Decision Support Systems Chapter 9 Decision Support Systems McGraw-Hill/Irwin Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.

Decision Support in Business Companies invest in data-driven decision support application frameworks to help them respond to Changing marketing conditions Customer needs Management information Accomplished by several types of Decision support Other information systems

Levels of Managerial Decision Making

Information has three dimensions Information Quality Information products are made more valuable by their attributes, characteristics, or qualities Outdated, inaccurate, or hard to understand information has much less value Information has three dimensions Time Content Form

Attributes of Information Quality

Decision Structure Structured (operational) The procedures to follow when a decision is needed can be specified in advance Unstructured (strategic) It is not possible to specify in advance most of the decision procedures to follow Semi-structured (tactical) Decision procedures can be pre-specified, but not enough to lead to the correct decision

Decision Support Systems Management Information Systems Decision Support Systems Decision support provided Provide information about the performance of the organization Provide information and techniques to analyze specific problems Information form and frequency Periodic, exception, demand, and push reports and responses Interactive inquiries and responses Information format Pre-specified, fixed format Ad hoc, flexible, and adaptable format Information processing methodology Information produced by extraction and manipulation of business data Information produced by analytical modeling of business data

Business Intelligence Applications

Decision Support Systems To support the making of semi-structured business decisions, DSS uses Analytical models Specialized databases Decision-maker’s own insights and judgments Interactive, computer-based modeling process DS systems Ad hoc, quick-response systems Initiated and controlled by decision makers

DSS Components

DSS Model Base Model Base Spreadsheet Examples A software component Consists of models used in computational and analytical routines Mathematically expresses relationships among variables Spreadsheet Examples Linear programming Multiple regression forecasting Capital budgeting present value

Applications of Statistics and Modeling Supply Chain Simulate & optimize supply chain flows, reduce inventory & stock-outs Pricing Identify the price that maximizes yield or profit Product & Service Quality Detect quality problems early in order to minimize them Research & Development Improve quality, efficacy, and safety of products and services

Management Information Systems The original type of information system that supported managerial decision making Produces information products that support many day-to-day decision-making needs Produces reports, displays, and responses Satisfies needs of operational and tactical decision makers who face structured decisions

Management Reporting Alternatives Periodic Scheduled Reports Pre-specified format, issued on a regular basis Exception Reports Reports about exceptional conditions, scheduled or on event Demand Reports & Responses Information is available on demand Push Reporting Information is pushed to a networked computer

Online Analytical Processing OLAP Enables managers and analysts to examine and manipulate large amounts of detailed and consolidated data from many perspectives Done interactively, in real time, with rapid response to queries

Online Analytical Operations Consolidation Aggregation of data Ex: sales office data, rolled up to the district level Drill-Down Display underlying detail data Ex: sales figures by individual product Slicing and Dicing Viewing database from different viewpoints Often performed along a time axis

Geographic Information Systems (GIS) DSS uses geographic databases to construct and display maps and other graphic displays Supports decisions affecting the geographic distribution of people and other resources Often used with Global Positioning System (GPS) devices

Data Visualization Systems (DVS) Represents complex data using interactive, three-dimensional graphical forms (charts, graphs, maps) Helps users interactively sort, subdivide, combine, and organize data while it is in its graphical form

Using Decision Support Systems Using a decision support system involves an interactive analytical modeling process Decision makers are not demanding pre-specified information They are exploring possible alternatives

Using Decision Support Systems What-If Analysis Sensitivity Analysis Basic analytical modeling activities Goal-seeking Analysis Optimization Analysis What-If Analysis Observing how changes to selected variables affect other variables Sensitivity Analysis Observing how repeated changes to a single variable affect other variables Goal-seeking Analysis Making repeated changes to selected variables until a chosen variable reaches a target value Optimization Analysis Finding an optimum value for selected variables, given certain constraints

Data Mining Decision support through knowledge discovery Analyzes vast stores of historical business data Looks for patterns, trends, and correlations Goal is to improve business performance Types of analysis Regression Decision tree Neural network Cluster detection Market basket analysis

Market Basket Analysis One of the most common uses for data mining Determines what products customers purchase together with other products Typical applications of MBA Cross-selling Product placement Affinity promotion Survey analysis Fraud detection Customer behavior identification

Executive Information Systems (EIS) Combines many features of MIS and DSS Provides top executives with immediate, easy access to information Identifies factors critical to accomplishing strategic objectives So popular it was expanded to managers, analysis, and other knowledge workers

Features of an EIS Information presented in forms tailored to the preferences of the executives using the system Customizable graphical user interfaces Exception reports Trend analysis Drill down capability

Enterprise Information Portals A Web-based interface and integration of MIS, DSS, EIS, and other technologies Available to all intranet users and select extranet users Provides access to a variety of internal and external business applications and services Typically tailored or personalized to the user or groups of users Often has a digital dashboard Also called enterprise knowledge portals

Enterprise Information Portal Components

Enterprise Knowledge Portal