Decision Support Systems
Managers and Decision
Why Managers Need the Support of Information
It is very difficult to make good
valid, timely and relevant
to be considered is increasing
Many decisions are made under
in the decision environment, it is
frequently necessary to conduct a sophisticated analysis.
It is often necessary to rapidly access
refers to a choice made between alternatives.
Can we make better decisions?
Decision makers go through a fairly systematic process.
Act on it
“Process or Problem”
Courses of Action
The nature of decisions
Information systems can support
making levels. These include
the three levels of management
Strategic management, tactical
management, and operational
A board of directors and an executive
committee of the CEO develop long
Decisions made at the strategic level
tend to be
level mangers deal with middle
level management activities such as
term planning, medium range
plans and control.
Decisions made at the tactical
management level tend to be
Operating managers deal with day
day operations of an organization,
such as assigning employees to tasks,
or placing or purchase an order.
Decisions made at the operational
management level tend to be more
Structured decisions are repetitive
and routine problems for which
standard solutions exist.
Ex: finding an appropriate inventory
level, finding an optimal investment
MIS primarily analyzes structured
structured problems fall between
structured and unstructured problems.
Only some of the phases are structured in
It requires a combination of standard
procedures and individual judgment.
Ex: annual evaluation of employees,
trading bonds, setting marketing budgets
for consumer products.
Unstructured problems are novel and non
For unstructured problems we cannot
specify some procedures to make a
Ex: expanding the business, moving
operations to foreign countries.
IS must provide a wide range of
information products to support these types
of decisions at all levels of the organization.
Decision making ranges from simple to very complex decisions that
fall along a continuum that ranges from structured to unstructured.
processes refer to routine & repetitive problems with
standard solutions. While
are "fuzzy," complex problems
with no clear
Impor t ant
Inf or mat i on
Unst r uct ur ed
st r uct ur ed
St r uct ur ed
It s been
done bef or e
Oper at ional
St r at egic
Repet i t i ve
Day t o Day
Mul t i
Di mensi onal
Oper at i on
Pr obl em
Obj ect i ve
Management Support Systems
Management Information Systems
Decision Support Systems
Executive Information Systems
MIS primarily provides information on
the firm’s performance to help
managers in monitoring and
controlling the business.
Information provided by MIS is used by
decision makers at the operational and
tactical levels of organization.
They face with more
types of decision situations.
A typical MIS report might show a
summary of monthly sales for each of the
major sales territories of a company.
MIS typically produces
scheduled reports based on data extracted
and summarized from the organization's
underlying transaction processing systems.
Sometimes MIS produces
reports, highlighting only exceptional
conditions, such as when the sales quotas for
a specific territory fall below an anticipated
level or employees who have exceeded their
spending limit in a dental care plan.
Traditional MIS produced primarily hard copy
Today, these reports might be available
online through an intranet, and more MIS
reports can be generated on demand.
Decision Support Systems
DSS is a part of special category of information systems
that are designed to enhance managerial decision
Decision support system (DSS)
is a computer
information system that combines models and data in
an attempt to solve semi
structured and unstructured
problems with user involvement.
They help managers make more effective decisions by
answering complex questions such as;
Should a newer, more powerful machine replace two
older pieces of equipment?
Should your company sell directly to the retail market,
continue to sell through distributors, or both?
Should your company order parts more frequently and in
DSSs help managers make decisions
that are unique, rapidly changing and
not easily specified in advance.
Although DSS uses internal
information from TPS and MIS, it also
uses external sources, such as
current stock prices or product prices
DSSs combine data and sophisticated
analytical models to support semi
structured and unstructured decision
DSSs help managers better use their
knowledge and help create new
They are essential components of
knowledge management systems.
DSS relies on model bases and databases.
in decision making
) is a simplified
Simplified because reality is
too complex to copy exactly and much of the
processes complexity is irrelevant to a specific
is a software component that
contains all the models used to develop applications
to run the system.
DSS uses models to manipulate data.
: If you have some historic sales data, you can use
many different types of models to create a forecast of
DSS software is a collection of
software tools that are used for data
analysis or a collection of
mathematical and analytical models.
There can be 3 different types of
modeling software for DSSs:
Statistical modeling software can be
used to help establish relationships
such as relating product sales to
differences in age, income or other
factors between communities.
Optimization models often using
Linear Programming (LP) determine
the proper mix of products within a
given market to maximize profit.
The user of this type of model might
supply a range of historical data to
project future conditions and sales
that might result from those
Companies often use this software to
predict the action of competitors.
Capabilities of DSS
Using a DSS involves 4 basic types of
analytical modeling activities:
An end user makes predictions and assumptions
regarding the input data, many of which are based
on the assessment of uncertain futures.
When the model is solved, the results depend on
if analysis attempts to check the impact of a
change in the assumptions on the proposed
will happen to the total inventory cost
the originally assumed cost of carrying inventories
is not 10 percent but 12 percent? Or,
the market share
the initially assumed
advertising budget is overspent by 5 percent?
