Decision Support SystemRev: Feb, 2012

Euiho (David) Suh, Ph.D.

POSTECH Strategic Management of Information and Technology Laboratory(POSMIT: http://posmit.postech.ac.kr)

Dept. of Industrial & Management EngineeringPOSTECH

Contents※ Discussion Questions

1 Decision Making

2 Introduction to Decision Support System (DSS)

3 Development of DSS

4 Use of DSS

5 Business Intelligence

6 Group Decision Support System(GDSS) and Web DSS

7 Limitation of DSS

8 Case Study

3

Discussion Questions

■ Explain the decision-making process of Simon

■ Why does a company need computerized support of managerial decision making?

■ What are two definitions of decision support system? With DSS, what advantages could the company obtain?

■ What are the differences between MIS and DSS? Explain them using your own words.

■ What are the four types of analytical modeling? Choose one and explain it with an example

■ Explain the background of BI’s emergence and compare BI with DSS

■ What is GDSS? How is it different from DSS?

■ In the case study, how did Interpark use DSS in the management?

4

Decision Making

■ Definition– Selecting the best solution from two or more alternatives

■ Levels of Managerial Decision Making

Operational Management

Operating Managersand Self-Directed Teams

Tactical Management

Business Unit Man-agers

and Self-Directed Teams

Strategic Management

Executives and Directors

Dec

i-si

ons

Informa-

tion

Decision Struc-ture

Information Character-istics

Unstructured

Semistruc-tured

Structured

Ad HocUnscheduledSummarizedInfrequentForward Look-ingExternalWide Scope

PrespecifiedScheduledDetailedFrequentHistoricalInternalNarrow Focus

1. Decision Making

5

Types of Problems and Decision Style

■ Combinations of the type of problems and the levels of the management activities[Huff, 1985]

Levels of Management Activities

Operational Control Management Control Strategic Planning

Types of

Problems

Structured Inventory reordering quantity Setting production level Plant’s location

Semi-structured Share trading Setting budget Capital acquisition

Unstructured Package design Selecting a new man-ager

Information systems portfolio

1. Decision Making

6

Decision-making Process (Simon, 1977)

Organization objectives Search and scanning proce-

dures Data collection Problem identification Problem ownership Problem classification Problem statement

Intelligence Phase

Formulate a model Set criteria for choice Search for alternatives Predict and measure out-

comes

Design Phase

Solution to the model Sensitivity analysis Selection of the best(good) al-

ternative(s) Plan for implementation

Choice Phase

Implementationof solution

Satisfaction?END

Feedback

NoYes

1. Decision Making

7

Difficulties in Decision-making

■ Rapidly increasing alternatives– Technology– Information system– Advanced search engines– Globalization

■ Uncertainty of the future– Government regulations– Need for compliance– Political instability– Terrorism, competition, changing consumer demands

■ Need to make rapid decisions

■ Increasing potential costs of trial-and-error learning

1. Decision Making

8

Definition of Decision Support System (DSS)

■ DSS as an Umbrella Term– Any computer-based information system that provide interactive information to sup-

port decision-making in an organization• e.g. an organization wide knowledge management system, a decision support system specific to an or-

ganizational function (marketing, finance, accounting, manufacturing, planning, SCM, etc.)

■ DSS as a Specific Application– An interactive, flexible, and adaptable computer-based application using informa-

tion and model specially developed for supporting the solution of a semi-structured management problem for improved decision making

2. Introduction to DSS

9

Differences between DSS and MIS

DSS MIS

Decision support provided

Provide information and decision support techniques to analyze specific problems or opportunities

Provide information about the per-formance of the organization

Information form and frequency Interactive inquiries and responses Periodic, exception, demand, and

push reports and responses

Information format Flexible, adaptable format Fixed format

Information pro-cessing

methodology

Information produced by analytical modeling of business data

Information produced by extrac-tion and manipulation of business data

2. Introduction to DSS

10

Structure of DSS

■ Dialog-Data-Models DSS Frameworks– Dialog based management system (DGMS)• All the capabilities of the DSS must be articulated and implemented through dialog subsystem

– Data based management system (DBMS)• Performing all data-related tasks(maintains, stores and retrieves data from the database, extracts data

from various sources, …)

– Models based management system (MBMS)• Containing the library of models and routines to maintain and manage them

User

DBMS MBMS

DGMS

2. Introduction to DSS

11

Composition of DSS 2. Introduction to DSS

12

DSS Model

Individualproblemsolver

Othergroup

members

Reportwriting

software

Mathematicalmodels

Database

Groupware

Decisionsupportsystem

InformationData Communication

Environment

Environment

3. Development of DSS

13

Four-stage Process for developing DSS

Decision support analysis

DSS software

evaluation and

selection

• Identification of candidate vendors

• Feature analysis• Benchmarks• External site sur-

veys

• Structured inter-views

• Decision analysis• Data analysis• Technical analysis• Conceptual DSS

orientation• Plans and prioritiza-

tion

• Scoping of proto-type

• Project evaluation criteria

• Detailed design• System construc-

tion• Testing• Demonstration• Evaluation

• Functional orienta-tion

• Operational training• Deployment• Maintenance

Prototype developmen

t

Operational deployment and support

3. Development of DSS

14

Types of Analytical Modeling

Type of Analytical Modeling Activities and Examples

What-if Analysis

Observing how changes to selected variables affect other variables

• What will happen to the total inventory cost if the cost of car-rying inventories increases by 10 percent?

