MIS 05 Decision Support Systems

Management information systemThird Year Information TechnologyPart 05Decision Support SystemsTushar B Kute,Department of Information Technology,Sandip Institute of Technology and Research Centre, Nashikhttp://www.tusharkute.com

Problem-Solving and Decision Making ReviewProblem solving consists of response to things going well and also to things going badly.Problem is a condition or event that is harmful or potentially harmful to a firm or that is beneficial or potentially beneficial.Decision making is the act of selecting from alternative problem solutions.Decision is a selected course of action.

How Decision Making Relates to Problem Solving

Problem-Solving PhasesHerbert A. Simon’s four basic phases:Intelligence activity–Searching the environment for conditions calling for a solution.Design activity–inventing, developing, and analyzing possible course of actions.Choice activity–Selecting a particular course of action from those available.Review activity–Assessing past choices.

ImportantDecision SupportSystemsAnalytical ModelsWhat If-AnalysisSensitivity AnalysisGoal-Seeking AnalysisOptimization AnalysisDecision Support Systems

Frameworks and Systems ApproachProblem-solving frameworksGeneral systems model of the firm.Eight-element environmental model.Systems approach to problem-solving, involves a series of steps grouped into three phases–preparation effort, definition effort, and solution effort.

The Importance of a Systems ViewSystems view which regards business operations as systems embedded within a larger environmental setting; abstract way of thinking; potential value to the manager.Prevents the manager from getting lost in the complexity of the organizational structure and details of the job.Recognizes the necessity of having good objectives.Emphasizes the importance of all of the parts of the organization working together.Acknowledges the interconnections of the organization with its environment.Places a high value on feedback information that can only be achieved by means of a closed-loop system.

Elements of the Problem-Solving Process

Selecting the Best SolutionHenry Mintzberg, management theorist, has identified three approaches:Analysis–a systematic evaluation of options.Judgment–the mental process of a single manager.Bargaining–negotiations between several managers.

Types of DecisionsProgrammed decisions are “repetitive and routine, to the extent that a definite procedure has been worked out for handling them so that they don’t have to be treated de novo (as new) each time they occur.”Nonprogrammed decisions are “novel, unstructured, and unusually consequential. There’s no cut-and-dried method for handling the problem because its precise nature and structure are elusive or complex, and or because it is so important that it deserves a custom-tailored treatment.”

Decision Support SystemsGorry and Scott Morton (1971) argued that an information system that focused on single problems faced by single managers would provide better support.Central to their concept was a table, called the Gorry-Scott Morton grid (Figure next slide) that classifies problems in terms of problem structure and management level. The top level is called the strategic planning level, the middle level-the management control level, and the lower level-the operational control level.Gorry and Scott Morton also used the term decision support system (DSS) to describe the systems that could provide the needed support.

The Gorry and Scott-Morton Grid

A DSS ModelOriginally the DSS was conceived to produce periodic and special reports (responses to database queries), and outputs from mathematical models.An ability was added to permit problem solvers to work in groups.The addition of groupware enabled the system to function as a group decision support system (GDSS).The arrow at the bottom indicates how the configuration has expanded over time. More recently, artificial intelligence (AI) capability has been added, along with an ability to engage in on-line analytical programming (OLAP).

Types of decision support systemsStatus inquiry systemDoes not call for any elaborate computations, analysis, choice etc. for decision making. If status is known decision is automatic.Data Analysis SystemDecision system are based on comparative analysis and use of formula or algorithm. But, these processes are not structured. Information Analysis SystemData is analysis and reports are generated.Accounting SystemIt is desirable to keep track of major aspects of the business or function.

Types of decision support systemsModel Based SystemsThese systems are the simulation models of optimization models for decision making.

Some more factsDSS are developed by the users and System Analysts jointly.They uses the principle of economics, science and engineering and also tools and techniques of management.The data used in the DSS is drawn from the information systems developed in the company.The DSS are developed in isolation and form an independent system subset of the MIS.The data and information

Using decision support systems: multiple goalsToday’s management systems are much more complex and one with single goal is rare. Instead some managers want to attain multiple goals.For example: a profit making firm.In addition to earning money, the company wants to grow, develop its products and employees, provide job security to its workers and serve the community.

Difficulties in multiple goalsIt is usually difficult to obtain an explicit statement of organization’s goal.The decision maker may change the importance assigned to specific goals over time or different decision scenarios.Goals and sub-goals are viewed differently at various levels of organization and within different departments.Goals change in response to changes in the organization and its environment.Complex problems are solved by groups of decision makers, each of whom has a personal agenda.Participants assess the importance (priorities) of the various goals differently.

