Management Information Systems, 4th Edition 1

Chapter 12Decision Support Systems

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Learning Objectives• List and explain the steps in decision making• Articulate the difference between structured and

unstructured decision making• Describe the typical software components that

decision support systems comprise• Describe the typical elements of geographic

information systems• Identify business situations in which decisions can

be supported by geographic information systems

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Decision Support Aids

• Organization’s success depends on quality of managers’ decisions

• When decisions involve large amounts of information and processing, computer-based systems can make the process effective and efficient.

• Applications now called business analysis tools or business intelligence applications

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• Three decision-making phases

– Intelligence

– Design

– Choice

• Models to analyze data

– Maps, mathematical equations of variables

The Decision-Making Process

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The Decision-Making Process (Cont.)

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Structured and Unstructured Problems

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Structured Problems

• Proven set of steps for solution

– Algorithm

– Parameters

• Most mathematical and physical problems are structured

• Programmable problems: feasible to write a program to solve them

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• No algorithm to follow to reach optimal solution

• Multiple potential solutions

• Unstructuredness is closely related to uncertainty

Unstructured Problems

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• Neither fully structured nor totally unstructured

• Managers and Semistructured Problems

– Most common type of problem for managers

– Task is to choose one alternative that will bring about the best outcome

– Often rely on decision support applications to select the best course of action

Semistructured Problems

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Decision Support System (DSS)

• Computer-based information systems that help managers select one of many solutions

– Automates some of decision-making process

– Sophisticated and fast analysis

– Used at all management levels

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• Three Major Components

– Data management module

– Model management module

– Dialog management module

Decision Support System (DSS) Components

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• Together, DSS modules:

– Help enter request conveniently

– Search vast amounts of data

– Use data in desired models

– Present results in readable manner

Decision Support System (DSS) Components (Cont.)

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• Gives user access to databases or data warehouses

• Allows decision maker to conduct intelligence phase of decision making

The Data Management Module

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Decision Support System Components (Cont.)

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• Closely intertwined with other organizational systems

– Data warehouses

– Data marts

– ERP systems

• Draw relevant data for decision-making

Decision Support System Components

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• Selects appropriate model to analyze data

– Linear regression model

– May be built by the organization based on accumulated knowledge

• Trade secrets

The Model Management Module

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The Model Management Module (Cont.)

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• Creating New Models

– Data mining techniques do not rely on predetermined models

– No hypothesis on relationships of data required

– Software looks for the relationships

– Results in a new model or set of relationships

The Model Management Module (Cont.)

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• Interface between user and other modules

– Prompts user to select a model

– Allows database access and data selection

– Lets user enter/change parameters

• Displays analysis results

• Textual, tabular, and graphical displays

The Dialog Module

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The Dialog Module (Cont.)

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• Personal Decision Support Systems

– Individual Knowledge worker uses in daily work

– Raw data entered into a program either by user or drawn from other sources

– Tax preparation software is an example

Types of DecisionSupport Systems

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• Group Decision Support Systems

– Promote brainstorming and group decision making

– Located in conference room or on networked computers

– Weigh votes to overcome impasses

Types of Decision Support Systems (Cont.)

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Types of Decision Support Systems (Cont.)

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Sensitivity Analysis

• Tests degree to which result is affected by change in parameters

• What-if analysis

• Can change multiple parameters at once

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Executive Information Systems

• Alleviate information overload for executives

• Select most relevant data for analysis

– Drilling down

• Consolidate and summarize data

• Display data graphically

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• An easy-to-use and easy-to-learn graphical user interface

• On-request “drill-down” capability

• On-demand financial and other ratios, and other indicators

• Easy-to-use but sophisticated tools to allow navigation in databases and data warehouses

Effective EIS features

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• Statistical analysis tools

• The ability to respond to ad hoc queries and sensitivity analyses

• Access to external data pools

• The ability to solve diverse business problems

Effective EIS Features (Cont.)

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Developing Decision Support Systems

• When Should a DSS Be Built?– What is the type problem and how structured is

it?

– Are the required data available in databases and data warehouses?

– How often do managers encounter the problem?

– Who will use the system?

– Can the prospective users spare adequate time for the development process?

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The Electronic Spreadsheet: A DSS Tool

• Provide two facilities for building DSS

– Preprogrammed functions

– Ability to use IF-THEN statements

• Most widely used tool

– Inexperienced users can use to develop DSSs

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GeographicInformation Systems

• Decision aid for map-related decisions

• Typical GIS contains:

– database of quantitative and qualitative data

– database of maps

– program to display information on maps

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Ethical and Societal IssuesDecisions by Machines

• Automated decisions can affect individuals

– Mortgage companies, credit card companies, employers, banks, etc.

• European Protection

– “Automated Individual Decisions” Directive

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Ethical and Societal IssuesDecisions by Machines

• Who Needs Protection– Determining creditworthiness

• Efficient

• Effective

• Hidden Injustice– Mistakes on records

– Decisions final

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Summary• Decisions are made in three steps: intelligence,

design, and choice• Structured and unstructured are two types of

decision-making techniques and are based on the type of problem to be solved

• Decision support systems have typical components

• Geographic information systems use certain elements