DECISION SUPPORT IN

BUSINESS
Introduction to Decision Support
The type of information required by decision
makers in a company is directly related to the level
of management decision making and the amount
of structure in the decision situation they face.
Even in todays downsized organizations and
flattened or non-hierarchical organizational
structures, the framework of the classic
managerial pyramid shown below still exists.
There are still levels of management decisionmaking but their size, shape and participants
continue to change.

 The levels of managerial decision making

that must be supported by information
technology in a successful organization are:
Strategic Management
[Typically, a board of directors and an executive
committee of the CEO and top executives]
They develop organizational goals, strategies,
policies, and objectives as part of a strategic
planning process.
They also monitor the strategic performance of
the organization and its overall direction in the
political, economic, and competitive business
environment.

Tactical Management.
This group is increasingly made up of
business professionals in self-directed
teams as well as business unit managers.
They develop short and mediumrange
plans, schedules, and budgets and specify
the policies, procedures, and business
objectives of their sub-units of the
company.
They also allocate resources and monitor
the performance of their organizational
subunits, including departments, divisions,
project teams, and other workgroups.

Operational Management.
The members of self-directed teams or
operating managers develop shortrange plans such as weekly production
schedules.
They direct the use of resources and
the performance of tasks according to
procedures and within budgets and
schedules establish for the teams and
other workgroups of the organization.
Information Requirements of Decis

 To be valuable to managers and decision

makers, information should also have the ff
characteristics.
Accurate
Complete
Economical
Flexible
Relevant
Simple
Reliable
Timely
Verifiable
Accessible
Secure

Decision Support Trends

As discussed earlier, using information
systems to support decision making has
been one of the primary thrusts of the
business use of information technology.
However, the traditional managerial
focus originating in
classical management information systems
(1960s),
decision support systems (1970s), and
executive information systems (1980s) is
expanding.

 The fast pace of new information technologies

like
PC hardware and software suites,
client/server networked PC versions of DSS/EIS
software tools

made decision support available to lower

levels of management, as well as to nonmanagerial individuals and self-directed
teams of business professionals.

 The growth of corporate intranets, extranets,

as well as the Web, has accelerated the
development and use of executive class
information delivery and decision support
software tools by lower levels of
management and by individuals and teams
of business professionals.
In addition this dramatic expansion has
opened the door to the use of such business
intelligence (BI) tools by the suppliers,
customers, and other business stakeholders
of a company for customer relationship
management, supply chain management,
and other e-business applications.

 Business
Intelligence Applications
Decision Support Systems
Management Information
System
Knowledge Management
Systems
Data Mining
Online Analytical Processing

Online Analytical Processing and Data

Mining
The competitive and dynamic nature of todays
global business environment is driving demands
by business managers and analysts for
information systems that can provide fast
answers to complex business queries.
The IS industry has responded to these
demands with developments like analytical
databases, data marts, data warehouses, data
mining techniques, and multidimensional
database structures, and with specialized
servers and Web-enabled software products that
support online analytical processing (OLAP).

Online analytical processing enables managers

and analysts to interactively examine and
manipulate large amounts of detailed and
consolidate data from many perspectives.
OLAP involves analysing complex relationships
among thousands or even millions of data
items stored in data marts, data warehouses,
and other multidimensional databases to
discover patterns, trends, and exception
conditions.
An OLAP session takes place online in real
time, with rapid responses to managers or
analysts queries, so that their analytical or
decision-making process is undisturbed.

Online analytical processing involves several

basic analytical operations
Consolidation. This involves the aggregation of
data. This can involve simple roll-ups or
complex groupings involving interrelated data.
For example, sales office can be rolled up to
districts and districts rolled up to regions.
Drill-down. OLAP can go in the reverse
direction and automatically display detailed
data that comprise consolidated data. This is
called drill-down. For example the sales by
individual products or sales reps that make up
a regions sales total could be easily accessed.

 Slicing and Dicing. Slicing and dicing

refers to the ability to look at the
database from different viewpoints. One
slice of the sales database might show
all sales by sales channel within each
product type.

Data Mining for Decision Support

Data mining and data warehouses are vital tools
for organizing and exploring the data resource of
a company.
Data minings main purpose is to provide
decision support to managers and business
professionals through a process sometimes
called knowledge discovery.
Data mining software analyses the vast stores of
historical business data that have been prepared
for analysis in corporate data warehouses, and
tries to discover patterns, trends, and
correlations hidden in the data that can help a
company improve its business performance.

 The data mining process can

highlight buying patterns,
reveal customer tendencies,
cut redundant costs, or
uncover unseen profitable relationships and
opportunities.

For example many companies use data mining

to find more profitable ways to perform successful
direct mailings including e-mailings, or
discover better ways to display products in a store,
design a better e-commerce website,
reach untapped profitable customers, or
recognize customers or products that are
unprofitable or marginal.

Enhancing Management Decisionmaking with Decision Support Systems

Decision Support Systems (DSS)
In the 1970s a number of companies begun
developing information systems that were
quite different from traditional MIS systems.
These systems were smaller, interactive, and
designed to help end-users utilize data and
models to discuss and decide (not solve)
semi-structured and unstructured problems.
By the late 1980s these early efforts to assist
individual decision making were extended to
groups and entire organizations.