In a well designed DSS, managers themselves can
interactively ask the computer these types of
questions as many times as needed.
Investigation of the effect that
changes in one or more parts of a
model have on other parts of the
Usually we check the impact that
changes in input variables on output
It is a special case of
Attempts to find the value of the inputs
necessary to achieve a desired level of
: let us say that a DSS solution yielded a
profit of $ 2 million. Management wants to
know that what sales volume and additional
advertising would be necessary to generate
a profit of $2.7 million. This is a goal
Often uses Linear Programming.
Determines optimal resource
allocation to max or minimize
specified variable such as cost, profit,
revenue, or risk.
A classic use of optimization analysis
is to determine the proper mix
products within a given market to
The benefits of DSSs
Improved decision making through better
understanding of the businesses
An increased number of decision
The ability to implement ad hoc analysis
Faster response to expended situations
More effective teamwork
Time and costs savings
Uses data from TPS, MIS, and
Uses data from TPS.
Emphasis on models.
Assumptions, display graphics.
Not fixed format reports.
specified, fixed format
Addresses structured and
Data visualization refers to
data by technologies such as digital
images, geographical information systems,
graphical user interfaces, multidimensional
tables and graphs, virtual reality, three
dimensional presentations, videos and
By presenting data in graphical form helps
users see patterns.
Visualization software packages offer users
capabilities for self
guided exploration and
visual analysis of large amounts of data.
Geographical Information System
geographical information system
) is a computer
based system for capturing, storing, checking,
integrating, manipulating, and displaying data using
digitized maps. Every record or digital object has an
identified geographical location. It employs spatially
GIS software uses geographic information tying data to
points, lines and areas on a map.
GIS software simplifies the analysis and visualization of
information about entities whose physical location is
GIS can be used to support decisions that require
knowledge about the geographic distribution of people or
other resources in scientific research and resource
GIS might be used to help state and
local governments calculate
emergency response times to natural
disasters or to help banks identify the
best locations for installing new
branches or ATM terminals.
GIS tools have become affordable
even for small businesses and some
can be used on the Web.
What the application does
Helps select new locations for Taco Bell and Pizza
Hut restaurants by combining demographic data
and traffic patterns.
Supports planning of truck routes
Maps company’s entire cellular network to identify
clusters of call disconnects and to dispatch
Direct drivers to destinations
Manages leased property in dozens of places
Wilkening & Co.
Designs optimal sales territories and routes for
clients, reducing travel costs by 15 percent
Executive Information Systems
executive information system (EIS),
known as an
executive support system
is a technology designed in response
to the specific needs of top
EIS help managers with unstructured
problems, focusing on the information
needs of Senior management.
EIS helps senior executives monitor
organizational performance, track activities
of competitors, spot problems, identify
opportunities, and forecast trends.
very user friendly
supported by graphics
provides the capabilities of
(reporting only the results that
deviate from a set standard)
information in increasing detail).
Contemporary EIS can bring together data
from all parts of the organization and allow
managers to select, access them as needed
use desktop analytical tools
and online data displays.
It also helps managers to determine the
critical success factors which are critical to
accomplishing an organization's objective.
Today’s systems try to avoid the problem of
data overload because data can be filtered
and viewed in graphic format.
EIS has the ability to
moving from a piece of summary data
to lower and lower levels of detail.
capability provides details
behind any given information.
External data including data from Web are
now easily available in many EISs.
Executives need a variety of external data
from current stock market news to
competitor information, industry trends.
Through their EIS, many managers have
access to news services, financial market
databases and economic information.
EIS includes tools for modeling and analysis.
With only a min. experience, most managers
can use these tools to create graphic
comparisons of data by time, region,
product, price, and so on.
EIS provides for
with which executives can make specific
requests for data analysis. Instead of merely
having access to existing reports, the
executives can do creative analysis on their
ABILITY TO ANALYZE, COMPARE,
GRAPHICS HELP EXPLORE SITUATION
TIMELINESS, AVAILABILITY OF DATA
ALLOWS PROMPT ACTION
Data mining for Decision Support
is a tool for analyzing
large amounts of data.
It derives its name from the
similarities between searching for
valuable business information in a
large database, and mining a
mountain for a vein of valuable ore.
Data mining helps organize information by
analyzing huge quantities of data and
looking for patterns, trends, associations,
exceptions, and changes in data that are
too complicated for normal human
Data mining uses a variety of tools, such as
artificial intelligence and statistical and
visualization tools to analyze the data in a
Artificial Intelligence (AI)
Will computers be smarter than
Several capabilities are considered to
be the signs of intelligence: learning
and understanding from experience,
responding quickly and successfully to
a new situation, dealing with complex
Artificial intelligence (AI)
with studying the thought processes of
humans and representing those
processes via machines (computers,
robots, and so on).
s ultimate goal is to build machines
that will mimic human intelligence.
