chapter 1: decision support systems and business intelligence decision support systems and business...

Chapter 1:DECISION SUPPORT SYSTEMS AND

BUSINESS INTELLIGENCE

DECISION SUPPORT SYSTEMS AND BUSINESS INTELLIGENCE , Eighth Edition

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Changing Business Environments and Computerized Decision Support

The business pressures-responses-support model

The business environment Business environment factors divided into four

categories: markets, consumer demands, technology, and societal.

2Decision Support and Business Intelligence Systems, Eighth Edition

Organizational responses: be reactive, anticipative, adaptive, and proactive Employ strategic planning Use new and innovative business model Restructure business process Use new IT to improve communication. : :

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Changing Business Environments and Computerized Decision Support (cont.)

Decision Support and Business Intelligence Systems, Eighth Edition

Computerized support It used to facilitate closing the gap between the

current performance and the desired performance.

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Management Support Systems (MSS) Four major information technologies have been

successfully used to support managers.

DSSs: provide support primarily to analytical, quantitative types of decisions.

Executive (enterprise) support systems: support the informational roles of executives.

Group decision support systems: support managers working in groups.

Intelligent systems: provide mulitfunctional support.


DSS Definition Decision support system (DSS) are used to make

business decision often based on data collected by On-Line-Analytical-Processing system (OLAP)

Example of data used for making decision : Retail sales transaction detail

DSS as an Umbrella term: Describes any computerized system that supports decision making in an organization


Why Use of DSS Why use decision support systems?

Speedy computations Improved communication and collaboration Increased productivity of group members Improved data management Managing giant data warehouses Quality support Overcoming cognitive limits in processing and

storing information


Why Use of DSS(cont.) Using the Web Anywhere, anytime support


Decision Making and Management Management is a process by which organizational

goals are achieved through the use of resources (people, money, energy, materials, space, time).

These resources are considered to be inputs, and the attainment of the goals is viewed as the output of the process.

Measuring success: Productivity= output/input


Decision Making and Management (cont.) Management is decsion making

The manager is decsion maker


Decision Making and Management (cont.) The nature of managers’ work

Interpersonal : figurehead, leader, liaison. Informational: monitor, disseminator,

spokesperson. Decisional: entrepreneur, disturbance handler,

resource allocator, negotiator.


Decision Making and Management (cont.) Why Managers Need IT Support

processing information manually is growing increasingly difficult

computerized modeling examining numerous alternatives very quickly providing a systematic risk analysis being integrated with communication systems and

databases being used to support group work


Intelligence PhaseIntelligence Phase

Design PhaseDesign Phase

Choice PhasesChoice Phases

REALITY

Implementationof Solution

Implementationof Solution

SUCCESS

FAILURE

Verification, Testing of Proposed Solution

Verification of the Model

Examination

Phases of the Decision Making


Phases of the Decision Making (cont.) Intelligence phase

Organizational objectives Search and scanning procedures Data collection Problem identification Problem classification Problem statement


Result:Reality is examined The problem is identified and defined

Phases of the Decision Making(cont.) Design phase

Formulate a model (Assumption) Set criteria for choice Search for alternative Predict and measure outcomes


Result:Representative model is constructedThe model is validated and evaluation criteria are set

Phases of the Decision Making(cont.) Choice phase

solution to the model Sensitivity analysis Selection of Best (Good) alternative Plan for implementation Design of control system


Result:Proposed solution is included to the modelIf reasonable, move to implementation phase.

Phases of the Decision Making(cont.) Implementation phase

Put solution into action

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Result:Solution to the original problem


Decision Making Processes The process of decision making

1. Defining the problem (i.e., a decision situation that may deal with some difficulty or with an opportunity)

2. Constructing a model that describes the real-world problem

3. Identifying possible solutions to the modeled problem and evaluating the solutions

4. Comparing, choosing, and recommending a potential solution to the problem


Decision makers: Who are They? Decision maker classification

Individual decision makers can be single person or a computer system

Multiple decision makers can be: Team where members support a single decision

maker Groups where all members have a say in the decision Organization where global agreement is needed.


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Type of Control

Type of Decision

Operational Control Managerial Control StrategicPlanning

Structured

Semi-structured

Unstructured

Accounts Receivable Order entry

Production scheduling inventory control

Selecting a cover for a magazine, buying software approving loans

Support Needed

Budget analysis,short-term forecasting, personnel reports, make-of-buy analysis

Credit evaluation, Budget Preparation, plan layout, project scheduling, rewarded systems design

Negotiating,recruiting and executive,buying hardware,lobbying

Financialmanagement ,warehouse location, distribution systems

Building new plant, mergers and acquisitions, new product planning, compensation planning, quality assurance planning

R & D planning, new technology development social responsibility planning

MISMS modelsF & S models

DSS

DSSES Neural Networks

MIS,MS

MS, DSS, EIS, ES EIS, ES, Neural Networks

1 2 3

4 5 6

7 8 9

Support Needed

Framework for Computerized Decision Support


Framework for Computerized Decision Support (cont.) Three type of decision :

1- Structured problems: are routine problems for which standard solution method exist. Procedure for obtaining the best solution are known Objective are clearly defined


Framework for Computerized Decision Support (cont.)

