Lesson10 - Information System in Decision Making

7/28/2019 Lesson10 - Information System in Decision Making

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Information System in Decision Making

Decision-making

oSuccess of a firm depends on the quality of the decisions managers makes

oWhen amount of information is large & processes are complex

oCBIS can make the process effective and efficient in decision making

oIS that supports decision making:

o DSS, EIS, GIS, & Expert System

Decision-Making process PHASES

By Herbert Simon (researcher of management & decision making)

oIntelligence. Collect facts, beliefs, & ideas.

oDesign. Design the method by which we will consider data. Methods are sequences of steps, formulas,

models & other tools that enable us to systematically reduce the alternatives to a manageable number.

oChoice. Make a choice from alternatives



Types of Problems

oStructured. Optimal solution can be reached through a single sets of steps.

most physical & mathematical problems are structured. A formula or sequence is followed

Algorithm – sequence of steps

oUnstructured. No algorithm to follow to reach an optimal solution.

not enough information about the factors that may affect the solution

Many potential factors that no algorithm can be formulated to guarantee a unique optimal

solution

oSemistructured. Neither fully structured nor totally unstructured

An unstructured problem can become semistructured by experts in the field

o Because experts may have enough knowledge to narrow down number of possible

solutions, \but not enough to guarantee 100% certainty of producing an optimal solution

Programmable problems

oStructured problems are programmable

oUnstructured are not programmable



oSemistructured problems

Managers face daily in different industries & in different business functions

Managers chooses one alternative from many multiple possible courses of action.

Decision support system (DSS)

o A CBIS designed to help managers select one of many alternative solutions to a problem & help the corporations

increase market share, reduce costs, increase profitability, and enhance product quality.

DSS Components

oData management module

oModel management module

oDialog module

These modules:

o Help the user enter a request in a convenient manner

o Search vast amount of data to focus on the relevant facts

o Process the data through desired models



o Present the results in one or several manners so the output can be easily understood.

Data Management module

oDatabase or data warehouse

o Allows a decision maker to conduct the intelligence phase of decision making

Model Management Module

oCollection of models the DSS draws upon to assist in decision making

User must select a model in order to turn data into information

DIALOG MODULE

oPart of DSS that allow the user to interact with DSS

o Prompts the user to select a model.

o Allows the user to access the database and select data for the decision process, Lets user enter

parameters and change them to see how the change affects the result of the analysis

o Maybe in the form of commands, menus, dialog boxes, or any other approach. Simply, it is the

interface.

Types of DSS

oDiffer in degree of sophistication and the manner in which they are used



oPersonal DSS. Built for the use of the individual knowledge worker in his/her daily work

oGroup DSS. Usually installed in conference room settings or through a group of networked computers.

Designed to take input from multiple users interacting with the program at the same time and convergingon decision as a group

Executive Information system

o Are decision-aids especially designed for high ranking managers, to provide them with the most essential

information for running the organization.

oUseful to executives who almost always suffer from information overload

Information overload is the phenomenon whereby the very volume of information creates the additionalburden of having to decide what is important, rather than helping to solve problems and make decisions.

oHigh level managers makes decisions based on highly summarized information

oEIS display data graphically so exemptions can be easily spotted.

oMEIS do not require user to enter the values of any parameter like DSS do

Features of an effective EIS

oEasy-to-use and easy-to-learn GUI

oOn request “drill down” capability that allows the executive to reach information in further detail



oOn-demand financial and other ratios & indicators to reflect organizational strengths & weaknesses

oEasy-to-use but sophisticated tools to allow navigation in databases and data warehouses

oStatistical analysis tools

o Ability to respond to ad hoc queries and sensitivity analyses

o Access to external data pools

o Ability to solve diverse business solutions

Geographic Information system

oA set of tools for collecting, storing, retrieving, transforming and display of spatial data from the real world.

ofamous IT application tool which can provide best decision support to bridge the gap between the requirements and the

reality.

oIntegrates hardware, software, and data for capturing, managing, analyzing, and displaying all forms of

geographically referenced information.

oallows us to view, understand, question, interpret, and visualize data in many ways that reveal relationships,

patterns, and trends in the form of maps, globes, reports, and charts.

Why GIS?



oTo inventory and monitor resources

oTo test the sensitivity of the analysis assumptions

oTo simulate potential impacts of management alternatives

oTo make the map the 2nd time, the 50th time, the 100th time...

GIS in business

Source: Lofty Azaz, International Conference on Humanities, Geography and Economics (ICHGE'2011) Pattaya Dec.2011

oUse for management functions such as logistics, site and facilities management, marketing, decision making, &

planning

oHelp retail business locate the best site for its next store

- Help marketers find new prospects

- Highlights where the firm has many customers by placing data on the map



oUse for a variety of routine decision support and analysis applications (eg. Market & demographic analyses)

GIS FUNCtions & Application(Mennecke, 2000)

GIS functions

oSpatial Imaging - representing displays of data and information within a spatially defined coordinate system.

oData management - store, manipulate, and provide access to data.

oDecision modelling – used to provide support for analysis and decision-making.

oDesign and Planning - used to create, design, and plan.



