Lecture 8 Decision Support and Expert Systems

Decision Support Success of an organization largely depends on the quality of decisions made by employees Computer-based systems can help when: –There are large amounts of information –There is a lot of processing involved Two types of decision support aids: –Decision support systems (DSSs) –Expert systems (ESs) Applications today may combine both types –Provide single optimal solution or set of solutions

The Decision-Making Process A decision must be made whenever more than one possible action is available It can be difficult to make decisions when many reasonable alternatives are present –In business, there may be dozens, hundreds, or even millions of different courses of actions available to achieve a desired result

The Decision-Making Process (continued) Decision making is a three-phase process: –Intelligence phase: collect facts, beliefs, and ideas –Design phase: design the method for considering the collected data, to reduce the alternatives to a manageable number –Choice phase: select an alternative from the remaining choices

The Decision-Making Process (continued)

Businesses collect data internally within the organization and externally from outside sources Model: a representation of reality, such as: –Map: represents a geographical area –Tabletop representation of a building –Mathematical equations representing relationships among variables Managers either choose universal models or design their own models

Structured and Unstructured Problems Structured problem: one in which an optimal solution can be reached through a single set of steps Algorithm: a sequence of steps to complete a task Parameters: categories of data that are considered in an algorithm Most mathematical and physical problems are structured, but many business problems are not

Structured and Unstructured Problems (continued) Unstructured problem: one for which there is no algorithm that leads to an optimal solution –May not be enough information –May be a large number of potential factors Unstructuredness is closely related to uncertainty Examples of unstructured problems include: –Weather prediction –Stock market prediction

Decision Support Systems Decision support system (DSS): a computer- based information system designed to help knowledge workers select one of many alternative solutions to a problem Advantages of DSSs include: –Help increase market share –Help reduce costs –Help increase profitability –Help enhance product quality

Decision Support Systems (continued) Most DSSs consist of three components: –Data management module –Model management module –Dialog module These components help users: –Enter a request in a convenient manner –Search vast amounts of data –Process the data through desired models –View the results in a desired format

The Data Management Module Data management module: a database or data warehouse that provides data for the intelligence phase –Accesses the data –Provides a means to select data by specified criteria Many DSSs are intertwined with other organizational systems, including data warehouses, data marts, and ERP systems

The Model Management Module Model management module: turns data into useful information May offer a fixed model, a dynamically modified model, or a collection of models –Dynamically modified model: one that is automatically adjusted based on changing relationships among variables A sequence of events or a pattern of behavior can become a useful model Models are often based on mathematical research

The Dialog Module Dialog module: part of a DSS that allows user interaction with the program –Prompts the user to select a model and data to process –Allows the user to change parameters and view the results of the changes (“what if” analysis) –Displays the results of the analysis in textual, tabular, or graphical format Many DSSs are available through the Internet

Decision Support Systems in Action DSSs can be used on demand or integrated into a scheme that enforces corporate policy DSSs help maintain standard criteria in decision making throughout the organization Automated decision production is becoming very popular –The only labor required is for data entry

Decision Support Systems in Action (continued) DSSs are used in many industries: –Food production and retailing: to forecast the number of patrons, the amount of ingredients to purchase, etc. –Agriculture: allows farmers to make decisions about how to control specific pests, and for picking farm locations –Tax planning: tax helper applications such as TurboTax and TaxCut

Decision Support Systems in Action (continued) DSSs are used in many industries (continued): –Web site planning and adjustment: to analyze shopper behavior, and to design Web sites based on page usage –Yield management: to maximize revenue from airline trips or lodging –Financial services: to determine loan amounts, and to qualify customers based on credit history –Benefits selection: to allow employees to make decisions about their benefits

Expert Systems Expert system (ES): emulates the knowledge of a human expert –Solves problems –Makes decisions in a relatively narrow domain Domain: a specific area of knowledge Neural network: a program that emulates how the human brain works

Expert Systems (continued) ESs are part of artificial intelligence (AI) research AI focuses on methods and technologies that emulate how humans learn and solve problems Knowledge base: used by an ES –A collection of facts and the relationships among them –Built as a series of IF-THEN rules –Uses an inference engine Inference engine: software that combines data input by the user with the data relationships

Expert Systems (continued) Neural networks: used by more sophisticated ESs to mimic the way a human brain learns –Constructed with a set of rules, but then it refines itself based on its decision success rate –Very effective for detecting fraud Intelligent agent: software that is dormant until it detects a certain event, and then performs a prescribed action

Expert Systems in Action ESs have been implemented in many industries: –Medical diagnosis: Help doctors with the diagnosis of symptoms and treatment advice Can help enhance the accuracy of Alzheimer’s disease diagnosis –Medical management: Help discern which treatments patient should receive Help with administrative decisions –Telephone network maintenance: Used to help diagnose and fix network failures

Expert Systems in Action (continued) ESs have been implemented in many industries (continued): –Credit evaluation: Used to approve credit card charges Used to analyze financial reports submitted with credit applications Local loan officers may periodically update the knowledge base to customize it for current loan policy –Detection of insider securities trading: Help prevent trading of stocks based on private information by analyzing the stock’s history

Expert Systems in Action (continued) ESs have been implemented in many industries (continued): –Detection of common metals: Help nonexperts identify common metals and alloys outside laboratories Based on results of simple chemical tests and other information available at the scene –Irrigation and pest management: Provide recommendations on irrigation, application of fungicides, and likelihood of pest conditions Can significantly improve crop yields

Expert Systems in Action (continued) ESs have been implemented in many industries (continued): –Diagnosis and prediction of mechanical failure: Diagnose cause of component failure Can provide a set of instructions for fixing the problem Help companies know when to replace components before a failure occurs

Geographic Information Systems Geographic information system (GIS): a decision aid for map-related decisions –Processes location data to aid in decision making GISs are used to help: –Find shortest paths for deliveries or school bus routes –City planning for police coverage and health care resources –Find oil drilling locations –Locate suitable outdoor recreation sites –Businesses determine locations for service kiosks