a user.

• User interface programs for Communicating with end users are also needed, including an explanation Program to
explain the reasoning Process to a user if requested.

• Knowledge acquisition Programs are not part of an expert System but are Software tools for knowledge base
development, as are expert system shells, which are used for developing expert systems.
 Knowledge Representation in Expert
System’s knowledgebase
 Case-based reasoning: Representing knowledge in an expert system’s knowledge base in the form of
cases, that is, examples of past Performance, Occurrences and experiences.

 Frame based knowledge:Knowledge represented in the form of a hierarchy or network of frames. A

frame is a collection of knowledge about an entity consisting of a Complex Package of data values
describing its attributes.

 Object – based knowledge: Knowledge represented as a network of objects. An object is a data

element that includes both data and the methods or Processes that act on that data.

 Rule – based knowledge:Knowledge represented in the form of rules and statements of fact. Rules are
Statements that typically take the form of a Premise and a conclusion such as: If (Condition), Then
(Conclusion).
DEVELOPING EXPERT SYSTEMS
ENTERPRISE COLLOBORATION SYSTEMS
ARTIFICIAL INTELLIGENCE
• According to the father of Artificial Intelligence, John McCarthy, it is
“The science and engineering of making intelligent machines,
especially intelligent computer programs”.
• Artificial Intelligence is a way of making a computer, a computer-
controlled robot, or a software think intelligently, in the similar
manner the intelligent humans think.
• AI is accomplished by studying how human brain thinks, and how
humans learn, decide, and work while trying to solve a problem, and
then using the outcomes of this study as a basis of developing
intelligent software and systems.
Philosophy of AI
• While exploiting the power of the computer systems, the curiosity of
human, lead him to wonder, “Can a machine think and behave like
humans do?”
• Thus, the development of AI started with the intention of creating
similar intelligence in machines that we find and regard high in
humans.
Goals of AI
• • To Create Expert Systems − The systems which exhibit intelligent
behavior, learn, demonstrate, explain, and advice its users.
• • To Implement Human Intelligence in Machines − Creating systems
that understand, think, learn, and behave like humans.
The Domains of Artificial Intelligence
Cognitive Science
• This area of artificial
intelligence is based on
research in biology, neurology,
psychology, mathematics, and
many allied disciplines.
• Example: Chess-playing
systems
Robotics Natural Interfaces
• AI, engineering and • Major area of AI
physiology are the applications and is
basic disciplines of essential to the natural
robotics use of computers by
humans.
KNOWLEDGE ENGINEERING
• A knowledge engineer is a professional who works with experts to
capture the knowledge (facts and rules of thumb) they process.
• The knowledge engineer then builds the knowledge base (and the
rest of the expert system if necessary), using an iterative, prototyping
process until the expert system is acceptable.
• Thus, knowledge engineers performs a role similar to that of systems
analysts in conventional information systems development
NEURAL NETWORKS
• Neural Networks are computing systems modeled after the brain’s
mesh like network of interconnected processing elements called
neurons.
• Like the brain, however, the interconnected processors in a neural
network operate in parallel and interact dynamically.
• This interaction enables the network to “learn” from data it process.
• Neural networks are defined as computing systems modeled on the
human brain’s mesh-like network of interlinked processing elements,
known as neurons.
 NEURAL NETWORKS
• Neural networks can be executed on microcomputers and other computer systems through
software packages, which simulate the actions of a neural network of many processing elements.
• Specialized neural network co-processor circuit boards are also obtainable. Special-purpose
neural net microprocessor chips are used in some application areas.
• Uses comprise:
• Military weapons systems
• Voice recognition
• Check signature verification
• Manufacturing quality control
• Image processing  Credit risk assessment
• Investment forecasting  Data mining
FUZZY LOGIC SYSTEM
• Fuzzy Logic Systems are defined as computer-based systems that can access data that
are incomplete or only partially accurate.
• These systems can solve unstructured problems with incomplete knowledge by
producing approximate inferences and solutions.
• Fuzzy Logic is a technique of reasoning that appears similar human reasoning as it
permits for approximate values and inferences (fuzzy logic) and incomplete data
(fuzzy data) rather than depending only on Crisp data, like binary (yes/no) options.
• Fuzzy Logic in Business Instances of applications of fuzzy logic are various in Japan,
but rate in the United States.
• The United States has tended to favor by means of AI solutions such as expert systems
or neural networks.
• Japan has executed many fuzzy logic applications, especially the use of special-
purpose fuzzy logic microprocessors chips, known as fuzzy process controllers.
FUZZY LOGIC SYSTEM
• Fuzzy logic is a method of reasoning that resembles human
reasoning, in that it allows for approximate values and interfaces
(fuzzy logic) and incomplete or ambiguous data (fuzzy data) instead
of relying only on crisp data, such as binary (yes/no) choices.
GENETIC ALGORITHM
• Genetic algorithms is a growing application of artificial intelligence.
• Genetic algorithm software accesses Darwinian (survival of the
fittest); randomizing, and other mathematical functions to create an
evolutionary process that can capitulate increasingly better solutions
to a problem.
• Genetic algorithms were initially used to create millions of years in
biological, geological, and ecosystem evolution in just a few minutes
on a computer.
• Now genetic algorithm software is being accessed to model
numerous scientific, technical, and business processes.
GENETIC ALGORITHM
• Genetic algorithms are especially useful for conditions in which
thousands of solutions are probable and must be calculated to form a
best possible solution.
• Genetic algorithm software accesses sets of mathematical process
rules (algorithms) that mention how combinations of process
components or steps are to be produced.
• This may comprise:
• Trying random process combinations (mutation)
• Merging parts of several good processes (crossover)
• Choosing good sets of processes and discarding poor ones (selection).