GIS Applications in business

a. Digital Mapping

First purpose: capturing spatial data to generate maps automatically

provides managers with the ability to generate spatial data in-house

Use of Remote sensing and global positioning systems (GPS) allow more accurate map production

Companies in petroleum business uses digital maps

b. Facilities Management

provides managers with a powerful tool for supporting real-time monitoring of facilities and is

routinely used for emergency management, security, and other applications.

Utility firms represent one of the largest private-sector GIS end-user groups

c.Market and demographic Analysis

a powerful market analysis tool because:

o it provides a platform for representing the spatial relationship between the components of the market;

that is, the customers, suppliers, and competitors.

o it also provides a way to bring together data from multiple sources and link them based on spatial

attributes.

d.Transportation and Logistics



critical tool for addressing logistics and transportation problems.

Some tools that fits in this category:

o Vehicle routing system & navigation system

o intelligent vehicle highway systems (IVHS)

o dispatch systems

oproduction control systems

o inventory systems

e.Design and Engineering

can be used to design plans, layouts, and maps.

make use of both the imaging and the planning functions of GIS.

commonly used in landscape engineering, environmental restoration, commercial and

residential construction and development, and a host of other design activities.

Some telecom companies use GIS to support expansion...

Expert Systems and AI

Intelligence – ability to learn and think

It includes:



making associations between a previous experience and a new situation

Drawing conclusions in a systematic manner

Quickly adopting new ways to solve problems

Determine what tools can or cannot help in handling complex situation

AI - Coined in 1956 in seminar @ Dartmouth College

in 25 years Projected that intelligent machines would do physical and intellectual work for

human beings

today, It was not materialized but continuous research on AI is done.

Researchers try to search on how machines emulate the human mind

AI Categories (fields)

a. Robotics – design machines to perform useful work

Robots don’t look like humans but do human works

b. Artificial Vision – ability of a machine to “see” its environment, and to recognize visual input (ex: handwriting)

according to general patterns

c. Natural Language Processing – programs designed to take human language as input and translate it into a

standard set of statements that a computer can execute

Goal: to eliminate programming...



d.Neural Networks – designed to mimic the way the human brain operates – the way it links facts, draws

conclusions and use experience to learn & to understand how new facts relate to each other.

e.Fuzzy Logic – based on logic that do not have discrete boundaries but lie along a continuum, enabling a

system to better deal with ambiguity.

Allows computer applications to solve problems in a manner that is more humanlike

f. Genetic Algorithms – math functions that use Darwinian principles to improve application.

Software mimics a living organisms improve through mutation and natural selection,

based on their success or failure surviving the physical environment.

g.Intelligent Agents – computer programs that automatically wade through massive amounts of data and select

and deliver the most suitable information for the user, according to the contextual or specific requirements.

Major application is on the web

h.EXPERT SYSTEMS

Programs to solve problems in specific areas by utilizing experts’ knowledge and

reasoning.

Purpose: replicate the unstructured and undocumented knowledge the few (experts), and

put it at the disposal of others.

Formulated based on the experience of experts

Examples:

DENDRAL – identifies molecules from spectroscopic data (Stanford U in 1965)



MACSYMA – solver of complex mathematical problems (MIT in 969)

MYCIN – system for diagnosis of bacterial diseases (Stanford U in 1973)

PROSPECTOR – software to target sites for molybdenum exploration based on geological

data input (SRI Int. 1980)

Contribution of Expert Systems

oEnhance product/service quality

oEnforce consistent reasoning

oGain more insight into decision making process

oBetter control complex systems

oDistribute scarce expertise

oPreserve expertise

oTrain less-experienced employees

oReduce costs

oMonitor vast amounts of information



AREAS where Es can help in business

oPlanning. It can use information from previous projects to improve subsequent plans. Example: by

cautioning the planner against pitfalls that may cause budget and time overruns.

oDecision making. Supports decision making by bringing input from several experts, thereby providing the

organization with a true strategic weapon.

oMonitoring. Monitor industrial processes, cash management & employee activities

oDiagnosis. Diagnosing different conditions like malfunctioning equipment, products or processes; or

hardware problems & their solutions

oTraining. Contain an explanation facility that describes the logic being used to address the problem at

hand. Teach users decision rules.

oIncidental learning. While users use ES in their regular work, they internalize how the system reaches

decisions; thereby increasing their own expertise and makes them better decision makers.

oReplication of expertise. Since it is software, it can be replicated and disseminated, thereby implementing

the same expertise in the organization

oTimely response. ready at all times to provide immediate support and to perform processes.

oConsistent solutions. Consistency in decision making, thereby managers makes consistent solutions.

