Analytical Support

for Decision Making

- an Introduction

Analytical Support for Decision Making

Why is ASDM an important topic on the

MBA?

Q: Whats a Managers Role/Function?

A: to make timely and effective decisions

Traditionally, this has happened through intuition, experience

and gut-feel
But because the business world is now much more complex,
cut-throat and competitive, such approaches dont deliver.
Increasingly theres a need for a more structured, analytical and
evidence-based approach but also building on experience and
judgement

What Do Managers Do?

Managers make
decisions

That data has to be

managed collected,
analysed, reported

Information comes from

data

Decisions need to be
made rationally and to be
based on available evidence

Managers need information to

help make proper decisions

Implications
You cant be a good manager without
understanding the basics of good ASDM
Otherwise you have to rely on the ASDM
experts

ASDM Experts
Youve brought in some ASDM consultants to do some market
research on likely customer reaction to a new product/service.
Their report concludes:
Based on a random sample of 350 potential customers
selected using statistical quota methods and stratified by the
targeted customer segments, we conclude that the most likely
level of market penetration is 37% with a margin of error at the
95% level of +/- 5.3%. This compares with the projected
penetration figure of 32% obtained from straight line linear
regression of past sales, with an R2 at 0.87
Your CEO knows youve done the MBA and asks
Should we launch the new product/service?

What We Want to Achieve

To develop your understanding as to why good data,
information and decision making are critical for any successful
organisation
To develop your understanding of the process of effective
problem structuring and business modelling
To develop your understanding of the principles and practice of
effective data collection
To develop your understanding of different approaches to
analysis and modelling used to support management decision
making
To ensure you appreciate the issues which arise in putting
business analysis into practice

What You Want to Achieve

To pass this class

Relevance of ASDM?
Information is power in today's constantly changing business
environment
Data is the raw material of information
ASDM is the art and science of collecting that data and
extracting the relevant information from it and deciding how to
use that information in decision-making

Why Isnt ASDM Used More in Business?

It is used but its often hidden
Managers are sometimes/often frightened of ASDM
ASDM sometimes has a poor image/reputation poorly taught,
too theoretical

Why Doesnt ASDM have a Higher Profile?

A lot of ASDM techniques are applied in many organisations but
theyre often hidden
For example, establishing a call centre requires management:
- forecast likely demand (Ch. 9,10)
- market research into customer expectations and response (Ch.
7)
- assess queue lengths and waiting times using probability (Ch. 5)
- look at the business case using financial probability-based
evaluation (Ch. 15)
- present and sell the analysis (Ch. 3, 4)

ASDM Contributes Directly to Bottom Line

An American electricity company used forecasting techniques to improve

demand planning. The result was a reduction in costs of US$140 million a
year

Forecasting models are estimated to save the mail order company L.L.
Bean US$300,000 each year by forecasting staffing requirements in call
centres

A New Zealand utility company applied quantitative techniques to its

vehicle fleet management. The result was a reduction of 55% in the number
of vehicles required while maintaining quality of service

Digital (DEC) saved an estimated US$100 million by applying quantitative

techniques to its world-wide manufacturing and distribution strategy

American Airlines has developed a number of quantitative models in

relation to its airline seat reservation systems. The models are estimated to
contribute around US$500 million per year to the company's revenue.

Quantitative techniques were applied to the transportation of mentally

handicapped adults to and from a specialist training centre in the UK with a
resulting 16% reduction in travel time and a 12% reduction in distance
travelled

Quantitative models were developed for the planning of transportation of

blood supplies from a regional centre to surrounding hospitals in the UK. A
reduction of over 12% in the number of units of blood which had reached
their expiry date before use was achieved.

Derbyshire Constabulary dramatically improved crime detection rates by

applying ASDM techniques to its crime pattern analysis

One UK NHS hospital analysed its patient appointments system and cut
waiting times by 50%

Companies like Federal Express, Gap, Dell, Amazon, Shell .

acknowledge the contribution of AM&DM to their success

Common Applications of ASDM

Forecasting
Customer research
Competitor analysis
Quality control
Risk & reliability
Six Sigma
Queuing
Operations management
Performance measurement
Strategy evaluation
Stock/inventory control
Supply chain management (logistics)

Implications
If you cant manage the data and information in your business to
help make better decisions
you wont have a business