Decision Support Systems C H A P T E R 10

Decision Making and Problem Solving

Decision Making: A Problem Solving Component Decision-making phase Intelligence stage Design stage Choice stage [Figure 10.1]

Decision-Making Phase Intelligence stage (first stage) Identify and define potential problems and/or opportunities Design stage (second stage) Develop alternative solutions to the problem Choice stage (last stage) Select a course of action

Problem Solving Decision-making (intelligence, design, and choice) plus: Implementation stage Monitoring stage [Figure 10.1]

Problem Solving Implementation stage Take action to put the solution into effect Monitoring stage Evaluate the implementation of the solution

Programmed vs. Nonprogrammed Decisions Programmed decisions Are made using a rule, procedure, or quantitative method Nonprogrammed decisions Deal with unusual or exceptional situations

[Figure 10.3] Optimization, Satisficing, and Heuristic Approaches Optimization model Involves finding the best solution Some spreadsheets have optimizing routines.

Optimization, Satisficing, and Heuristic Approaches Satisficing model Involves finding a good -- but not necessarily the best -- solution Heuristics Commonly accepted guidelines or procedures that usually find a good solution

Problem-Solving Factors Multiple decision objectives Increased alternatives Increased competition Need for creativity Social and political actions International aspects Technology Time compression

An Overview of Decision Support Systems

Decision Support Systems An organized collection of people, procedures, software, databases, and devices used to support problem-specific decision making Focus on decision-making effectiveness when faced with unstructured or semi-structured business problems

Characteristics of a DSS Handles large amounts of data from different sources Provides report and presentation flexibility Offers both textual and graphical orientation

Characteristics of a DSS Supports drill down analysis Performs complex, sophisticated analysis and comparisons using advanced software packages Supports optimization, satisficing, and heuristic approaches

Characteristics of a DSS Performs different types of analyses “What-if” analysis Makes hypothetical changes to problem and observes impact on the results Simulation Duplicates features of a real system Goal-seeking analysis Determines problem data required for a given result

Sample Goal-Seeking Analysis [Figure 10.5]

Capabilities of a DSS Support for problem-solving phases Support for different decision frequencies Ad hoc DSS One-of-a-kind Institutional DSS Repetitive continued...

Capabilities of a DSS Support for different problem structures Highly structured problems Straightforward; known facts/relationships Semi-structured or unstructured problems Complex; unclear data relationships; data in various formats; data difficult to manipulate or obtain

DSSs and Spheres of Influence Decision support systems can support all three levels of spheres of influence: Individual support - DSS Group support - GDSS Enterprise support (top management) - ESS

Components of a Decision Support System

Conceptual Model of a DSS [Figure 10.9]

The Model Base Gives decision makers access to a variety of models and assists them in the decision-making process Model management software Coordinates the use of models in a DSS

Types of DSS Models Financial models Provide cash flow, internal rate of return, and other investment analysis Statistical analysis models Provide summary statistics, trend projections, and hypothesis testing

Types of DSS Models Graphical modeling programs Assist decision makers in designing, developing, and using graphic displays of data and information Project management models Handle and coordinate large projects Help users discover critical activities and tasks that could delay or jeopardize an entire project

Advantages of Modeling Less expensive, faster than experimenting with custom approaches or real systems Less risky than experimenting on real systems, yet still shows how a decision might affect the overall system Permits complex relationships to be analyzed and projected into the future Allows decision makers to test important assumptions of the model and ensure accuracy and validity before using it in decision making

Disadvantages of Modeling May be time consuming to decide which model to use (numerous choices) Potential for results to be misleading May be difficult to build and hard to interpret (high degree of mathematical sophistication) Expensive to develop if used only once

The Group Decision Support System

The Group DSS Consists of most of the elements in a DSS, plus GDSS software to support group decision making Also known as a computerized collaborative work system

Configuration of a GDSS [Figure 10.12]

Characteristics of a GDSS Special design Ease of use Flexibility Decision-making support Cost, control, and complexity factors Anonymous input Reduction of negative group behavior Parallel communications Automated record keeping

GDSS Decision-Making Support Delphi approach Used when group decision makers are geographically dispersed Brainstorming Involves decision makers offering ideas “off the top of their heads” Fosters creative and free thinking

GDSS Decision-Making Support Group consensus approach Forces members in a group to reach a unanimous decision Nominal group technique Encourages feedback from individual group members

GDSS Software Offers useful tools for group work Compound documents Include documents to be created, used, and shared by members of a group Groupware (workgroup software) Helps with joint work group scheduling, communication, and management

GDSS Alternatives [Figure 10.14]

GDSS Alternatives Decision room alternative Decision makers are located in the same building or geographic area. Decision makers are occasional users of the GDSS approach.

GDSS Alternatives Local area decision network Group members are located in the same building or geographic area. Group decision making is frequent. Teleconferencing alternative Location of group members is distant. Decision frequency is low.

GDSS Alternatives Wide area decision network Location of group members is distant. Decision frequency is high. Virtual workgroups Groups of workers located around the world working on common problems via a GDSS

The Executive Support System

The Executive Support System (ESS) A specialized DSS that includes all hardware, software, data, procedures, and people used to assist senior-level executives within the organization Also known as an executive information system (EIS)

Layers of Executive Decision Making [Figure 10.17]

Characteristics of an ESS Tailored to individual executives Easy to use Offer drill-down abilities Support the need for external data Can help with situations that have a high degree of uncertainty Have a futures orientation Linked with value-added business processes

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

DSS Development

Usually developed with a DSS generator and DSS tools for a specific application DSS generator A generalized program that facilitates development of a specific DSS Specific DSS A DSS developed for a single or unique situation or problem