2. WHAT IS DECISION MAKING?
⢠A selection process, concerned with selecting the best type of alternative
⢠The thought process of selecting a logical choice from the available options
⢠The process by which managers respond to opportunities and threats
⢠It leads to commitment. The commitment depends upon the nature of the
decision whether short term or long term.
3. MANAGERS AND DECISION MAKING
⢠It is very difficult for managers to make good decisions without valid, timely
and relevant information:
ď§ Number of alternatives to be considered is increasing
ď§ Many decisions are made under time pressure
4. DECISION PROCESS
⢠Decision makers go through a fairly systematic process:
Act on it
Review It
Define the
âProcess or Problemâ
Develop Alternative
Courses of Action
Select
The âBestâ One
5. THE NATURE OF DECISIONS
⢠Information systems can support decision-making levels.
⢠These include the three levels of management activity.
ď§ Strategic management
ď§ Tactical management
ď§ Operational management
7. TYPES OF DECISIONS
⢠The decision fall into one of the following categories:
ď§ Structured Decisions
ď§ Unstructured
ď§ Semi-Structured
8. STRUCTURED DECISIONS
⢠Structured decisions are repetitive and routine problems for which standard
solutions exist
⢠Ex: finding an appropriate inventory level, finding an optimal investment
strategy
9. UNSTRUCTURED DECISIONS
⢠Unstructured decisions are non-routine and complex.
⢠We cannot specify some procedures to make a decision
⢠Ex: expanding the business, moving operations to foreign countries.
⢠IS must provide a wide range of information products to support these types
of decisions at all levels of the organization
10. SEMI-STRUCTURED DECISIONS
⢠Semi-structured decisions fall between structured and unstructured
decisions
⢠It requires a combination of standard procedures and individual judgment.
⢠Ex: annual evaluation of employees, trading bonds, setting marketing
budgets for consumer products.
11. WHAT IS DSS?
⢠A decision support system is a computer application that analyzes business
data and presents it so that users can make business decisions more easily.
⢠It is an informational application.
⢠Typical information that a decision support application might gather and
present would be:
ď§ Comparative sales figures between one week and the next
ď§ Projected revenue figures based on new product sales assumptions
ď§ The consequences of different decision alternatives, given past
experience in a context that is described
12. DSS ARCHITECTURE
⢠Three fundamental components of a DSS architecture are:
⢠the database (or knowledge base),
⢠the model (i.e., the decision context and user criteria), and
⢠the user interface
The users themselves are also important components of the architecture.
13. TYPES OF MODELS
⢠DSS software is a collection of software tools that are used for data analysis
or a collection of mathematical and analytical models.
⢠There can be 3 different types of modeling software for DSSs:
ď§ Statistical models
ď§ Optimization models
ď§ Forecasting models
14. STATISTICAL MODELING
⢠Statistical modeling software can be used to help establish relationships
such as relating product sales to differences in age, income or other factors
between communities.
⢠Ex: SPSS.
15. OPTIMIZATION MODELS
⢠Optimization models often using Linear Programming (LP) determine the
proper mix of products within a given market to maximize profit.
16. FORECASTING MODELS
⢠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.
⢠Companies often use this software to predict the action of competitors.
17. CAPABILITIES OF DSS
⢠Using a DSS involves 4 basic types of analytical modeling activities:
ď§ What-if analysis
ď§ Sensitivity analysis
ď§ Goal-seeking analysis
ď§ Optimization analysis
18. WHAT-IF ANALYSIS
⢠What-If analysis is used to determine what some of the possible changes
could be on a theoretical solution.
⢠Observing how changes to selected variables affect the other variables.
⢠E.g. What if we cut advertising by 10%?What would happen to sales?
19. SENSITIVITY ANALYSIS
⢠Sensitivity analysis is the study of how different variables effect one and
other, when change occurs.
⢠Observing how repeated changes to a single variables affect other variables.
⢠E.g: Let's cut advertising by $1000 repeatedly so we can see its relationship
to sales.
20. GOAL-SEEKING ANALYSIS
⢠Compiles all of the given data and determines what inputs are required to
reach specific goals.
⢠Making repeated changes to selected variables until a chosen variable
reaches to a target value.
⢠E.g. Let's try increase in advertising until sales reach to target
21. OPTIMIZATION ANALYSIS
⢠To find the optimum value for one or more target variables, given certain
constraints.
⢠Finding an optimum value for selected variables, given certain constraints.
⢠E.g. What's the best amount of advertising to have, our budget and choice of
media?
22. CHARACTERISTICS OF DSS
⢠Improved decision making through better understanding of the businesses
⢠An increased number of decision alternatives examined
⢠The ability to implement ad hoc analysis
⢠Faster response
⢠Improved communication
⢠More effective teamwork
⢠Better control
⢠Time and costs savings