lesson10 - information system in decision making
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Information System in Decision Making
Decision-making
oSuccess of a firm depends on the quality of the decisions managers makes
oWhen amount of information is large & processes are complex
oCBIS can make the process effective and efficient in decision making
oIS that supports decision making:
o DSS, EIS, GIS, & Expert System
Decision-Making process PHASES
By Herbert Simon (researcher of management & decision making)
oIntelligence. Collect facts, beliefs, & ideas.
oDesign. Design the method by which we will consider data. Methods are sequences of steps, formulas,
models & other tools that enable us to systematically reduce the alternatives to a manageable number.
oChoice. Make a choice from alternatives
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Types of Problems
oStructured. Optimal solution can be reached through a single sets of steps.
most physical & mathematical problems are structured. A formula or sequence is followed
Algorithm – sequence of steps
oUnstructured. No algorithm to follow to reach an optimal solution.
not enough information about the factors that may affect the solution
Many potential factors that no algorithm can be formulated to guarantee a unique optimal
solution
oSemistructured. Neither fully structured nor totally unstructured
An unstructured problem can become semistructured by experts in the field
o Because experts may have enough knowledge to narrow down number of possible
solutions, \but not enough to guarantee 100% certainty of producing an optimal solution
Programmable problems
oStructured problems are programmable
oUnstructured are not programmable
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oSemistructured problems
Managers face daily in different industries & in different business functions
Managers chooses one alternative from many multiple possible courses of action.
Decision support system (DSS)
o A CBIS designed to help managers select one of many alternative solutions to a problem & help the corporations
increase market share, reduce costs, increase profitability, and enhance product quality.
DSS Components
oData management module
oModel management module
oDialog module
These modules:
o Help the user enter a request in a convenient manner
o Search vast amount of data to focus on the relevant facts
o Process the data through desired models
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o Present the results in one or several manners so the output can be easily understood.
Data Management module
oDatabase or data warehouse
o Allows a decision maker to conduct the intelligence phase of decision making
Model Management Module
oCollection of models the DSS draws upon to assist in decision making
User must select a model in order to turn data into information
DIALOG MODULE
oPart of DSS that allow the user to interact with DSS
o Prompts the user to select a model.
o Allows the user to access the database and select data for the decision process, Lets user enter
parameters and change them to see how the change affects the result of the analysis
o Maybe in the form of commands, menus, dialog boxes, or any other approach. Simply, it is the
interface.
Types of DSS
oDiffer in degree of sophistication and the manner in which they are used
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oPersonal DSS. Built for the use of the individual knowledge worker in his/her daily work
oGroup DSS. Usually installed in conference room settings or through a group of networked computers.
Designed to take input from multiple users interacting with the program at the same time and convergingon decision as a group
Executive Information system
o Are decision-aids especially designed for high ranking managers, to provide them with the most essential
information for running the organization.
oUseful to executives who almost always suffer from information overload
Information overload is the phenomenon whereby the very volume of information creates the additionalburden of having to decide what is important, rather than helping to solve problems and make decisions.
oHigh level managers makes decisions based on highly summarized information
oEIS display data graphically so exemptions can be easily spotted.
oMEIS do not require user to enter the values of any parameter like DSS do
Features of an effective EIS
oEasy-to-use and easy-to-learn GUI
oOn request “drill down” capability that allows the executive to reach information in further detail
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oOn-demand financial and other ratios & indicators to reflect organizational strengths & weaknesses
oEasy-to-use but sophisticated tools to allow navigation in databases and data warehouses
oStatistical analysis tools
o Ability to respond to ad hoc queries and sensitivity analyses
o Access to external data pools
o Ability to solve diverse business solutions
Geographic Information system
oA set of tools for collecting, storing, retrieving, transforming and display of spatial data from the real world.
ofamous IT application tool which can provide best decision support to bridge the gap between the requirements and the
reality.
oIntegrates hardware, software, and data for capturing, managing, analyzing, and displaying all forms of
geographically referenced information.
oallows us to view, understand, question, interpret, and visualize data in many ways that reveal relationships,
patterns, and trends in the form of maps, globes, reports, and charts.
Why GIS?
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oTo inventory and monitor resources
oTo test the sensitivity of the analysis assumptions
oTo simulate potential impacts of management alternatives
oTo make the map the 2nd time, the 50th time, the 100th time...
GIS in business
Source: Lofty Azaz, International Conference on Humanities, Geography and Economics (ICHGE'2011) Pattaya Dec.2011
oUse for management functions such as logistics, site and facilities management, marketing, decision making, &
planning
oHelp retail business locate the best site for its next store
- Help marketers find new prospects
- Highlights where the firm has many customers by placing data on the map
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oUse for a variety of routine decision support and analysis applications (eg. Market & demographic analyses)
GIS FUNCtions & Application(Mennecke, 2000)
GIS functions
oSpatial Imaging - representing displays of data and information within a spatially defined coordinate system.
oData management - store, manipulate, and provide access to data.
oDecision modelling – used to provide support for analysis and decision-making.
oDesign and Planning - used to create, design, and plan.
