1. Chapter 4 DECISION SUPPORT AND ARTIFICIAL INTELLIGENCE Brainpower for Your Business SHEN Bo jxcdsb@gmail.com

2. Student Learning Outcomes 1.Compare and contrast decision support systems and geographic information systems. 2.Define expert systems and describe the types of problem to which they are applicable. 3.Define neural networks and fuzzy logic and the use of these AI tools. 4.Define genetic algorithms and list the concepts on which they are based and the types of problems they solve. 5.Describe the four types of agent-based technologies. 6/11/2016 2 Management Information Systems

3. Introduction Phases of decision making 1.Intelligence – find or recognize a problem, need, or opportunity 2.Design – consider possible ways of solving the problem 3.Choice – weigh the merits of each solution 4.Implementation – carry out the solution 6/11/2016 3 Management Information Systems

4. Four Phases of Decision Making 6/11/2016 4 Management Information Systems

5. Satisficing 6/11/2016 5 Management Information Systems Satisficing: making a choice that meet you needs and is satisfactory without necessarily being the best possible choice available. Why satisficing? Why not optimal solution?

6. Types of Decisions You Face Structured decision – processing a certain information in a specified way so that you will always get the right answer – Examples: Choose a job; Allocate resources to managers; develop a marketing plan Nonstructured decision – one for which there may be several “right” answers, without a sure way to get the right answer 6/11/2016 6 Management Information Systems

7. Types of Decisions You Face 6/11/2016 7 Management Information Systems

8. Types of Decisions You Face Recurring decision – happens repeatedly – Example: deciding how much inventory to carry and deciding at what price to sell the inventory Nonrecurring (ad hoc) decision – one you make infrequently – Example: deciding where to build a distribution or company mergers 6/11/2016 8 Management Information Systems

9. Types of Decisions You Face EASIEST MOST DIFFICULT 6/11/2016 9 Management Information Systems

10. Decision Process and Decision Type 6/11/2016 10 Management Information Systems

11. Decision Process and Decision Type 6/11/2016 11 Management Information Systems Operational decisions Obtain data from transaction processing systems Use a structured decision process (understood and accepted method for making decisions) Require very little collaboration; no feedback or iteration necessary

12. Decision Process and Decision Type 6/11/2016 12 Management Information Systems Managerial decisions Focus on the allocation and utilization of resources Decisions are both structured and unstructured Require some collaboration Strategic decisions Are broader in their scope and center around organizational issues Use an unstructured decision process (no agreed on decision making process) Almost always collaborative; communication systems are important

13. Decision Process and System Support 6/11/2016 13 Management Information Systems

14. Decision Support Systems Decision support system (DSS) – a highly flexible and interactive system that is designed to support decision making when the problem is not structured Decision support systems help you analyze, but you must know how to solve the problem, and how to use the results of the analysis 6/11/2016 14 Management Information Systems

15. DSS 6/11/2016 15 Management Information Systems Examples: A national insurance company: analysis its risk exposure when insuring drivers with histories of driving under the influence Wall Street: retail brokerage companies analyze customers’ behaviors and goal

16. Characteristics of a Decision Support System 6/11/2016 Management Information Systems 16 Provide rapid access to information Handle large amounts of data from different sources Provide report and presentation flexibility Offer both textual and graphical orientation Support drill-down analysis Perform complex, sophisticated analysis and comparisons using advanced software packages Support optimization, satisficing, and heuristic approaches. Perform simulation analysis—the ability of the DSS to duplicate the features of a real system, where probability or uncertainty is involved

17. DSS Applications 6/11/2016 Management Information Systems 17

18. Comparison of DSSs and MISs 6/11/2016 Management Information Systems 18

19. Conceptual Model of a DSS 6/11/2016 19 Management Information Systems

20. Components of a DSS 6/11/2016 20 Management Information Systems

21. Components of a DSS Model management component – consists of both the DSS models and the model management system What-if analysis Statistical model 6/11/2016 21 Management Information Systems

22. Types of analytical Modeling 6/11/2016 22 Management Information Systems

23. Common DSS Models 6/11/2016 Management Information Systems 23

24. Examples 6/11/2016 Management Information Systems 24 Many businesses are turning to decision support systems and their underlying models to improve a wide variety of business functions

25. Components of a DSS Data management component – stores and maintains the information that you want your DSS to use Organizational information: company’s databases or data warehouses External information: government, Dow Jones, Internet Personal information: your own insights and experience 6/11/2016 25 Management Information Systems

26. Components of a DSS User interface management component – allows you to communicate with the DSS – Enter information, commands, and models 6/11/2016 26 Management Information Systems

27. Group Support System A GSS also called a group decision support system and a computerized collaborative work system, consists of most of the elements in a DSS, plus software to provide effective support in group decision-making settings. 6/11/2016 27 Management Information Systems

28. Geographic Information Systems Geographic information system (GIS) – DSS designed specifically to analyze spatial information Spatial information is any information in map form Businesses use GIS software to analyze information, generate business intelligence, and make decisions 6/11/2016 28 Management Information Systems

29. Zillow GIS Software for Denver 6/11/2016 29 Management Information Systems

30. GIS 6/11/2016 30 Management Information Systems GIS Application

31. Data Visualization System 6/11/2016 31 Management Information Systems DVS Application

32. Artificial Intelligence DSSs and GISs support decision making; you are still completely in charge Artificial intelligence, the science of making machines imitate human thinking and behavior, can replace human decision making in some instances – Expert systems – Neural networks (and fuzzy logic) – Genetic algorithms – Intelligent agents (or agent-based technologies) 6/11/2016 32 Management Information Systems