Methods of handling multiple goalsUtility theoryGoal ProgrammingExpression of goals as constraints, using LPA points system

Sensitivity analysisA model builder makes predictions and assumptions regarding input data, many of which deal with the assessment of uncertain futures. When the model is solved, the result depends upon these data.Sensitivity analysis attempts to assess the impact of a change in the input data or parameters on the proposed solution.It allows flexibility and adaptation to changing conditions and to the requirements of decision making situations.

Sensitivity analysis uses–Revising models to eliminate too-large sensitivities.Adding details about sensitive variables or scenarios.Obtaining better estimates of sensitive external variables.Altering a real-world system to reduce actual sensitivities.Accepting and using the sensitive real world, leading to continuous and close monitoring of actual results.

Types of sensitivity analysisAutomatic Sensitivity Analysis.Trial-and-error Analysis.

automatic sensitivity analysisIt is performed in standard quantitative model implementations such as LP.For example: it reports the range within which a certain input variable or parameter value can vary without having any significant impact on the proposed solution.

Trial and error analysisThe impact of changes in any variable, or in several variables can be determined through this approach.These experimentation is easy to conduct using MS-Excel.

What-if analysisWhat-if analysis is structured as what will happen to the solution if input variable, an assumption, or a parameter value is changed?Example: What will happen to the total inventory cost is the cost of carrying inventories increased by 10%?What will be the market share if the advertising budget increases by 5%?Computer models are used to get the immediate answers.

Goal seekingIt calculates the value of the inputs necessary to achieve a desired level of output (goal). It represents a backward solution approach. Example:What annual R&D budget is needed for an annual growth rate of 15% by 2011?How many nurses are needed to reduce the average waiting time of a patient in the emergency room to less than 10 minutes?

A DSS Model that Incorporates Group Decision Support, OLAP, and Artificial Intelligence

Mathematical ModelingModel is an abstraction of something. It represents some object or activity, which is called an entity.There are four basic types of models:Physical model is a three-dimensional representation of its entity. Narrative model, which describes its entity with spoken or written words. Graphic model represents its entity with an abstraction of lines, symbols, or shapes (Figure 11.4).Economic order quantity (EOQ) is the optimum quantity of replenishment stock to order from a supplier. Mathematical model is any mathematical formula or equation.

Uses of ModelsFacilitate Understanding: Once a simple model is understood, it can gradually be made more complex so as to more accurately represent its entity. Facilitate Communication: All four types of models can communicate information quickly and accurately. Predict the Future: The mathematical model can predict what might happen in the future but a manager must use judgment and intuition in evaluating the output. A mathematical model can be classified in terms of three dimensions: the influence of time, the degree of certainty, and the ability to achieve optimization.

Classes of Mathematical ModelsStatic model doesn’t include time as a variable but deals only with a particular point in time. Dynamicmodel includes time as a variable;it represents the behavior of the entity over time.Probabilistic model includes probabilities. Otherwise, it is a deterministicmodel.Probability is the chance that something will happen.Optimizing model is one that selects the best solution among the alternatives. Suboptimizingmodel (satisficing model) does not identify the decisions that will produce the best outcome but leaves that task to the manager.

Components of a Decision Support SystemModel base: provides decision makers access to a variety of models and assists them in decision makingDatabaseExternal database accessAccess to the Internet and corporate intranet, networks, and other computer systemsDialogue manager: allows decision makers to easily access and manipulate the DSS and to use common business terms and phrases

Group decision support systemsThe GDSS is the interactive computer-based system that facilitates the solution of semi-structured and unstructured problems by the group of decision makers.The goal of GDSS is to improve the productivity of decision making meetings, either by speeding up the decision making process, by improving the quality of resulting decisions or both.

Similarities Between GDSS and DSSBoth use models, data and user-friendly softwareBoth are interactive with “what-if” capabilitiesBoth use internal and external dataBoth allow the decision maker to take an active roleBoth have flexible systemsBoth have graphical output

Why Use GDSS?High level managers can spend 80% of their time making decisions in groups. Applied correctly, GDSS can reduce this time, arriving at a better decision faster.GDSS provides the hardware, software, databases and procedures for effective decision making.

Characteristics of GDSSSpecial DesignEase of useSpecific and general supportSuppressing negative group behaviorSupporting positive group behavior

Typical GDSS Meeting CharacteristicsOrganizational commitment/supportTrained facilitators or may be user drivenUser training Anonymity Appropriate tasks Dedicated decision rooms

Advantages of GDSSAnonymity – drive out fear leading to better decisions from a diverse hierarchy of decision makersParallel Communication – eliminate monopolizing providing increased participation, better decisionsAutomated record keeping – no need to take notes, they’re automatically recordedAbility for virtual meetings – only need hardware, software and people connectedPortability - Can be set up to be portable… laptopGlobal Potential - People can be connected across the worldNo need for a computer guru – although some basic experience is a must.

