Decision Support Systems and Executive Support Systems

1. Decision Support Systems and Executive Support Systems

2. Management decisions/problems • Most management problems for which decisions are sought can be represented by three standard elements – objectives, decision variables, and constraints. • These problems can be structured, semi-structured and unstructured in nature: • Objective • Maximize profit • Provide earliest entry into market • Minimize employee discomfort/turnover • Decision variables • Determine what price to use • Determine length of time tests should be run on a new product/service • Determine the responsibilities to assign to each worker • Constraints • Can’t charge below cost • Test enough to meet minimum safety regulations • Ensure responsibilities are at most shared by two workers • Is there any connection between the above and strategic formulation (the strategic formulation process.)

3. 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

4. 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 (information) needed to make decision. • Advertise a new product • how much to spend on MIS.

5. Unstructured • Unstructured decisions are novel. • There is no cut and dried  method for handling the problem because it is novel, it's precise nature and structure are complex, • These, types of decisions often , involve a high degree of freedom- many ways to try and solve the problem. • 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.

6. Decision support systems • A Decision Support System (DSS) is an interactive computer-based system or subsystem intended to help decision makers- use information systems (data, computational processing and output (report) - identify and solve problems and make decisions. • Decision Support System is a general term for any computer application that enhances a person or group’s ability to make decisions; can be as simple as an excel spread sheet to a complicated system involving large databases, statictical modelling techniques and applying A.I. to dervive information.

7. Information Systems to support decisions

8. 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.

9. Examples of their use Typical information that a decision support application might gather and present would be: • Gather information by: • Accessing all of your current information assets, including legacy and relational data sources, cubes, data warehouses, and data marts • Present information: • 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

10. Making decisions • Four stages of making decisions • Intelligence • Design • Choice • Implementation Please note the close similarity to the strategic formulation/implementation and evaluation framework

11. Intelligence (find what to fix) Find or recognize for example: a problem, a requirement, or opportunity. • 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

12. Design (find solutions) • Consider possible ways of: • solving the problem, • filling the need requirement, • taking advantage of the opportunity. • In this phase, you develop all the possible solutions you can.

13. Choice a solution Examine and weigh the merits of each solution, estimate the consequences of each, and choose the best one. Using factors such as: • Cost • Ease of implementation . • Staffing requirements • Time to implement solution This is the prescriptive phase of decision making

14. Implementation (apply the fix) • Carry out the chosen solution, • monitor the results, and make adjustments as necessary (evaluation and modification of solution) • Simply implementing a solution is seldom enough. Your chosen solution will always need fine-tuning, especially for complex problems or changing environments.

15. Basic Functions of DSS • Data/Information retrieval • Data reconfiguration • Calculator activities (computational processing of the reconfigured data)

16. 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

17. Data reconfiguration • Often managers using a DSS want information in a form other that that in which the data is 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: the use of online analytical processing and data warehouseis clearly quite helpful for this DSS functionality.

18. Calculator activities • Business (mathematical) Functions • Functions : profit = sales – costs; costs = production…. • 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)

19. 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.

20. Optimizing tools solve problem which • Can be stated in numerical terms. • All factors have linear relationships. • Permit a choice between alternatives. • Have one or more restrictions on the factors involved

21. What if analysis (sensitivity analysis) • Assessing risk with the help of DSS tools is known as sensitivity analysis. • One object of sensitivity analysis is to identify the "Critical" or "Sensitive" variables, which are those variables which have a more than proportionate effect on the result. • At its simplest this means, holding all the variables, bar one, constant and altering that one variablestep by step and noting the effect on the result. • A simple example a simulation to determine profit. Depends on cost per unit, price per unit, volume of units sold… • What if price per unit is increased by 0% & 1/2%, 2% or minus 1% etc. what effect would it have on profit.

22. Using a DSS for the supply chain • A DSS can give a Comprehensive examination of supply management chain • Searches for most efficient and cost-effective combination. Normally the most efficient is not always the most cost effective • Reduces overall costs • Increases speed and accuracy of filling customer orders

23. 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; e.g. using OLAP software

24. DSS for customer analysis and segmentation

25. Executive support systems (ESS) • Senior managers use a category of information systems called executive support systems (ESS) to make decisions. • They address unstructured decisions and create a generalized computing and communications environment rather than providing any fixed application or specific capability

26. Executive Support Systems (ESS) features • Tailored to individual executives • Not to managers in other levels • Easy to use • Drill down capabilities • Support need for external data • Future-oriented • Linked to value-added processes (business process) • Track critical data from these business processes • Ensure the data/information is available quickly and when required

27. Capabilities of 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 (sales 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. • What software/technology could be used to facilitate these capabilities.

28. 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?

29. 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)

30. 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)