FUNCTIONS OF A DSS

There are five functions of a DSS facilitating managerial decision making. They are:

a) Model building: This allows decision makers to identify the most appropriate
Model for solving the problem on hand. It takes into' account input variables,
interrelationships among the variables, problem assumptions and constraints. For
example, a marketing manager of a television manufacturing company is charged with
the responsibility of developing a sales forecasting model for color TV sets. A model
builder uses a structured framework to identify variables like demand, cost and profit,
analyze the relationships among these, variables, identify the assumptions, if any (e.g.,
assume the prices of raw materials will increase by 5% over the forecasting period),
and identify the Constraints like the production capacity of the plant. All this
information is then integrated by a system into a decision making model, which can be
updated and modified whenever required.

b) 'What-if' analysis : This is the process of assessing the impact of changes to model
variables, the values of the variables, or the interrelationships among variables. This
helps managers to be proactive, rather than reactive, in their decision making. This
analysis is critical for semi-structured and unstructured problems because the data
necessary to make such decisions are often either not available or incomplete. Hence,
managers normally use their intuition and judgment in predicting the Long-term
implications of their decisions. Managers can prepare themselves to face a dynamic
business environment by developing a group of scenarios (best-case scenario, worst-
case scenario and realistic scenario).

c) Goal seeking: 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
(say\for example, Rs. 5,000) and calculate the number of such payments required to
pay the desired house.

d) Risk analysis: It is a function of DSS that allows managers to assess the risks
associated with various alternatives. Decisions can be classified as Iow risk, medium
risk, and high risk. A DSS is particularly useful in medium risk and high risk
environments.

e) Graphical analysis: This helps managers to quickly digest large volumes of data
and visualize the impacts of various courses-of action. S L Jarvenpaa and G W Dickson
studied the relative advantages and disadvantages of tabular and graphic output. They
recommended the use of graphs when:

 Seeking a quick summary of data

 Detecting trends over time
 Comparing points and patterns at different variables
 Forecasting activities
 Seeking relatively simple impressions from a vast amount of information.
DSS GOALS/FEATURES AND APPLICATIONS
DSSs are interactive information systems that help managers to utilize data analysis models for
solving unstructured problems. The features/ goals of DSS may be termed as follows:—
(a)DSSs support unstructured and semi-structured decisions - A structured decision is one
which is pre-planned and pre-specified. These are programmed in the sense that unambiguous
decision rules can be specified in advance. Many of structured decisions can be handled by
lower level management with little specialized knowledge. On the other hand; unstructured
decisions are not preplanned or pre-specified and tend to be non-routine. The data requirement
for making unstructured decisions is not completely known in advance. Most unstructured
decisions are made by top-level management. Decision support systems are more suitable in
the case of unstructured or semi-structured decisions. The support of data and models offered
by DSS improves the decision-making process.
(b)DSS should be flexible - The decision support systems are more suitable for unstructured
and semi-structured decisions which are not pre-planned or pre-specified and tend to be non-
routine. The information requirements for making unstructured decisions are not completely
known in advance. DSS does not aim at any specific type of decisions. It should have flexibility
of use in various unex-pected decision situations. They should be flexible enough to enable
users to model their own information needs. Moreover, they should be flexible enough to adapt
to the changing information needs.
(c)DSSs emphasis is on small single models that are easily understood and implemented, as
different sets of information are sought for the use of different models. The decision support
systems are usually built and operated by users who may not be computer professionals.
Therefore, the accompanying tools or models should be easy to learn and use.