Disadvantages of GDSSCost–infrastructure costs to provide the hardware and software/room/network connectivity can be very expensiveSecurity – especially true when companies rent the facilities for GDSS; also, the facilitator may be a lower-level employee who may leak information to peersTechnical Failure – power loss, loss of connectivity, relies heavily on bandwidth and LAN/WAN infrastructure – properly setup system should minimize this riskKeyboarding Skills – reduced participation may result due to frustrationTraining – learning curve is present for users, varies by situationPerception of messages – lack of verbal communication could lead to misinterpretation

Typical GDSS Process1) Group Leader (and Facilitator?) select software, develop agenda 2) Participants meet (in decision room/Internet) and are given a task. 3) Participants generate ideas – brainstorm anonymously4) Facilitator organize ideas into categories (different for user-driven software)5) Discussion and prioritization – may involve ranking by some criteria and/or rating to the facilitators scale6) Repeat Steps 3, 4, 5 as necessary 7) Reach decision8) Recommend providing feedback on decision and results to all involved

Facilities for gdssDiscussion RoomsExample– Ohio school district built a portable facility in bus (the driver’s seat turns around to become the facilitator's seat)Multiple-use facilityExample– The Terry college of Business, University of Georgia, Sanford Hall has 48-seat lab computer classroom with GroupSystems and MeetingRoom installed.Internet or intranet based groupwareExample– Lotus Notes, Groove, WebEx, PlaceWare, GroupSystems, NetMeeting.

Decision Rooms:Arizona Public Service Technical ClassroomExecutive Decision Room – CMI – Center for the Management of Information – University of ArizonaDecision Information Center – CMI - Center for the Management of Information – University of ArizonaPortable "Rigs“ - CMI - Center for the Management of Information – University of Arizona

Examples of GDSS taken directly fromhttp://cicero.com1) “One example of implementation of GDSS is at IBM. They, as well as many other corporations, initiated GDSS to improve group meetings. A specific case involved a plant manager not being able to identify the cause of problems with shop floor control. After having a meeting for two hours with plant personnel all that resulted were arguments and bad feelings.So after meeting with the company's GDSS facilitator, the manager decided to have ten plant employees, himself, and two junior analysts participate in a GDSS program. They would use electronic brainstorming and voting to resolve the shop floor control problem.The manager and the facilitator decided the topic would be "What are the key issues in improving shop floor control?"After brainstorming for 35 minutes and compiling 645 lines of suggestions, ideas and comments on how to improve shop floor control, the manager found that he had gotten useful information about the issue for the first time.A list was compiled of the comments and then the members of the group ranked them in order of importance. The results were displayed and a discussion occurred for ten minutes. The manager thanked the participants and was given a printout of all the discussion and results of the group vote (Aiken 3).”2) “Another example is Hewlett-Packard. Their human-factors engineers work at locations all over the world. And they meet in person only once a year. The rest of the time, they have frequent, ongoing meetings to discuss professional and company issues. But they have these discussions through an electronic conference and final decision making is done with the aid of GDSS (Sproull 121).”

Best Uses Of GDSSComplex decision makingFor Large Groups – a meeting of 2 or 3 people does not justify GDSS investment

Group Support SystemsGroup support system (GSS)Consists of most elements in a DSS, plus software to provide effective support in group decision makingAlso called group support system or computerized collaborative work system

GSSGSS can be considered in terms of the common group activities that can benefit from computer based support – Information retrieval.Information sharing.Information use.

Characteristics of a GSS That Enhance Decision MakingSpecial designEase of useFlexibilityDecision-making support

Characteristics of a GSS That Enhance Decision Making (continued)Anonymous inputReduction of negative group behaviorParallel communicationAutomated record keeping

Electronic meeting systemIt is a form of GSS that support anytime / anyplace meetings.Group tasks include, but are not limited to, communication, planning of a meeting, idea generation, problem solving, issue discussion, negotiation, conflicts resolution, and collaborative group activities.EMS may include desktop videoconferencing, whereas in the past GSS did not.

referenceWamanJawadekar, "Management Information Systems” , 4th Edition, Tata McGraw-Hill Publishing Company Limited.

MIS 05 Decision Support Systems

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MIS 05 Decision Support Systems