Decision Support Systems

C H A P T E R

10

Decision Making and Problem Solving

Decision Making: A Problem Solving Component

Decision-making phaseIntelligence stageDesign stageChoice stage

[Figure 10.1]

Decision-Making Phase

Intelligence stage (first stage)Identify and define potential problems and/or

opportunities

Design stage (second stage)Develop alternative solutions to the problem

Choice stage (last stage)Select a course of action

Problem Solving

Decision-making (intelligence, design, and choice) plus:Implementation stageMonitoring stage

[Figure 10.1]

Problem Solving

Implementation stageTake action to put the solution into effect

Monitoring stageEvaluate the implementation of the solution

Programmed vs. Nonprogrammed Decisions

Programmed decisionsAre made using a rule, procedure, or quantitative method

Nonprogrammed decisionsDeal with unusual or exceptional situations

[Figure 10.3]

Optimization, Satisficing, and Heuristic Approaches

Optimization modelInvolves finding the best solution

Some spreadsheets have optimizing routines.

Optimization, Satisficing, and Heuristic Approaches

Satisficing modelInvolves finding a good -- but not necessarily the best --

solution

HeuristicsCommonly accepted guidelines or procedures that usually

find a good solution

Problem-Solving Factors

Multiple decision objectives

Increased alternatives

Increased competition

Need for creativity

Social and political actions

International aspects

Technology

Time compression

An Overview of Decision Support Systems

Decision Support Systems

An organized collection of people, procedures, software, databases, and devices used to support problem-specific decision making

Focus on decision-making effectiveness when faced with unstructured or semi-structured business problems

Characteristics of a DSS

Handles large amounts of data from different sources

Provides report and presentation flexibility

Offers both textual and graphical orientation

Characteristics of a DSS

Supports drill down analysis

Performs complex, sophisticated analysis and comparisons using advanced software packages

Supports optimization, satisficing, and heuristic approaches

Characteristics of a DSS

Performs different types of analyses“What-if” analysis

Makes hypothetical changes to problem and observes impact on the results

SimulationDuplicates features of a real system

Goal-seeking analysisDetermines problem data required for a given result

Sample Goal-Seeking Analysis

[Figure 10.5]

Capabilities of a DSS

Support for problem-solving phases

Support for different decision frequenciesAd hoc DSS

One-of-a-kind

Institutional DSSRepetitive

continued...

Capabilities of a DSS

Support for different problem structuresHighly structured problems

Straightforward; known facts/relationships

Semi-structured or unstructured problemsComplex; unclear data relationships; data in various formats; data

difficult to manipulate or obtain

DSSs and Spheres of Influence

Decision support systems can support all three levels of spheres of influence:Individual support - DSSGroup support - GDSSEnterprise support (top management) - ESS

Components of a Decision Support System

Conceptual Model of a DSS

[Figure 10.9]

The Model Base

Gives decision makers access to a variety of models and assists them in the decision-making process

Model management softwareCoordinates the use of models in a DSS

Types of DSS Models

Financial modelsProvide cash flow, internal rate of return, and other

investment analysis

Statistical analysis modelsProvide summary statistics, trend projections, and

hypothesis testing

Types of DSS Models

Graphical modeling programsAssist decision makers in designing, developing, and

using graphic displays of data and information

Project management modelsHandle and coordinate large projectsHelp users discover critical activities and tasks that could

delay or jeopardize an entire project

Advantages of Modeling

Less expensive, faster than experimenting with custom approaches or real systems

Less risky than experimenting on real systems, yet still shows how a decision might affect the overall system Permits complex relationships to be analyzed and

projected into the futureAllows decision makers to test important assumptions of

the model and ensure accuracy and validity before using it in decision making

Disadvantages of Modeling

May be time consuming to decide which model to use (numerous choices)

Potential for results to be misleading May be difficult to build and hard to interpret

(high degree of mathematical sophistication)Expensive to develop if used only once

The Group Decision Support System

The Group DSS

Consists of most of the elements in a DSS, plus GDSS software to support group decision making

Also known as a computerized collaborative work system

Configuration of a GDSS

[Figure 10.12]

Characteristics of a GDSS

Special designEase of useFlexibilityDecision-making supportCost, control, and

complexity factors

Anonymous inputReduction of negative

group behaviorParallel communicationsAutomated record

keeping

GDSS Decision-Making Support

Delphi approachUsed when group decision makers are geographically

dispersed

BrainstormingInvolves decision makers offering ideas “off the top of

their heads”Fosters creative and free thinking

GDSS Decision-Making Support

Group consensus approachForces members in a group to reach a unanimous decision

Nominal group techniqueEncourages feedback from individual group members

GDSS Software

Offers useful tools for group workCompound documents

Include documents to be created, used, and shared by members of a group

Groupware (workgroup software)Helps with joint work group scheduling, communication, and

management

GDSS Alternatives

[Figure 10.14]

GDSS Alternatives

Decision room alternativeDecision makers are located

in the same building or geographic area.

Decision makers are occasional users of the GDSS approach.

GDSS Alternatives

Local area decision networkGroup members are located in the same building or

geographic area.Group decision making is frequent.

Teleconferencing alternativeLocation of group members is distant.Decision frequency is low.

GDSS Alternatives

Wide area decision networkLocation of group members is

distant.Decision frequency is high.Virtual workgroups

Groups of workers located around the world working on common problems via a GDSS

The Executive Support System

The Executive Support System (ESS)

A specialized DSS that includes all hardware, software, data, procedures, and people used to assist senior-level executives within the organization

Also known as an executive information system (EIS)

Layers of ExecutiveDecision Making

[Figure 10.17]

Characteristics of an ESS

Tailored to individual executives

Easy to useOffer drill-down abilitiesSupport the need for

external data

Can help with situations that have a high degree of uncertainty

Have a futures orientationLinked with value-added

business processes

Capabilities of an ESS

Support for defining an overall visionSupport for strategic planningSupport for strategic organizing and staffingSupport for strategic controlSupport for crisis management

DSS Development

DSS Development

Usually developed with a DSS generator and DSS tools for a specific applicationDSS generator

A generalized program that facilitates development of a specific DSS

Specific DSSA DSS developed for a single or unique situation or problem