ADVANTAGES OF DSS
Following are the advantages of DSS:-
(a) As DSS reduces the time and effort in collecting and analysis of data from different sources,
a large number of alternatives can be evaluated.
(b) As modelling and forecasting is made easy by DSS, managers get more insight into the
business processes. Thus, it enables a thorough quantitative analysis in a very short time. Even
major changes in a scenario can be evaluated objectively in a timely manner.
(c) As DSS makes it possible to explain to others the basis for arriving at a particular
conclusion, benefits of intra-group and inter-group communication in terms of earning the
backing of others in the enterprise can be obtained.
(d) DSS facilitates the quicker analysis of data for unstructured deci¬sion-making, which
improves the speed of response in unexpected decision-making situation.
(e) DSS may be constructed to support one-time decisions.
(f)As the DSS is typically designed for either a particular decision-maker or a group of
decision-makers, it allows the system designer to customize important system features to adapt
to the type of representations.
(g)DSS involves the use of database for a specific decision-making process. A DSS does not
just automate transformations performed on data nor simply provides output in the form of
reports. Instead, a DSS supports the decision-maker's problem solving approach and
application needs. It neither replaces judgment nor makes a decision for the user.

The other advantages of DSS are:—

 Cost savings.
 Improves managerial effectiveness.
 Extensive range of support to management.
 Support of individual/groups.
 Graphical display.
 Designed and run by managers, incorporated data and models.
 Contains a database drawn from internal files /external environ-ment.
 Concerned with a small area of managerial activity or a small part of a large problem.
 It permits the managers to test the probable results of alternative solutions.
 It specializes in easy to use software that utilizes natural languages.
 It employs interactive processing that permits rapid response times.
 Use and control rests with the user and not with the information management
department.
 These are flexible and adaptable to changes in the external environ-ment or in the
decision-maker's style.
 They support and not replace the managerial judgment.
 They improve the effectiveness of the decisions instead of effi¬ciency with which the
decisions are made.

LIMITATIONS OF DSS
(a) DSSs cannot replace human decision-making talents such as creativity, imagination or
intution.
(b) DSSs are generally designed to be narrow in scope of application. This prevents their
generalize use to multiple decision-making contexts.
(c) Language and command interfaces are not sophisticated enough to allow for natural
language processing of user directives and in queries.
(d) The power of a DSS is limited by the computer system upon which it is running, its
design and the knowledge possessed by it at the time of its use.

Although DSSs can make the decision process more effective for the human decision
maker, however, they cannot overcome or prevent the actions of a poor decisions maker.
The user ultimately controls the process and must understand when to use a DSS, what
DSS(s) to use, and, most importantly, to what degree to depend on the output and
information obtained from the DSS. DSS should be used as a valuable' tool in the process
of decision-making rather than as a mechanism that makes the decision.

