Decision Making & Information Systems

Good decision-making and problem-solving skills are the key to developing effective information and decision support systems Define the stages of decision making Discuss the importance of implementation and monitoring in problem solving

The management information system (MIS) must provide the right information to the right person in the right fashion at the right time Explain the uses of MISs and describe their inputs and outputs Discuss information systems in the functional areas of business organizations

Decision support systems (DSSs) are used when the problems are unstructured List and discuss important characteristics of DSSs that give them the potential to be effective management support tools Identify and describe the basic components of a DSS

Specialized support systems, such as group support systems (GSSs) and executive support systems (ESSs), use the overall approach of a DSS in situations such as group and executive decision making State the goals of a GSS and identify the characteristics that distinguish it from a DSS Identify the fundamental uses of an ESS and list the characteristics of such a system

Decision Making and Problem Solving: Decision Making as a Component of Problem Solving Decision-making phase: first part of problem-solving process Intelligence stage: potential problems or opportunities are identified and defined Design stage: alternative solutions to the problem are developed Choice stage: requires selecting a course of action

Figure 10.1: How Decision Making Relates to Problem Solving

Decision Making as a Component of Problem Solving (continued) Problem solving: a process that goes beyond decision making to include the implementation stage Implementation stage: a solution is put into effect Monitoring stage: decision makers evaluate the implementation

Programmed Versus Nonprogrammed Decisions Decision made using a rule, procedure, or quantitative method Easy to computerize using traditional information systems

Programmed Versus Nonprogrammed Decisions (continued) Decision that deals with unusual or exceptional situations Not easily quantifiable

Optimization, Satisficing, and Heuristic Approaches Optimization model: a process to find the best solution, usually the one that will best help the organization meet its goals Satisficing model: find a good—but not necessarily the best—problem solution Heuristics: commonly accepted guidelines or procedures that usually find a good solution

An Overview of Management Information Systems: Management Information Systems in Perspective A management information system (MIS) provides managers with information that supports effective decision making and provides feedback on daily operations The use of MISs spans all levels of management

Figure 10.3: Sources of Managerial Information

Inputs to a Management Information System Internal data sources (TPSs and ERP systems and related databases; data warehouses and data marts; specific functional areas throughout the firm) External data sources (Customers, suppliers, competitors, and stockholders whose data is not already captured by the TPS; the Internet; extranets)

Outputs of a Management Information System Scheduled report: produced periodically, or on a schedule Key-indicator report: summary of the previous day’s critical activities Demand report: developed to give certain information at someone’s request Exception report: automatically produced when a situation is unusual or requires management action Drill-down reports: provide increasingly detailed data about a situation

Characteristics of a Management Information System Fixed format, standard reports Hard-copy and soft-copy reports Uses internal data User-developed reports Users must request formal reports from IS department

Functional Aspects of the MIS Most organizations are structured along functional lines or areas MIS can be divided along functional lines to produce reports tailored to individual functions

Figure 10.5: MIS is an integrated collection of functional information systems

Financial Management Information Systems Financial MIS: provides financial information to all financial managers within an organization Profit/loss and cost systems Auditing Uses and management of funds

Figure 10.6: Overview of a Financial MIS

Manufacturing Management Information Systems The manufacturing MIS subsystems and outputs monitor and control the flow of materials, products, and services through the organization Design and engineering Master production scheduling and inventory control Process control Quality control and testing

Figure 10.7: Overview of a Manufacturing MIS

Marketing Management Information Systems Marketing MIS: supports managerial activities in product development, distribution, pricing decisions, and promotional effectiveness Marketing research Product development Promotion and advertising Product pricing

Figure 10.10: Overview of a Marketing MIS

Human Resource Management Information Systems Human resource MIS: concerned with activities related to employees and potential employees of an organization Human resource planning Personnel selection and recruiting

Human Resource Management Information Systems (continued) Training and skills inventory Scheduling and job placement Wage and salary administration Outplacement

Figure 10.13: Overview of a Human Resource MIS

Other Management Information Systems Accounting MIS: provides aggregate information on accounts payable, accounts receivable, payroll, and many other applications Geographic information system (GIS): capable of assembling, storing, manipulating, and displaying geographic information

Figure 10.4 REPORTS Most management information systems produce predetermined reports – that is, reports whose content has been designed and programmed in advance. These include scheduled reports, key indicator reports, demand reports, exception reports and drilldown reports. Scheduled reports are produced at regular intervals, such as hourly, daily, weekly or monthly. For example, a sales manager might get a weekly report summarizing sales by region, store, or salesperson. This allows the manager to monitor sales and follow-up on locations or people that seem to be slipping. Key indicator reports summarize the prior day’s critical activities to allow the user to take quick action to fix a potential problem. For instance, a report received each morning summarizing sales figures from each store would allow a sales manager to immediately follow up with stores that show slow sales. Demand reports are reports produced to give information at a manager’s request, rather than on a particular schedule. For example, on a Wednesday, the sales manager may request weekly sales to date for each store. Although these reports can be produced on demand, the requested information must have been identified at an earlier time and processed and stored in the application database. For example, if a company has never identified a store’s rate of sales growth as necessary information before, a manager cannot suddenly request it and except to receive it from the management information system. Exception reports are automatically produced to show a deviation from normal or from a plan. For example, each quarter the sales manager might receive an exception report listing those stores that failed to meet their sales target.