 DSS assist management decision making by

combining data, sophisticated analytical models,
and user-friendly software in a single powerful
system that can support semi-structured or
unstructured decision making.
The relationship between DSS and the
organizations existing TPS, KWS, and MIS are
vague. In some cases, DSS are linked closely to
existing corporate information flows. Model of DSS
Often, however, DSS are isolated from major
organizational information systems.
they tend to be stand-alone systems,
developed by end user divisions or groups not under
central IS control, although it is obviously better if they
are integrated into organizational system when this is a
functional requirement.

DSS as a philosophy
Stated simply, the philosophy of DSS is
to give users the tools necessary to
analyze important blocks of data, using
easily controlled sophisticated models
in a flexible manner. DSS are designed
to deliver capabilities not simply to
respond to information needs.

 MIS is still largely dominated by professionals.

Users receive information from a professional
staff of analysts, designers, and programmers.
In terms of objectives, MIS focuses on
structured information flows to middle
managers.
DSS is aimed at top managers and middle
managers with emphasis on change, flexibility
and a quick response
With DSS there is less of an effort to link users
to structured information flows and a
correspondingly greater emphasis on models,
assumptions and display graphics.

 Both DSS and MIS rely on professional

analysis and design. However, whereas
MIS usually follows a traditional systems
development methodology, freezing
information requirements before design
and throughout the life cycle. DSS
systems are consciously iterative, are
never frozen and in a sense are never
finished.

Characteristics of DSS: what it means to

support decisions
Structured problems are repetitive and routine,
for which known algorithms provide solutions.
Unstructured problems are novel and nonroutine for which there are no algorithms for
solutions.
One can discuss, decide and ruminate about
unstructured problems, but they are not solved
in the sense that one finds an answer to an
equation, semi-structured problems fall
between structured and unstructured problems.
DSS are designed to support semi-structured
and unstructured problem analysis.

 A well designed DSS can be used at many

levels of the organization.
Senior management can use a financial DSS to
focus the availability of corporate funds for
investments by division.
Middle managers within divisions can use
estimates and the same system and data to
make decisions about allocating divisions
funds to projects.
Capital project managers within divisions, in
turn, can use this system to begin their
projects reporting to the system (and
ultimately to senior managers) on a regular
basis about how much money has been spent.

 It is a mistake to think that decisions

are made only by individuals in large
organizations. In fact, most decisions
are made collectively. Frequently
decisions must be coordinated with
several groups before being finalized.
In large organizations, decision making
is inherently a great process, and DSS
can be designed to facilitate group
decision making.

Component Of DSS
Decision support system has three basic
components
a database,
a model base, and
the DSS software system.

The DSS Database is a collection of current or

historical data from a number of applications
or groups, or organized for easy access by a
range of applications.
The DSS database management system
protects integrity of the data while controlling
the processing that keeps the data current; it
also saves historical data.

 DSS uses organizational data (from such

systems as production and sales) so that
individuals and groups are also able to make
decisions based upon actual conditions. The
data are usually extracted from relevant
databases and are stored specifically for use
by the DSS.
A model base is a collection of mathematical
and analytical models that can easily be made
accessible to the DSS user.
A model is an abstract representation that
illustrates the component or relationships of a
phenomenon.

 Each decision-support system is built

for a specific purpose and will make
different collections of models available
depending upon those purposes.

 Optimization models, often using linear

programming, determine optimal resource
allocation to maximize or minimize
specific variables such as cost or time. A
classic use of optimization models is to
determine the proper mix of products
within a given market to maximize profits.
Forecasting models are often used to
forecast sales. The user of this type of
model might supply a range of historical
data to project future conditions and sales
that might result from those conditions.

 The decision maker could then vary

those future conditions (entering, for
example, a rise in raw materials costs
or entry of a new low-priced competitor
in the market) to determine how these
new conditions might affect sales.
Companies often use this software to
attempt to predict the action of
competitors.
Model libraries exist for specific
functions, such as financial and risk
analysis models.

 Among the most widely used models

are sensitivity analysis models that ask
what-if questions repeatedly to
determine the impact of changes in one
or more factors on outcomes.
What-if analysis working forward from
known or assumed conditions allows
the user to vary certain values to test
results in order to better predict the
outcome if changes occur in those
values.

 The third component of DSS is the DSS

software system. The DSS software
system
permits easy interaction between the users
of the system and the DSS database and
model base.
manages the creation, storage, and
retrieval of models in the model base and
integrates them with the data in the DSS
database.
also provides a graphic, easy to use,
flexible user interface that supports the
dialogue between the user and the DSS.

Factors in DSS Success and Failure

As experience with DSS has grown, a
number of factors have been identified as
important to their success or failure.
Several studies have noted that
user training, involvement and experience;
top managements support;
length of use, and
novelty of application

was the most important factors in DSS

success.
Success is defined as perceived
improvements in decision making and
overall satisfaction with the DSS.

 A smaller study of 34 DSS found that

DSS orientation toward top management
(assistance with making important
decisions) and
return on investment

are the most important factors in

approval process for DSS.