COMPONENTS OF A DSS
DSS is an information system application that assists decision-making. DSS is a coordinated
collection of data, systems, tools and techniques with the necessary software and computer
hardware through which an organization gathers and interprets relevant information from the
business and environment and turns into information that can be acted upon.
(a)User - Decision-making in an organization can be classified into three levels, namely, the
strategic, the managerial and the operational. Many of the decisions required to be taken at
operational • level and managerial level can be automated as the decisions taken at these level
are largely structured. DSS can be of use when the decisions to be made are of unstructured or
semi-structured problems. Most of\ the unstructured decisions are made at the strategic or top
level of management. Upper level managers and chief executives are the main users of DSS.
For that user must have a thorough understanding of the problem and the factors to be
considered for solving that problem. It is not necessary that user of DSS should have thorough
knowledge of computer for using DSS for solving a problem. The user of DSS may not have
extensive knowledge of computer programming as most of the DSS models use easy to use
software which utilize natural language.
(b)Databases - A database is a collection of data that is organized in such a way that it
corresponds to the needs and structure of an organization and which can be used for more than
one application. Database is a pre-requisite for developing DSS. DSS uses information from
multiple sources in an organization which is presented in summarized forms such as graphs
and charts to assist top management to take strategic decisions. The DSS needs databases from
which information can be obtained for decision-making. As the use of information is common,
input to the DSS is from the database. The support of data improves the decision-making
process. These data-bases contain both routine and non-routine data from both internal and
external sources. DSS user, however, may construct his own database using data from both
internal and external sources.
(c)DSS software - The third component of DSS is DSS software which permits easy interaction
between the user and the database and model base. DSS software system manages the creation
of models, storage of models, and the retrieval of models from the mod61 base and integrates
them with data in the database. DSS software helps in interaction between the user and the
DSS. Since the DSS is meant for relatively higher level management who may not be experts
in handling computers, DSS software must be easy to operate for extracting relevant
information without much efforts. The DSS software system must be flexible to adapt to
different working style of different managers, because each manager may have his unique
working style. Spreadsheet software such as Lotus 1-2-3. and MS Excel provides such facilities
and enables; the user to solve problems relating to budgeting, forecasting, etc.
(d) Model base - A model base is a collection of mathematical and analytical models which
could be accessed by the DSS user. A model is an abstract representation which illustrates the
various components or relationships of a phenomenon. The DSS model may be physical
models (such as model of machine), mathematical model (such as formulas and equations) or
verbal models (such as description of procedure for doing a work). Each DSS is built for a
specific set of purposes and model base would differ according to the purposes for which
models are required. Most common models available in a model base are collection of
statistical models. Such collection generally contains a full range of expected statistical
functions such as mean, median, mode, deviation, scatter plot, etc. The DSS software has the
capability to project future outcomes by analyzing a series of data. Optimization models,
forecasting models and sensitivity analysis models are some of the common models which
form a model base. The brief description of each is given below :
 Optimization models provide guidelines for actions by generating optimal solutions
within the constraints. An optimal solution is one which optimizes returns to the
organisation as a whole in terms of maximum revenues or minimum costs or both.
Optimization mod¬els by using linear and non-linear programming, determine optimal
resource allocation to maximize revenues or minimise costs or time. A good example
is the determination of product mix to maximize the profits.
 Forecasting models are used to forecast the prospects of business organization; such
as sales. Forecasting models use past data and extrapolate the likely behaviour of these
data in future. Forecasting models may be used to predict the likely actions of the
competitors.In case the future conditions are projected to show some changes like entry
of a new competitor or emergence of a substitute product, necessary adjustments are
made in extrapolated data.
 Sensitivity analysis models study the impact of discrete changes in parameters of
optimal solution. A discrete change is one that occurs on irregular basis, e.g., change in
excise duty structure by the Government, ban on import/ export of the product, or
entrance of a new powerful competitor. Sensitivity analysis enables the user to vary
certain values to test results in order to predict outcomes in a better way if changes
occur in these values.

Introduction
A decision support system (DSS) is a computer-based information system that supports
business or organizational decision-making activities. DSSs serve the management, operations,
and planning levels of an organization (usually mid and higher management) and help people
make decisions about problems that may be rapidly changing and not easily specified in
advance - i.e. Unstructured and Semi-Structured decision problems. Decision support systems
can be either fully computerized, human-powered or a combination of both.DSS is an
interactive software-based system intended to help decision makers compile useful information
from a combination of raw data, documents, and personal knowledge, or business models to
identify and solve problems and make decisions.
Benefits of DSS:
Following are the main benefits of DSS:
(i) A DSS enables the solution of complex problems that ordinarily cannot be solved by other
computerized approaches.
(ii)A DSS enables a thorough quantitative analysis in a very short.
(iii) They support managerial judgment; rather than replacing it.
(iv) DSS improve the effectiveness of the decisions; not the efficiency with which decisions
are being made.

OPERATIONS RESEARCH MODEL

 Based on the different mathematical formulae.
 Represent the real life problems depending on the various variables and
the parameters expressed in the algebraic equations form.
 Examples of such a model can be linear programming, ABC analysis.
mathematical programming techniques, material requirement planning.

BEHAVIOURAL MODEL
 Focuses on studying and understanding the different behaviour/trends
amongst the variables.
 A behavioural model is built by observing the previous behaviour of an
entity or a system; the resulting model can then be used to predict future
behaviour and performance.
 Examples of such a model can be trend analysis, co-relation, regression
etc.

MANAGEMENT SCIENCE MODEL

 Based upon the principles of the management, the management
accounting and the econometrics.
 Examples of such a model can include budgetary systems, cost
accounting, capital budgeting, inventory management etc.