Decision Support Systems

Yong ChoiSchool of Business

CSU, Bakersfield

Type of Decision-makings

Structured (Programmed) routine & repetitive, predictable problems standard solutions exist Accounts receivable, order entry, payroll

Type of Decision-makings

Unstructured (Nonprogrammed) non-routine, unpredictable, “fuzzy” complex

problems no cut-and-dried solutions Negotiation, Lobbying

Type of Decision-makings

Semistructured (Programmed + Nonprogrammed) non-routine, predictable, Require a combination of standard solution

procedures and individual judgement Production Scheduling, design lay-out of factory

Stages of Decision Making

Stage 1: Intelligenceidentify the problems/opportunities and then, collect data or information

Stage 2: Designanalyze/develop the possible solutions for the feasibilityGO back to stage 1 if there is insufficient data.

Stages of Decision Making

Stage 3: ChoiceChoose one alternativeGo back to stage 1 or 2 if there are no satisfactory solutions.

Stage 4: ImplementationImplement the selected alternativeFailure of implementation go back to stage 1 or 2 or 3

Ex) Buying a new car

Transaction Processing Systems (TPS)

Developed in the early1960s Serve the operational management level Performing and recording daily routine and

repetitive transactions Primary focus: structured decision-makings

Transaction Processing Systems

Lifeblood of an organization Provide summarized and organized data in the

accounting and finance areas Account receivable and payable Sales transactions Payroll

Management Information Systems

Developed in the 1960s Intended to serve the operational or middle

management level Summary and exception reports

monthly production reports Quarterly travel expense reports

Management Information Systems

Difference between expected sales and actual sales of a particular product

Primary focus: fairly structured decision-makings

Decision-Support Systems

Developed in the early 1970s Serve the middle management Provide alternative-analysis report

investment portfolios Plant expansion

Primary focus: semistructured and unstructured decision-makings

See text book for detail examples Type of DSS

Model driven vs. Data driven

DSS Components

Three Major Components Data management module Model management module Dialog management module

DSS Components

DSS Components

The Data Management Module

Gives user access to databases

Usually linked to external databases

DSS Components

The Model Management Module

Selects appropriate model to analyze data Linear regression model

DSS Components

A linear regression model for predicting sales volume as a function of dollars spent on advertising

DSS Components

The Dialog Module Interface between user and other modules

Prompts user to select a model Allows database access and data selection Lets user enter/change parameters

Displays analysis results Textual, tabular, and graphical displays

Model driven DSS

Primarily stand alone systemsisolated from major org.’s systems

Use models (LP, Simulation)Sensitivity analysis as a main technique

What-If analysisGoal Seek Analysis

What-if analysis

Attempt to check the impact of a change in the assumptions (input data) on the proposed solution

What will happen to the market share if the advertising budget increases by 5 % or 10%?

Goal-seek analysis

Attempt to find the value of the inputs necessary to achieve a desired level of output

Use “backward” solution approach A DSS solution yielded a profit of $2M What will be the necessary sales volume to generate

a profit of $2.2M?

Tools for Model Driven DSS

Linear Programming Lindo Gindo

Spreadsheet Software Excel Lotus 1-2-3 Quattro Pro

Data Driven DSS

Many current and the newest DSSExtract and analyze complex information by analyzing large pools of dataSupport decision makings for the future by discovering previously unknown patternsData mining as main technique

Data Mining

• Help managers to find hidden patterns and relationships in large databases to predict future behavior

– “If a house is purchased, then new refrigerator will be purchased within two weeks 65% of the time.”

Web-based DSS for customers Evaluate and compare real estate prices

Zillow.com: 10402 Loughton Ave. 93311 Evaluate alternative investment in mortgage

portfolios fidelity.com (on-line investor center)

Evaluate and compare air fares travelocity.com

Evaluate and compare various automobile prices

aotubytel.com

Executive Information Systems OR

Executive Support Systems

Developed in the late 1980s Serve the senior management level Designed mainly to monitor organization’s

performance and address decision makings quickly and accurately

Very user-friendly, supported by graphics Drill-down capability

EIS drill-down interface design

The Need of EIS Need for more timely and accurate information

for better decision makings Need to access internal/external databases to

detect environmental changes Need to be more proactive due to intensive

competition Gain computer literacy