Decision Support Systems and Executive Support Systems

Three types of decision/Problems

• Structured: given set of rules (objective)

• Semi-structured: objectivity and intuitive

• Unstructured: predominately intuitive

Structured

• Structured decisions are those which are made according to specified procedures of rules or structured decisions are those that are easily made from a given set of inputs.

• Deciding to send a reminder notice to a customer for an overdue balance is considered to be structured decision

Semi-structured

• Semi-structured decisions are those for which information obtained from a computer system or information system is only a portion of the total knowledge needed to make decision.

• Advertise a new product or how much to spend on MIS.

Unstructured• Unstructured decisions are novel, and significant. • There is no cut and dried method for handling the

problem because it hasn't arisen before or because it's precise nature and structure are mysterious or complex, or because it so important' that it deserves a custom tailored treatment.

• These, types of decisions often , involve a high degree of freedom.

• They may require a lot of creativity and intuitions from the decision maker to tell what factors will come into play in an unstructured play.

Operational level systems

• To answer routine questions and track the flow of transactions through the organization. Therefore, information generally must be easily available, current, and accurate.

• Supporting operational managers by keeping track of the elementary activities and transactions of the organization, such as sales, receipts, cash deposits, payroll, credit decisions, and the flow of materials in a factory

Management-level Systems

• To serve the monitoring, controlling, decision-making, and administrative activities of middle managers

• Typically providing periodic reports rather than instant information on operations

– Including control systems for annual budgeting and inventory, and management systems for sales and human resources

Strategic-level systems

• To match changes in the external environment with existing organizational capability

• Helping senior management deal with and address strategic issues and long-term trends, both in the firm and in the external environment– Including a system to forecast sales trends over a

five-year period or systems for profit planning and personnel planning

Major Types of systems

• Executive Support Systems (ESS)• Decision Support Systems (DSS)• Management Information Systems (MIS)• Transaction Processing Systems (TPS)

Characteristics of a transaction processing system

• Records internal and external transactions that take place in a company

• Is used mostly by lower-level managers to make operational decisions

• Stores data that are frequently accessed by other systems• Is ideal for routine, repetitive tasks• Records transactions in batch mode or on-line• Requires six steps to process a transaction—data entry,

validation, data processing, storage, output generation, and query support

TPS payroll system

MIS systems obtain data from TPS systems

MIS report

What I.S. technology could help to generate this report?

Definition of decision support system

• Decision Support Systems (DSS) are a specific class of computerized information system that supports business and organizational decision-making activities.

Objective of DSS

• The objective of Decision Support System (DSS) is to support managers in their work, especially decision making.

• Decision support system (DSS) tends to be used in planning, modelling, analysing alternatives, and decision making.

• The emphasis is on small, simple models which can easily be understood and used by the manager rather than complex integrated systems which need information specialist to operate them.

Examples

Typical information that a decision support application might gather and present would be:• Accessing all of your current information assets, including

legacy and relational data sources, cubes, data warehouses, and data marts

• Comparative sales figures between one week and the next• Projected revenue figures based on new product sales

assumptions• The consequences of different decision alternatives, given

past experience in a context that is described

Differences to MIS

• What distinguished MIS from a decision support system (DSS) is flexibility.

• The format and types of information on MIS are predefined, but the format and types of information in decision support system (DSS) are not

• In decision support system (DSS), users are provided with the capabilities to generate their own information usually in their own way.

Making decision

• Four stages1. Intelligence2. Design3. Choice4. Implementation

Intelligence (find what to fix)Find or recognize a problem, need, or opportunity (also called the diagnostic phase of decision making). The intelligence phase involves detecting and interpreting signs that indicate a situation which needs your attention. These "signs" can come in many forms:• Consistent customer requests for new-product features• The threat of new competition• Declining sales• Skyrocketing costs• An offer from a company to handle your distribution needs,

and so on

Design (find fixes)

• Consider possible ways of solving the problem, filling the need, or taking advantage of the opportunity. In this phase, you develop all the possible solutions you can.

Choice (pick a fix)

Examine and weigh the merits of each solution, estimate the consequences of each, and choose the best one. The "best" solution may depend on such factors as:• Cost• Ease of implementation .• Staffing requirements• Timeliness of the solutionThis is the prescriptive phase of decision making; it's the stage at which a course of action is prescribed.

Implementation (apply the fix)

• Carry out the chosen solution, monitor the results, and make adjustments as necessary. Simply implementing a solution is seldom enough. Your chosen solution will always need fine-tuning, especially for complex problems or changing environments.

Applications of DSS

• DSS are men/machine systems and are suitable for semi-structured problems.

• The problems must be important to the manager and the decision required must be a key one.

