Decision Support Chapter 10
Overview Databases are really information technology Decision Support is a business application that actually uses databases
Data to Decisions
Levels of Management Decision Making Strategic – group of executives develop overall organizational goals, strategies, policies, and objectives as part of a strategic planning process Tactical – managers and business professionals in self- directed teams develop short- and medium-range plans, schedules and budgets and specify the policies, procedures and business objectives for their subunits Operational – managers or members of self-directed teams develop short-range plans such as weekly production schedules
Decision Structure Structured – situations where the procedures to follow when a decision is needed can be specified in advance Unstructured – decision situations where it is not possible to specify in advance most of the decision procedures to follow Semi structured - decision procedures that can be prespecified, but not enough to lead to a definite recommended decision
Business Intelligence
Business Intelligence (BI) Text: gathering the right information in a timely manner and usable form. Analyzing information so that it can have a positive impact on business strategy, tactics, or operations. Which markets to enter, customers to target, products to promote ? More about BI later in this course.
It’s a “dog eat dog” world! Competition is intensifying Globalization Internet – anywhere, anytime Competition is a click away! Speed of change is increasing
Therefore, we need to: Make better decisions Make faster decisions Outsmart the competition
We do this by: Empower employees to research their own decisions (not just CEO). Provide easy access to data and tools to analyze the data Data warehouse – Demand reports! Encourage sharing across Departments – collective intelligence The entire enterprise
BI techniques Data mining – patterns and trends in data OLAP – online analytical processing Multidimensional analysis Region by salesperson by product by time Decision Support Drill down /drill up for correct level of detail
Recap: Data Mining Discovery of patterns in data Trends Relationships and behaviors Using statistics, AI Generates & tests hypotheses
Data mining vs. OLAP Data mining Looking for patterns in data Online analytical processing (OLAP) Multidimensional analysis
OLAP Top-down, query driven Must know data well – interaction Relationships between data: Geography (Region) Sales person Product
Multidimensional Database
Table 5.6
BI applications: Market Segmentation Common characteristics of customers who buy the same products from your company.
Customer churn Predicts which customers are likely to leave your company and go to a competitor.
Fraud detection Identifies which transactions are likely to be fraudulent.
Direct marketing Identifies which prospects should be included in a mailing list to obtain the highest response rate.
Market basket analysis Identifies what products or services are commonly purchased together. Peanut butter & jelly Cereal and milk
Trend analysis Reveals the difference between a typical customer this month versus last month.
Department needs SALES Which products are selling to Which demographics Which markets Which sales channel ?
Other needs: Manage Customer relationships Need a 360 degree view of the customer Improve product planning production planning contract negotiations with suppliers Improve marketing and advertising programs Reduce costs and find new opportunities !
Example Auto maker Fiat found that it was paying 10 cents more for a lug nut for one vehicle than another. Renegotiated contract saving $100,000 per year. Do this for 100 parts…
Decision Support Systems (DSS) Definition: Computer-based information systems that provide interactive information support to managers and business professionals during the decision-making process using the following to make semi structured business decisions Analytical models Specialized databases A decision maker’s own insights and judgments An interactive, computer-based modeling process
DSS Components