Figure 10.4 cont’d REPORTS Drill-down reports start with highly summarized data and allow a user to request increasing levels of detail. For example, the sales manager may initially see a table listing monthly sales by region. If he wants more detail, he can use the mouse to click on a particular region, say the southeast, and would see a table summarizing sales in the southeast region by store. If he sees that store A has lower sales than any other, he could click on it and see sales for that store by department. He could click on a particular department to see sales by employee or by item. This helps users trace problems or superior performance to the root. Figure 10.4 shows a drilldown report starting with earning summarized by quarter, drilling down to sales by product category.

Functional Aspects of the MIS Each management information system is an integrated collection of subsystems, often organized along functional lines of an organization.

Functional Areas Finance Manufacturing Marketing Human Resources

Financial statements Uses and managements of funds Financial stats for control MIS is an integrated collection of functional systems, each supporting particular functional areas. Figure 10.5 Quality Control reports Process Control reports JIT reports Production Schedule CAD output Sales by customer Sales by salesperson Sales by product Pricing report Total service calls Customer satisfaction Functional areas typically include accounting, finance, marketing, personnel, operations, research and development, and legal. Management information systems organized by functional area produce specialized reports for each area. Benefit reports Salary surveys Scheduling report Job applicant profiles Needs and planning report

An Overview Of Decision Support Systems A DSS is an organized collection of people, procedures, software, databases, and devices used to support problem- specific decision making and problem solving The focus of a DSS is on decision-making effectiveness when faced with unstructured or semistructured business problems

Characteristics of Decision Support Systems Handle large amounts of data from different sources Provide report and presentation flexibility Offer both textual and graphical orientation Support drill-down analysis

Characteristics of Decision Support Systems (continued) Perform complex, sophisticated analysis and comparisons using advanced software packages Support optimization, satisficing, and heuristic approaches Simulation What-if analysis Goal-seeking analysis

Capabilities of a Decision Support System Support all problem-solving phases Support different decision frequencies Support different problem structures Support various decision-making levels

DEGREE OF PROBLEM STRUCTURE The DSS Focuses on Semistructured Problems Manager + Computer (DSS) Solution Computer Solution Manager Solution Structured Semistructured Unstructured DEGREE OF PROBLEM STRUCTURE 9

Peter Keen Believes That a DSS Should: 1. Assist in solving semistructured problems 2. Support, not replace, the manager 3. Contribute to decision effectiveness, rather than efficiency 10

A DSS Model support system problem solvers group members Report Environment Individual problem solvers Other group members Report writing software Mathematical Models GDSS software GDSS software Database Decision support system Environment Data Communication Information Legend: 11

Figure 10.15: Decision-Making Level

Table 10.3: Comparison of DSSs and MISs

Table 10.3: Comparison of DSSs and MISs (continued)

Components of a Decision Support System Model base: provides decision makers access to a variety of models and assists them in decision making Database External database access Access to the Internet and corporate intranet, networks, and other computer systems Dialogue manager: allows decision makers to easily access and manipulate the DSS and to use common business terms and phrases

Figure 10.16: Conceptual Model of a DSS

Group Support Systems Group support system (GSS) Consists of most elements in a DSS, plus software to provide effective support in group decision making Also called group support system or computerized collaborative work system

Characteristics of a GSS That Enhance Decision Making (continued) Anonymous input Reduction of negative group behavior Parallel communication Automated record keeping

Executive Support Systems Executive support system (ESS): specialized DSS that includes all hardware, software, data, procedures, and people used to assist senior-level executives within the organization

Executive Support Systems in Perspective Tailored to individual executives Easy to use Drill-down capabilities Support need for external data

Executive Support Systems in Perspective (continued) Can help when uncertainty is high Future-oriented Linked to value-added processes

Capabilities of Executive Support Systems Support for defining an overall vision Support for strategic planning Support for strategic organizing and staffing Support for strategic control Support for crisis management

Summary The decision-making phase of the problem-solving process includes three stages: intelligence, design, and choice A management information system (MIS) provides managers with information that supports effective decision making and provides feedback on daily operations A financial MIS provides financial information to all financial managers within an organization

Summary (continued) The manufacturing MIS subsystems and outputs monitor and control the flow of materials, products, and services through the organization A marketing MIS supports managerial activities in product development, distribution, pricing decisions, and promotional effectiveness A human resource MIS is concerned with activities related to employees and potential employees of an organization

Summary (continued) A DSS is an organized collection of people, procedures, software, databases, and devices used to support decision making and problem solving A group support system (GSS) consists of most elements in a DSS, plus software to provide effective support in group decision making An executive support system (ESS) is a specialized DSS that includes all hardware, software, data, procedures, and people used to assist senior-level executives within the organization

Review The decision making process. MIS provides feedback on daily operations. 5 types of MIS reports. MIS is used in functional units of an organization. DSS supports problem-specific non-programmed decision making.

Summary (continued) We are indeed in the information age. 1-34 Summary (continued) We are indeed in the information age. All businesses must coordinate their use of IT, information, and people (The MIS Challenge). The many forces shaping business today include: Globalization Competition Information as a key resource The virtual workplace and telecommuting Electronic commerce Knowledge worker computing.

1-35 Summary (continued) Businesses are using information technology (IT) in three ways: to support information-processing tasks as an enabler of innovation as a collapser of time and space Information is also a key resource in business today. The value of information can be defined according to its dimensions: Time (when) Content (what) Form (how)

1-36 Summary (continued) Finally, people are the most important resource in any organization. As an information-literate knowledge worker, you have 5 charges: 1.Define what information you need 2.Know how and where to obtain information 3.Understand the meaning of information 4.Act appropriately based on information 5.Use information legally and ethically