33. Commercial Applications of AI 6/11/2016 33 Management Information Systems

34. Commercial Applications of AI 6/11/2016 34 Management Information Systems

35. Expert Systems Expert (knowledge-based) system – an artificial intelligence system that applies reasoning capabilities to reach a conclusion Used for – Diagnostic problems (what’s wrong?) – Prescriptive problems (what to do?) 6/11/2016 35 Management Information Systems

36. Components of an expert system 6/11/2016 36 Management Information Systems

37. Traffic Light Expert System 6/11/2016 37 Management Information Systems

38. Examples of typical expert systems 6/11/2016 38 Management Information Systems

39. Examples of typical expert systems 6/11/2016 39 Management Information Systems

40. What Expert Systems Can and Can’t Do An expert system can – Reduce errors – Improve customer service – Reduce cost An expert system can’t – Use common sense – Automate all processes 6/11/2016 40 Management Information Systems

41. NEURAL NETWORKS AND FUZZY LOGIC Neural network (artificial neural network or ANN) – an artificial intelligence system that is capable of finding and differentiating patterns 6/11/2016 41 Management Information Systems

42. Neural Networks Can… Learn and adjust to new circumstances on their own Take part in massive parallel processing Function without complete information Cope with huge volumes of information Analyze nonlinear relationships 6/11/2016 42 Management Information Systems

43. Fuzzy Logic Fuzzy logic – a mathematical method of handling imprecise or subjective information Used to make ambiguous information such as “short” usable in computer systems 6/11/2016 43 Management Information Systems

44. Fuzzy Logic Applications – Google’s search engine – Washing machines – Antilock breaks 6/11/2016 44 Management Information Systems

45. Genetic Algorithms Genetic algorithm – an artificial intelligence system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem 6/11/2016 45 Management Information Systems

46. Evolutionary Principles of Genetic Algorithms 1.Selection – or survival of the fittest or giving preference to better outcomes 2.Crossover – combining portions of good outcomes to create even better outcomes 3.Mutation – randomly trying combinations and evaluating the success of each 6/11/2016 46 Management Information Systems

47. Genetic Algorithms Can… Take thousands or even millions of possible solutions and combine and recombine them until it finds the optimal solution Work in environments where no model of how to find the right solution exists 6/11/2016 47 Management Information Systems

48. Intelligent Agents Intelligent agent – software that assists you, or acts on your behalf, in performing repetitive computer-related tasks Types – Information agents – Monitoring-and-surveillance or predictive agents – Data-mining agents – User or personal agents 6/11/2016 48 Management Information Systems

49. Information Agents Information Agents – intelligent agents that search for information of some kind and bring it back Ex: Buyer agent or shopping bot – an intelligent agent on a Web site that helps you, the customer, find products and services you want 6/11/2016 49 Management Information Systems

50. Monitoring-and-Surveillance Agents  Monitoring-and-surveillance (predictive) agents – intelligent agents that constantly observe and report on some entity of interest, a network, or manufacturing equipment, for example 6/11/2016 50 Management Information Systems

51. Data-Mining Agents  Data-mining agent – operates in a data warehouse discovering information  A data-mining agent may detect a major shift in a trend or a key indicator  It can also detect the presence of new information and alter you 6/11/2016 51 Management Information Systems

52. User Agents User or personal agent – intelligent agent that takes action on your behalf Examples: – Prioritize e-mail – Act as gaming partner – Assemble customized news reports – Fill out forms for you – “Discuss” topics with you 6/11/2016 52 Management Information Systems

53. Multi-agent Systems And Agent-based Modeling Biomimicry – learning from ecosystems and adapting their characteristics to human and organizational situations Used to 1.Learn how people-based systems behave 2.Predict how they will behave under certain circumstances 3.Improve human systems to make them more efficient and effective 6/11/2016 53 Management Information Systems

54. Agent-Based Modeling Agent-based modeling – a way of simulating human organizations using multiple intelligent agents, each of which follows a set of simple rules and can adapt to changing conditions Multi-agent system – groups of intelligent agents have the ability to work independently and to interact with each other 6/11/2016 54 Management Information Systems

55. Business Applications Southwest Airlines – cargo routing P&G – supply network optimization Air Liquide America – reduce production and distribution costs Merck – distributing anti-AIDS drugs in Africa Ford – balance production costs & consumer demands Edison Chouest – deploy service and supply vessels 6/11/2016 55 Management Information Systems

56. Swarm Intelligence  Swarm (collective) intelligence – the collective behavior of groups of simple agents that are capable of devising solutions to problems as they arise, eventually leading to coherent global patterns 6/11/2016 56 Management Information Systems

57. Characteristics of Swarm Intelligence Flexibility – adaptable to change Robustness – tasks are completed even if some individuals are removed Decentralization – each individual has a simple job to do 6/11/2016 57 Management Information Systems

58. Assignments 1.What are the four types of decisions discussed in this chapter? Given an example of each. 2.What are the four steps in making a decision? 3.What is a DSS? Describe its components? 4.What is a geographic information system used for? 5.What are the advantages of an expert system? 6.What three concepts of evolution are used by the genetic algorithm? 7.What is artificial intelligence? Name the artificial intelligence systems used widely in business. 8.What sort of problems does a neural network solve? 6/11/2016 58 Management Information Systems