Why businesses are interested in AI;
To create a mechanism that is not subject
to human feelings, such as fatigue and
To eliminate routine and unsatisfying jobs
held by people.
To enhance the organization's knowledge
base by generating solutions to specific
problems that are too massive and complex
to be analyzed by human being in a short
period of time.
Visual & Auditory
Major areas of AI
Artificial neural networks (ANNs)
simulate massive parallel processes
that involve processing elements
interconnected in a network.
deals with uncertainties
by simulating the process of human
reasoning, allowing the computer to
behave less precisely and logically
than conventional computers do.
It is an attempt to
mimic human experts.
It is decision
making software that can reach a level
of performance comparable to a human
expert in some specialized and usually
narrow problem area.
Major areas of AI
1. Cognitive science
: It is based on
research in biology, neurology,
mathematic and many disciplines. It
focuses on researching how the
human brain works and how human
think and learn.
Its major applications are intelligent
agents, neural networks, and fuzzy
Intelligent agents represent a new
technology with the potential to become
one of the most important tools of
It is a software surrogate for end user or
process that fulfills a stated need or
is one of its examples. Wizard is a
in package capability that watches
users and offers suggestions as they
attempt to perform tasks by themselves.
: Excel’s or Word’s wizards.
Artificial Neural Networks (ANN)
It is an architecture that mimics certain data
processing capabilities of human brain.
It is a computer model which can handle fast retrieval
of large amounts of information and has the ability to
recognize patterns based on experiences.
It consists of interconnected processing elements,
It emulates a biological neural network.
The neurons in an ANN receive information from other
neurons or from external sources, transform the
information, and pass it on to other neurons or as
The value of neural network technology
includes its usefulness for pattern
recognition, learning, and the interpretation
of incomplete inputs.
ANNs have the potential to provide some of
the human characteristics of problem
solving that are difficult to simulate using
the logical, analytical techniques of DSSs.
ANN can analyze large quantities of data to
discover patterns and characteristics in
situations where the logic or rules are not
: Loan applications would be a good example.
By reviewing many historical cases of applicants’
responses to questionnaires and the granting
decisions (yes or no), the ANN can create “patterns”
or “profiles” of applications that should be approved,
or those that should be denied.
Let us say, a new application is matched against the
pattern. If it comes close enough, the computer
classifies it as a “yes” or “no”.
Otherwise it goes to a human to decide.
Applications can thus be processed more rapidly.
Specific business areas that are well
suited to the use of
Tax fraud: identifying, enhancing, and finding
Airline management: seat demand forecasting and crew
Prediction of consumer behavior on the Internet:
predicting consumer behavior in order to plan e
Stocks, bonds, and commodity selection and trading:
analyzing various investment alternatives, including
pricing of initial public offerings.
Signature validation: matching against previous
Evaluation of personnel and job candidates: matching
personnel data to job requirements and performance
It deals with uncertainties by simulating the
process of human reasoning.
These systems allow computers to behave
less precisely and logically than
conventional computers do.
The idea behind this approach is that
decision making is not always a matter of
true or false, black and white.
It often involves gray areas where the
are more appropriate.
: The variable “height”.
Most people would agree that if you are above 6 feet, you are
Similarly, if your height is less than 5 feet, you are short.
But between 6 feet and 5.75 feet, there is less probability that
you will be considered tall.
Similarly, between 5 and 5.25 feet some will consider you short.
Notice that in the area between 5.25 and 5.75 feet you have a
chance for being considered either short or tall.
Fuzzy logic systems can process such data that are ambiguous,
that is fuzzy data, instead of relying only on crisp data, such as
binary (yes/no) choices.
It quickly provides approximate, but acceptable solutions to
It allows for approximate values and inferences.
Currently there are only a few examples of fuzzy logic
applications in business.
trade shares on the Tokyo Stock Exchange using a
trading program based on fuzzy logic rules.
Major Areas of AI (cont’d)
2.Robotics: Robot machines are
electromechanical devices that can be
programmed and reprogrammed to
automate manual tasks.
In computer aided manufacturing
robotics are used.
Major Areas of AI (cont’d)
is an example of natural
Virtual reality is a computer
Human users can experience computer
spaces, activities as if they actually exist.
It is interactive, uses computer
Ex: NEC Corporation (Japan) developed a ski simulator,
which is available in amusement centers. It is also used for
Expert systems are an attempt to mimic
It is a decision
making software that can
reach a level of performance comparable to
a human expert in some specialized and
usually narrow problem area.
The idea is simple:
from an expert or other source of expertise
to the computer.
It captures the expertise of an expert or group
of experts in a computer
The necessary expertise is stored electronically
in a knowledge base.
The computer is programmed so that it can
During the past few years, the technology of
expert systems have been successfully applied
in thousands of organizations worldwide to
problems ranging from identifying credit card
fraud to medical diagnosis to the analysis of
dust in mines.