2- Unstructured problems: are fuzzy, complex problem for which there are no cut-and direct solution methods. Have no structure phase Often solved with human intuition

3- Semi-structured problem: is a decision problem in which some but not all phases are structured. In between solve with standard solution procedure

and human judgment


Framework for Computerized Decision Support (cont.) Types of control in all managerial activities

Strategic planning the long-range goals & policies for resource

allocation;

Management control the acquisition & efficient utilization of resources

in the accomplishment of organizational goals

Operational control the efficient & effective execution of specific tasks.


Framework for Computerized Decision Support (cont.) The decision support matrix

For semistructured decisions and unstructured decisions, conventional MIS and MS tools are insufficient ; BUT Decision support systems (DSS) are used.

Computer support for structured decisions Management science (MS) or operations research

(OR) are used . Automated decision systems (ADS) is used.


Framework for Computerized Decision Support (cont.) Management science (MS) or operations

research (OR) The application of a scientific approach and mathematical models to the analysis and solution of managerial decision situations (e.g., problems, opportunities) It adds new step 2 to the process of decision

making, that is classify the problem into standard category.


Framework for Computerized Decision Support (cont.) Automated decision systems (ADS) A business

rules-based system that uses intelligence to recommend solutions to repetitive decisions (such as pricing)


Architecture of a decision system


Architecture of a decision system(cont.) The architecture of DSS

Data Models manipulate data as related to a specific situation Knowledge component User interface

* The user themselves are also important components of the architecture


Structure of a decision system A SYSTEM is a collection of object such as

people, resources, concepts and procedure intended to perform an identifiable function or to serve a goal.

Three Distinct Parts of Systems Inputs Processes Outputs


Structure of a decision system (cont.)

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Processes

Input(s) output(s)

Feedback (flow of information


Structure of a decision system (cont.) Inputs are the element that enter the system Processes convert or transform inputs into outputs Outputs describe finished products or

consequences of being in the system Feedback is the flow of information from the

output to decision maker, who many modify the inputs or the processes (closed loop)

The Environment contains the elements that lie outside but impact the system performance


Modeling in DSS DSS is “ model-base set of procedures for

processing data and judgment to assist manager in his decision making”

A model is simplified representation or abstraction of (complex) reality.

With modeling, one can perform virtual experiments and an analysis on a model of reality, rather than on reality itself.


Modeling in DSS (cont.) Four groups of models:

Iconic (scale) Model An iconic model—the least abstract model—is a

physical replica of a system.

Analog Model does not look like the real system but behaves like it.


Modeling in DSS (cont.) Mathematical Model

Use mathematical relationship to represent complexity used in most DSS analysis

Mental models provide a description of how a person thinks

about a situation


Modeling in DSS (cont.) Benefits of Models:

Time compression Low cost construction Models allow for the simulated compression of time. Manipulating the model (by changing variables) is much

easier than manipulating the real system. Can model large and extermely complex system with

possibly infinite soultion. Low cosst excustion


Modeling in DSS (cont.) Modeling process and solution approach

Trail and Error

Simulation

Optimization

Heuristics


Decision analysis Decision analysis allow us to select a decision from

set of possible decision alternatives when uncertainties regarding the future exist.

The goal is to optimize the resulting return (payoff) in term of decision criteria.


Decision analysis (cont.) Type of decision analysis models:

Decision making under certainty Decision making under uncertainty Decision making under risk Decision making with perfect information Decision making with imperfect

information(Bayesian Theory) Decision making in light of competitive action

(Game Theory)


DSS and Data Warehouse Data warehouse is a decision support database.

The data warehouse is an integrated, subject-oriented, time-variant, non-volatile database that provide support for decision making.


DSS and Data Warehouse Integrated: the data warehouse is centralized,

consolidated database that integrates data retrieved from the entire organization.

Subject- oriented: data of data warehouse is arranged and optimized to provide answer to questions coming from diverse functional area within a company.


DSS and Data Warehouse Time-variant: the data warehouse represent the

flow of data through time

Non-volatile: once data enter the data warehouse, they are never removed.


On-Line Analytical Processing (OLAP) It is an element of DSS. It is support ad-hoc querying for business analyst. Multidimensional view of data is foundation of

OLAP


Multidimensional data

DSS knowledge base Any true decision requires information.

The knowledge base is where all information is stored.


CASE STUDY


Case: Managing Global Business at 3M Corporation The Business Problem

The company had difficulties responding

to new customers and markets in the global economy as each business unit kept separate databases and conducted independent decision support activities

The Solution The Company created a global enterprise data

warehouse (GEDW)


Case: Managing Global Business at 3M Corporation (cont.) The Results

Distributors and retailers, as well as end-users, now receive information in minutes instead of weeks or months, including the delivery of rich multimedia

Customers can find all their information in one place

Inventories are lower, and better and quicker inventory decisions are made, even in globally remote locations


Case: Managing Global Business at 3M Corporation (cont.) What have we learned from this case??

The case demonstrates the existence of vast amounts of important data in organizations, and the importance of organizing that data for optimum use

The case shows the need to share a company’s data internally and with business partners and customers, and to make it available in a format that enables end users to process data quickly

The case explains the data warehouse, and its role in supporting managerial decision making


Duty # 1 Each group have present one case study; under these

conditions:

define organization

Define business problem

Provide possible solutions

The result.


chapter 1: decision support systems and business intelligence decision support systems and business...

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