Limitation of expert systems

oHandle only narrow domains

oDo not possess common sense



oLimited ability to learn

Systems acquisition, Control and Security

Aquisition

a. Traditionally – IS is developed in-house

b. Now – many go into:

c. Outsourcing

d. IS subsidiaries

e. Pre-packaged software

f. Renting the application

Either: at-site renting or through the web

g. User-developed applications

Outsourcing

Contracting with an IT (software) company for the development

That the organization trusts all the activities associated with its ISs.

i. Companies go for long term service (like maintenance) aside from just purchasing the hardware &

software.



ii. Maybe: short-term or long-term contractual relationship.

Advantages of outsourcing

h. Improve financial planning

i. Reduce license and maintenance fee

j. Increased attention to core business

k. Shorten implementation cycles

l. Reduction of personnel and fixed costs

m. Increased access to highly qualified know-how

n. Availability of ongoing consulting as part of standard support

o. Increased security

Risk of outsourcing

p. Loss of control

q. Loss of experienced employees

r.Risks of losing a competitive advantage



IS Subsidiary

s. IS vendors like other IT consulting firm but they always have a primary client – the company that

owns them

t.Ex: American Airlines, Chevron & Boeing - own an IS subsidiary

Advantage:

u. The parent company has priority over other clients

v. Subsidiary’s potential to generate additional revenue for the parent.

Purchased applications

w. First alternative to consider must be purchasing pre-packaged software

x. Buyer gains many benefits

y. Immediate system availability

z. High quality

aa. Low price

bb. Available support



RENTING a SOFTWARE

cc. Solve the problem on software obsoleteness

dd. Nowadays, software is good to 2-3 years or even less, another version is introduced

i. On-site renting – rent software in a limited period and pay less than owning a system

ii. Renting through the web – application services providers

Information security

ee.Reduce the risk of systems and organizations ceasing operations

ff. Maintain information confidentiality

gg.Ensure the integrity and reliability of data resources

hh.Ensure the availability of data resources

ii. Ensure compliance with national security laws and privacy policies and law

Risks to Information Systems

jj. Risk to hardware



Natural disaster

Blackouts and brownouts

Solution: UPS

Vandalism – destroy hardware

kk. Risk to Applications & Data

Theft of information

solution: key/password

Data alteration and destruction – act of mischief (data diddling)

Computer viruses

Unauthorized remote control programs

Controls

ll. Constraints and other measures imposed on a user or a system.

mm. Common controls:

i. Program robustness and Data entry controls



ii. Backup

iii. Access controls

iv. Atomic transactions

v. Audit trail

vi. Program robustness and Data entry controls

vii. Robust – when a computer program is powerful in what it is intended to do, resists inappropriate usage

like incorrect data entry.

viii. It takes every possible misuse or abuse in data entry

ix. It gives a message when data entry violates data parameters and processes



nn. Backup

i.Easiest way to protect against loss of data caused by disasters, viruses & human errors. (ex: SPU coop

has a backup)

ii. Backing up – duplicate data periodically and place it in another storage and even other place

oo. Access Controls

i. are measures taken to ensure that only those who are authorized have access to a computer network or

to certain apps or data.

ii. Use of UserID and password

iii. Use of biometrics – physical access control

pp. Atomics Transactions

i. A system supports atomic transactions when its code will only allow the recording of data if they

successfully reach their destinations.

ii. It ensures that only full entry occurs in all appropriate files

iii. Example: order system where sale is recorded in shipping file, invoice file, A/R file and commission file.



qq.Audit Trail

i. a series of documented facts that help detect who recorded which transactions, at what time, and under

whose approval.

ii. Audit log is created

iii. Purposes:

* When abuses are found, they can be traced

* Fear of detection will indirectly discourage abuse.s

Integrating Security into development

rr. Use security standards, such as

i. Trusted Computer System Evaluation Criteria (TCSEC) – the orange book

ii. ISO/IEC (International Electrotechnical Comm) Standard – Info Tech-Security Techniques-Evaluation

Criteria

ss. Separation of duties

i. In systems development



ii. In using the system

tt.Network Controls, such as:

1. Callback – popular measure against unauthorized remote access. When a modem dials into a system, aspecial application asks for the tel.no. from which the call has been made...

2. Encryption

- Authentication – process of ensuring that the person who sends a message to or receives amessage from you is indeed that person

- Encryption – coding a message into a form unreadable to an interceptor.

3. Digital Certificate

- Equivalent of a physical ID card containing a public key and a digital signature

4. Firewalls

- The best defense against unauthorized access to system over the internet

- A software who purpose is to block access to computing resources.

Lesson10 - Information System in Decision Making

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