Other criteria

• Large database• Large amount of computation or data

manipulation required• Complex inter-relationships• Analysis by stages• Communication

Components of DSS

Interaction of man and machine• Hardware• Software• Decision maker (user/manager)

Functions of DSS

• Information retrieval• Data reconfiguration• Calculator activities

Information retrieval

• Information retrieval in DSS environment refers to the act of extracting information from a database for the purpose of making decisions. Usually, the sequence of retrievals made by the user is unanticipated. – For example, the manager may see a few startling

pieces of information on the display and, as a result of these, suddenly produce a report that provides more detail about the situation: Drill down

Data reconfiguration

• Often managers using a DSS want information in a form other that that in which the data are logically represented within the computer system.

• The ability to reconfigure data makes it possible for managers and other decision makers to look at existing data from alternative perspectives: sorting, exchanging fields, joining, and presentation graphics using online analytical processing and data warehouse

Calculator activities• Functions

– Functions are pre-stored formulas that enable a user to perform a calculator type task as soon as the function is invoked

• Analysis– Analysis refer to using a decision support system (DSS) to

review a set of facts and to assist in drawing conclusions based on there facts.

• Statistical Tools: regression and correlation analysis• Optimizing tools• What if analysis (sensitivity analysis)

Optimizing tools

• Optimizing tools are useful for deriving the best solution in certain structured decisions usually at tactical and operational levels.

• Optimizing tools are used where it is required to optimize the value of a single objective (e.g. production capacity) where the factors invoked (e.g. labour hours, machine capacity etc.) are subject to some constraints or limitation.

What if analysis (sensitivity analysis)

• Assessing risk with the help of DSS tools is known as sensitivity analysis.

• At its simplest this means, holding all the variables, bar one, constant and altering that one variable step and noting the effect on the result. – For example, a simulation of an investment program

might include factors such as; cost per unit, price per unit, volume sold, amount of investment and as on. What if sales growth per month is nil, 1/2%, 1 & 1/2%, 2% or minus 1% etc.

DSS for the supply chain• Comprehensive examination of supply management

chain

• Searches for most efficient and cost-effective combination

• Reduces overall costs

• Increases speed and accuracy of filling customer orders

DSS for Customer Relationship Management

• Uses data mining to guide decisions

• Consolidates customer information into massive data warehouses

• Uses various analytical tools to slice information into small segments

DSS for customer analysis and segmentation

Executive support systems (ESS)

• Senior managers use a category of information systems called executive support systems (ESS) to make decisions.

• ESS serves the strategic level of the organization. • They address unstructured decisions and create a

generalized computing and communications environment rather than providing any fixed application or specific capability

Executive Support Systems (ESS) in Perspective

• Tailored to individual executives– Not to managers in other levels

• Easy to use• Drill down capabilities• Support need for external data• Can help when uncertainty is high• Future-oriented• Linked to value-added processes

Executive support systems (ESS)

• ESS is designed to incorporate data about external events such as new tax laws or competitors, but they also draw summarized information from internal MIS and DSS.

• They filter, compress, and track critical data, emphasizing the reduction of time and effort required to obtain information useful to executives.

• ESS employs the most advanced graphics software and can deliver graphs and data from many sources immediately to a senior executive's.

Executive support systems (ESS)

• Unlike the other types of information systems, ESS is not designed primarily to solve specific problems.

• Instead, ESS provides a generalized computing and telecommunications capacity that can be applied to a changing array of problems.

• While many DSS are designed to be highly analytical, ESS tends to make less use of analytical models.

Sample questions answered by ESS

• What business should we be in?• What are the competitors doing?• What new acquisitions' would protect us from

cyclical business swings?• Which units should we sell to raise cash for

acquisitions?

Features/Properties of an ESS• Ease of use

– The system must be fast and extremely simple to use as it will be used by busy executives. The use of touch screens, mouse and icons, popup menus, etc. is normal.

• Access to data– There must be unhindered rapid access to data permitting vertical and

horizontal exploration. • Data Analysis

– EIS should provide facilities for such things as ratios, trend calculations, and data integration forecasts.

• Quality Presentation– The system should provide interesting and understandable formats using

colours, graphics, and diagrams.

Question

• LOOK at the solution to reword the question

• A decision support system (DSS) uses its analytical capabilities to solved semi-structured and unstructured problems. – Describe what is the difference between such problems

– (5 marks)– Explain how the functions of a DSS can be used to solve

such problems.– (25 marks)

Question

• A Transaction processing system and a management information system are designed to solve structured problems. Distinguish between both systems. (6 marks)

Question

• Distinguish between structured, semi-structured and unstructured decisions. (6 marks)

• What are the essential features of a decision support system. (12 marks)

• Explain, using suitable examples, How can these features help solve semi-structured and unstructured decisions. (12 marks)

• An Executive information systems is designed to solve unstructured problems. Distinguish between this system and the DSS. (6 marks)

Exam Question

• What are the four steps in a decision making process. (8 marks)

• What are the three features of a decision support system. (12 marks).

• Explain how these features can be used to help implement strategies that require a tighter integration with an organisations suppliers and customers. (10 marks)