Sensitivity analysis

Observing how repeated changes to a single variable af-fect other variables

• The impact of changes in external variables and parameters on the outcome variables

Goal-seeking analysis

Making repeated changes to selected variables until a chosen variable reaches a target value

• What annual R&D budget is needed for an annual growth rate of 15 percent by 2013?

Optimization analysis Finding an optimum value for selected variables, given certain constrains

3. Development of DSS

15

Use of DSS

■ DSS Applications– Corporate financial planning– Marketing analysis– Real estate investments– Mineralogical exploration– Transportation routing– Portfolio analysis

■ Reasons to use DSS– Speedy computations– Improved communication and collaboration– Increased productivity of group members– Improved data management– Overcoming cognitive limits – Quality support; agility support– Using Web; anywhere, anytime support

4. Use of DSS

16

Web Technology

Evolution of DSS into Business Intelligence

■ Change in the Use of DSS– Specialist → Managers → Whomever, Whenever, Wherever

■ Emergence of “Business Intelligence”

OLAP

Data Ware-housing

Data Min-ing

Intelligent Systems

Business Intelligence

4. Use of DSS

17

Business Intelligence (BI)

■ Definition– An umbrella term that combines architectures, tools, databases, analytical tools, applica-

tions, and methodologies

■ Objective– To enable easy access to data (and models) to provide business managers with the ability

to conduct analysis

ACTION

Data

Information Knowledge Decisions

Business Intelligence

5. BI

18

DSS and BI

Criteria DSS BI

Architecture Similar since BI evolved from DSS

SupportDirect support for

specific decision makingAccurate and timely information,

and indirect support for decision making

Orientation Analyst-oriented Executive-and strategy-orientated

Foundation Built from scratchCommercially available tools

and components

Core ToolsData mining, Predictive analysis(Many tools are used for both)

5. BI

19

Introduction to Group Decision Support Systems (GDSS)

■ Definition of GDSS– An interactive computer-based system that facilitates the solution of semi-structured and

unstructured problems by a group of decision makers

■ Characteristics of GDSS– A Specially designed information system, not a configuration of already-existing

system components– Supporting the process of group decision makers by providing automation of subprocesses,

using information technology tools– Addressing one type of problem or a variety of group level organizational decisions– Encouraging generation of ideas, resolution of conflicts, and freedom of expression– Containing built-in mechanisms that discourage development of negative group behaviors,

such as destructive conflict, miscommunication, and groupthink

c.f. Definition of Group Support System (GSS)– Any combination of hardware and software that supports the collaborative work of groups

6. GDSS and Web DSS

20

Classification of GDSS

Decision Room Local Decision Network

Teleconferencing Remote Decision Making

Public Screen

Terminal

Terminal

Terminal

Terminal

Terminal

Terminal

Terminal

Terminal

Terminal Terminal

TerminalTerminal

Terminal

Terminal

Video CameraNetworking

Smaller Larger

Face-to-face

Dispersed

Group sizeM

em

ber

pro

xim

ity

6. GDSS and Web DSS

21

Web DSS

■ Definition– Advanced DSS that supports CSCW (Computer Supported Cooperative Work) of individual

or group decision-maker in web– DSS which have components of the Intelligence Agent and Internet, unlike an existent deci-

sion support system

■ Development cause of Web DSS

Distribution of PositionVirtual enterpriseUnified ProtocolInternet

The problem that solution is impossible to traditional DSS occurs.

The necessity that replaces the existent DSS in the Internet

Overcome the regional limitation

Department offering service without the substance

6. GDSS and Web DSS

22

DSS & GDSS & Web DSS

DSS GDSS Web DSS

Data base Data base (Distributed) Data base

Model base Model base (Distributed) Model base

User Interface User Interface Internet supportingUser Interface

Personal Decision-maker Many Decision-maker Personal or Many Decision-maker

Group Application Software Intelligence Agent, Internet

6. GDSS and Web DSS

23

Problems Facing DSSs

■ Data capture and collection– How to capture and collect data– Non-compatibility of purchased DSSs with existing databases and computer networks

■ Data integrity and security

■ Unstructured problems– How to solve unstructured problems which are commonly faced by top executives

■ Management of DSSs

■ Cost-effectiveness

■ Standardization

■ Data are not independent of spreadsheets– Industrial standard for all spreadsheets

7. Limitation of DSS

24

Case Study 8. Case Study

25

Reference

■ Euiho Suh, “DSS/EIS/DW/OLAP (PPT Slide)”, POSMIT Lab. (POSTECH Strategic Management of Information and Technology Laboratory)

■ O’Brien & Marakas, “Introduction to Information Systems – Sixteenth Edition”, McGraw – Hill, Chapter 9

■ Efraim Turban, Ramesh Sharda, Dursun Delen, “Decision Support and Business Intelligence systems – Ninth Edition”, Pearson, Chapter 1, pp.1~35

■ Efraim Turban, Ramesh Sharda, Dursun Delen, “Decision Support and Business Intelligence systems – Ninth Edition”, Pearson, Chapter 2, pp.36~69

■ Efraim Turban, Ramesh Sharda, Dursun Delen, “Decision Support and Business Intelligence systems – Ninth Edition”, Pearson, Chapter 10, pp.419~470

■ Yunmi Lee, “DSS & ES (PPT Slide)”, POSMIT Lab.(POSTECH Strategic Management of Information and Technology Laboratory)

■ M.C. ER, “Decision Support Systems: A Summary, Problems, and Future Trends”,Decision Support Systems 4 (1988) 355-363