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GIS Applications in business
a. Digital Mapping
First purpose: capturing spatial data to generate maps automatically
provides managers with the ability to generate spatial data in-house
Use of Remote sensing and global positioning systems (GPS) allow more accurate map production
Companies in petroleum business uses digital maps
b. Facilities Management
provides managers with a powerful tool for supporting real-time monitoring of facilities and is
routinely used for emergency management, security, and other applications.
Utility firms represent one of the largest private-sector GIS end-user groups
c.Market and demographic Analysis
a powerful market analysis tool because:
o it provides a platform for representing the spatial relationship between the components of the market;
that is, the customers, suppliers, and competitors.
o it also provides a way to bring together data from multiple sources and link them based on spatial
attributes.
d.Transportation and Logistics
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critical tool for addressing logistics and transportation problems.
Some tools that fits in this category:
o Vehicle routing system & navigation system
o intelligent vehicle highway systems (IVHS)
o dispatch systems
oproduction control systems
o inventory systems
e.Design and Engineering
can be used to design plans, layouts, and maps.
make use of both the imaging and the planning functions of GIS.
commonly used in landscape engineering, environmental restoration, commercial and
residential construction and development, and a host of other design activities.
Some telecom companies use GIS to support expansion...
Expert Systems and AI
Intelligence – ability to learn and think
It includes:
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making associations between a previous experience and a new situation
Drawing conclusions in a systematic manner
Quickly adopting new ways to solve problems
Determine what tools can or cannot help in handling complex situation
AI - Coined in 1956 in seminar @ Dartmouth College
in 25 years Projected that intelligent machines would do physical and intellectual work for
human beings
today, It was not materialized but continuous research on AI is done.
Researchers try to search on how machines emulate the human mind
AI Categories (fields)
a. Robotics – design machines to perform useful work
Robots don’t look like humans but do human works
b. Artificial Vision – ability of a machine to “see” its environment, and to recognize visual input (ex: handwriting)
according to general patterns
c. Natural Language Processing – programs designed to take human language as input and translate it into a
standard set of statements that a computer can execute
Goal: to eliminate programming...
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d.Neural Networks – designed to mimic the way the human brain operates – the way it links facts, draws
conclusions and use experience to learn & to understand how new facts relate to each other.
e.Fuzzy Logic – based on logic that do not have discrete boundaries but lie along a continuum, enabling a
system to better deal with ambiguity.
Allows computer applications to solve problems in a manner that is more humanlike
f. Genetic Algorithms – math functions that use Darwinian principles to improve application.
Software mimics a living organisms improve through mutation and natural selection,
based on their success or failure surviving the physical environment.
g.Intelligent Agents – computer programs that automatically wade through massive amounts of data and select
and deliver the most suitable information for the user, according to the contextual or specific requirements.
Major application is on the web
h.EXPERT SYSTEMS
Programs to solve problems in specific areas by utilizing experts’ knowledge and
reasoning.
Purpose: replicate the unstructured and undocumented knowledge the few (experts), and
put it at the disposal of others.
Formulated based on the experience of experts
Examples:
DENDRAL – identifies molecules from spectroscopic data (Stanford U in 1965)
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MACSYMA – solver of complex mathematical problems (MIT in 969)
MYCIN – system for diagnosis of bacterial diseases (Stanford U in 1973)
PROSPECTOR – software to target sites for molybdenum exploration based on geological
data input (SRI Int. 1980)
Contribution of Expert Systems
oEnhance product/service quality
oEnforce consistent reasoning
oGain more insight into decision making process
oBetter control complex systems
oDistribute scarce expertise
oPreserve expertise
oTrain less-experienced employees
oReduce costs
oMonitor vast amounts of information
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AREAS where Es can help in business
oPlanning. It can use information from previous projects to improve subsequent plans. Example: by
cautioning the planner against pitfalls that may cause budget and time overruns.
oDecision making. Supports decision making by bringing input from several experts, thereby providing the
organization with a true strategic weapon.
oMonitoring. Monitor industrial processes, cash management & employee activities
oDiagnosis. Diagnosing different conditions like malfunctioning equipment, products or processes; or
hardware problems & their solutions
oTraining. Contain an explanation facility that describes the logic being used to address the problem at
hand. Teach users decision rules.
oIncidental learning. While users use ES in their regular work, they internalize how the system reaches
decisions; thereby increasing their own expertise and makes them better decision makers.
oReplication of expertise. Since it is software, it can be replicated and disseminated, thereby implementing
the same expertise in the organization
oTimely response. ready at all times to provide immediate support and to perform processes.
oConsistent solutions. Consistency in decision making, thereby managers makes consistent solutions.
