Lecture-6

Enhancing Management Decision Making The more information you have, based on internal experiences or from external sources, the better your decisions. Business executives are faced with the same dilemmas when they make decisions. They need the best tools available to help them. Decision-Support Systems When we discussed Transaction Processing Systems and Management Information Systems, the decisions were clear-cut: "Should we order more sugar to support the increased production of candy bars?" Most decisions facing executives are unstructured or semistructured: "What will happen to our sales if we increase our candy bar prices by 5%?" Decision Support Systems (DSS) help executives make better decisions by using historical and current data from internal Information Systems and external sources. By combining massive amounts of data with sophisticated analytical models and tools, and by making the system easy to use, they provide a much better source of information to use in the decision-making process. DSS and MIS In order to better understand a decision support system, let's compare the characteristics of an MIS system with those of a DSS system: MIS Structured decisions Reports based on routine flows of data General control of organization Structured information flows Presentation in form of reports DSS Semistructured, unstuctured decisions Focused on specific decisions or classes of decisions End-user control of data, tools, and sessions Emphasizes change, flexibility, quick responses Presentation in form of graphics Greater emphasis on models, assumptions, ad hoc queries Traditional systems development Develop through prototyping; iterative process

You can also understand the differences between these two types of systems by understanding the differences in the types of decisions made at the two levels of management.

Lecture-7 Types of Decision-Support Systems Because of the limitations of hardware and software, early DSS systems provided executives only limited help. With the increased power of computer hardware, and the sophisticated software available today, DSS can crunch lots more data, in less time, in greater detail, with easy to use interfaces. The more detailed data and information executives have to work with, the better their decisions can be. Model-Driven DSS were isolated from the main Information Systems of the organization and were primarily used for the typical "what-if" analysis. That is, "What if we increase production of our candy bars and decrease the shipment time?" These systems rely heavily on models to help executives understand the impact of their decisions on the organization, its suppliers, and its customers. Data-Driven DSS take the massive amounts of data available through the company's TPS and MIS systems and cull from it useful information which executives can use to make more informed decisions. They don't have to have a theory or model but can "free-flow" the data. By using datamining , executives can get more information than ever before from their data. One danger in datamining is the problem of getting information that, on the surface, may seem meaningful but when put into context of the organization's needs, simply doesn't provide any useful information. For instance, datamining can tell you that on a hot summer day in the middle of Texas, more bottled water is sold in convenience stores than in grocery stores. That's useful information executives can use to make sure more stock is targeted to convenience stores. Datamining could also reveal that when customers purchase white socks, they also purchase bottled water 62% of the time. We seriously doubt there is any correlation between the two purchases. The point is that you need to beware of using datamining as a sole source of decision making and make sure your requests are as focused as possible. Laudon and Laudon describe five types of information you can get from datamining customer information:

Associations: Immediate links between one purchase and another purchase Sequences: Phased links; because of one purchase, another purchase will be made at a later time Classification: Predicting purchases based on group characteristics and then targeting marketing campaigns Clustering: Predicting consumer behavior based on demographic information about groups to which individuals belong Forecasting: Use existing values to determine what other values will be

Components of DSS

A DSS has three main components, as shown in Figure 15.1: the database, software and models. The database is, of course, data collected from the organization's other Information Systems. Another important source of information the organization may use is external data from governmental agencies or research data from universities. The data can be accessed from the warehouse or from a data mart (extraction of data from the warehouse). Many databases are now being maintained on desktop computers instead of mainframes. The DSS software system must be easy to use and adaptable to the needs of each executive. A well-built DSS uses the models that the text describes. You've probably used statistical models in other classes to determine the mean, median, or deviations of data. These statistical models are the basis of datamining. The What-If decisions most commonly made by executives use sensitivity analysis to help them predict what effect their decisions will have on the organization. Executives don't make decisions based solely on intuition. The more information they have, the more they experiment with different outcomes in a safe mode, the better their decisions. That's the benefit of the models used in the software tools.

Examples of DSS Applications

The Advanced Planning System - A Manufacturing DSS: Uses the sensitivity analysis model of "What-If" analysis Southern California Gas Company: Uses classification and clustering datamining techniques to focus new marketing efforts.

Shop-Ko Stores: Uses the datamining technique of associations to recognize customers' purchasing patterns. Geographic Information Systems (GIS): Very popular with, of all people, farmers and ranchers. Using GIS tools, they can determine exactly how much fertilizer to spread on their fields without over- or under-spraying. They save money, time, and the land! Because of pinpoint accuracy, GIS systems are used by emergency response teams to help rescue stranded skiers, hikers, and bicyclists.

Web-Based DSS Of course, no discussion would be complete without information about how companies are using the Internet and the Web in the customer DSS decision-making process. Figure 15.3 shows an Internet CDSS (Customer Decision-Support System).

Here's an example: You decide to purchase a new home and use the Web to search real estate sites. You find the perfect house in a good neighborhood but it seems a little pricey. You don't know the down payment you'll need. You also need to find out how much your monthly payments will be based on the interest rate you can get. Luckily the real estate Web site has several helpful calculators (customer decision support systems) you can use to determine the down payment, current interest rates available, and the monthly payment. Some customer decision support systems will even provide an amortization schedule. You can make your decision about the purchase of the home or know instantly that you need to find another house.

DECISION SUPPORT SYSTEM

Abbreviated DSS, the term refers to an interactive computerized system that gathers and presents data from a wide range of sources, typically for business purposes. DSS applications are systems and subsystems that help people make decisions based on data that is culled from a wide range of sources. For example: a national on-line book seller wants to begin selling its products internationally but first needs to determine if that will be a wise business decision. The vendor can use a DSS to gather information from its own resources (using a tool such as OLAP) to determine if the company has the ability or potential ability to expand its business and also from external resources, such as industry data, to determine if there is indeed a demand to meet. The DSS will collect and analyze the data and then present it in a way that can be interpreted by humans. Some decision support systems come very close to acting as artificial intelligence agents. DSS applications are not single information resources, such as a database or a program that graphically represents sales figures, but the combination of integrated resources working together.

EXECUTIVE SUPPORT SYSTEM Executive Support System (ESS) is a reporting tool (software) that allows you to turn your organization's data into useful summarized reports. These reports are generally used by executive level managers for quick access to reports coming from all company levels and departments such as billing, cost accounting , staffing, scheduling, and more. In addition to providing quick access to organized data from departments, some Executive Support System tools also provide analysis tools that predicts a series of performance outcomes over time using the input data. This type of ESS is useful to executives as it provides possible outcomes and quick reference to statistics and numbers needed for decision-making. The exact reporting tools and outcome of an Executive Support System completely depends on the ESS developer and it's intended industry use. For example, Cambridge Systematics has ESS to support the investment planning process for the Ministry of Transportation. The features and functions of this Executive Support System are entirely different from the Executive Support System developed by Meditech, which is useful to health care organizations. Several companies offer pre-designed Executive Support System packages (usually suited to one particular industry), while others offer packages which can be customized your your organization's needs.