Limitation of expert systems
oHandle only narrow domains
oDo not possess common sense
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oLimited ability to learn
Systems acquisition, Control and Security
Aquisition
a. Traditionally – IS is developed in-house
b. Now – many go into:
c. Outsourcing
d. IS subsidiaries
e. Pre-packaged software
f. Renting the application
Either: at-site renting or through the web
g. User-developed applications
Outsourcing
Contracting with an IT (software) company for the development
That the organization trusts all the activities associated with its ISs.
i. Companies go for long term service (like maintenance) aside from just purchasing the hardware &
software.
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ii. Maybe: short-term or long-term contractual relationship.
Advantages of outsourcing
h. Improve financial planning
i. Reduce license and maintenance fee
j. Increased attention to core business
k. Shorten implementation cycles
l. Reduction of personnel and fixed costs
m. Increased access to highly qualified know-how
n. Availability of ongoing consulting as part of standard support
o. Increased security
Risk of outsourcing
p. Loss of control
q. Loss of experienced employees
r.Risks of losing a competitive advantage
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IS Subsidiary
s. IS vendors like other IT consulting firm but they always have a primary client – the company that
owns them
t.Ex: American Airlines, Chevron & Boeing - own an IS subsidiary
Advantage:
u. The parent company has priority over other clients
v. Subsidiary’s potential to generate additional revenue for the parent.
Purchased applications
w. First alternative to consider must be purchasing pre-packaged software
x. Buyer gains many benefits
y. Immediate system availability
z. High quality
aa. Low price
bb. Available support
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RENTING a SOFTWARE
cc. Solve the problem on software obsoleteness
dd. Nowadays, software is good to 2-3 years or even less, another version is introduced
i. On-site renting – rent software in a limited period and pay less than owning a system
ii. Renting through the web – application services providers
Information security
ee.Reduce the risk of systems and organizations ceasing operations
ff. Maintain information confidentiality
gg.Ensure the integrity and reliability of data resources
hh.Ensure the availability of data resources
ii. Ensure compliance with national security laws and privacy policies and law
Risks to Information Systems
jj. Risk to hardware
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Natural disaster
Blackouts and brownouts
Solution: UPS
Vandalism – destroy hardware
kk. Risk to Applications & Data
Theft of information
solution: key/password
Data alteration and destruction – act of mischief (data diddling)
Computer viruses
Unauthorized remote control programs
Controls
ll. Constraints and other measures imposed on a user or a system.
mm. Common controls:
i. Program robustness and Data entry controls
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ii. Backup
iii. Access controls
iv. Atomic transactions
v. Audit trail
vi. Program robustness and Data entry controls
vii. Robust – when a computer program is powerful in what it is intended to do, resists inappropriate usage
like incorrect data entry.
viii. It takes every possible misuse or abuse in data entry
ix. It gives a message when data entry violates data parameters and processes
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nn. Backup
i.Easiest way to protect against loss of data caused by disasters, viruses & human errors. (ex: SPU coop
has a backup)
ii. Backing up – duplicate data periodically and place it in another storage and even other place
oo. Access Controls
i. are measures taken to ensure that only those who are authorized have access to a computer network or
to certain apps or data.
ii. Use of UserID and password
iii. Use of biometrics – physical access control
pp. Atomics Transactions
i. A system supports atomic transactions when its code will only allow the recording of data if they
successfully reach their destinations.
ii. It ensures that only full entry occurs in all appropriate files
iii. Example: order system where sale is recorded in shipping file, invoice file, A/R file and commission file.
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qq.Audit Trail
i. a series of documented facts that help detect who recorded which transactions, at what time, and under
whose approval.
ii. Audit log is created
iii. Purposes:
* When abuses are found, they can be traced
* Fear of detection will indirectly discourage abuse.s
Integrating Security into development
rr. Use security standards, such as
i. Trusted Computer System Evaluation Criteria (TCSEC) – the orange book
ii. ISO/IEC (International Electrotechnical Comm) Standard – Info Tech-Security Techniques-Evaluation
Criteria
ss. Separation of duties
i. In systems development
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ii. In using the system
tt.Network Controls, such as:
1. Callback – popular measure against unauthorized remote access. When a modem dials into a system, aspecial application asks for the tel.no. from which the call has been made...
2. Encryption
- Authentication – process of ensuring that the person who sends a message to or receives amessage from you is indeed that person
- Encryption – coding a message into a form unreadable to an interceptor.
3. Digital Certificate
- Equivalent of a physical ID card containing a public key and a digital signature
4. Firewalls
- The best defense against unauthorized access to system over the internet
- A software who purpose is to block access to computing resources.