Decision Support System
Rev: 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 Engineering
POSTECH
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
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?
3
Decision Making
1. Decision Making
■ Definition
– Selecting the best solution from two or more alternatives
■ Levels of Managerial Decision Making
Decision Structure
Information Characteristics
Unstructured
Strategic
Management
Executives and
Directors
Semistructured
Tactical Management
Business Unit Managers
and Self-Directed Teams
Operational Management
Structured
Ad Hoc
Unscheduled
Summarized
Infrequent
Forward
Looking
External
Wide Scope
Operating Managers
and Self-Directed Teams
4
Prespecified
Scheduled
Detailed
Frequent
Historical
Internal
Narrow Focus
Types of Problems and Decision Style
1. Decision Making
■ Combinations of the type of problems and the levels of the management activities
[Huff, 1985]
Types of Problems
Levels of Management Activities
Operational Control
Management Control
Strategic Planning
Structured
Inventory reordering
quantity
Setting production level
Plant’s location
Semi-structured
Share trading
Setting budget
Capital acquisition
Unstructured
Package design
Selecting a new
manager
Information systems
portfolio
5
Decision-making Process (Simon, 1977)
1. Decision Making
Feedback
Intelligence Phase







Organization objectives
Search and scanning procedures
Data collection
Problem identification
Problem ownership
Problem classification
Problem statement
Design Phase




Choice Phase
 Solution to the model
 Sensitivity analysis
 Selection of the best(good)
alternative(s)
 Plan for implementation
Formulate a model
Set criteria for choice
Search for alternatives
Predict and measure outcomes
Implementation
of solution
END
6
Yes
Satisfaction?
No
Difficulties in Decision-making
1. 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
7
Definition of Decision Support System (DSS)
2. Introduction to DSS
■ DSS as an Umbrella Term
– Any computer-based information system that provide interactive information to support
decision-making in an organization
• e.g. an organization wide knowledge management system, a decision support system specific to an
organizational function (marketing, finance, accounting, manufacturing, planning, SCM, etc.)
■ DSS as a Specific Application
– An interactive, flexible, and adaptable computer-based application using information and
model specially developed for supporting the solution of a semi-structured management
problem for improved decision making
8
Differences between DSS and MIS
2. Introduction to DSS
DSS
MIS
Decision support
provided
Provide information and decision
support techniques to analyze
specific problems or
opportunities
Provide information about the
performance of the organization
Information form
and frequency
Interactive inquiries and
responses
Periodic, exception, demand, and
push reports and responses
Information format Flexible, adaptable format
Information
processing
methodology
Information produced by
analytical modeling of business
data
9
Fixed format
Information produced by
extraction and manipulation of
business data
Structure of DSS
2. Introduction to 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
DBMS
MBMS
DGMS
User
10
Composition of DSS
2. Introduction to DSS
11
DSS Model
3. Development of DSS
Environment
Individual
problem
solver
Other
group
members
Mathematical
models
Report
writing
software
Database
Decision
support
system
Environment
Data
Communication
Information
12
Groupware
Four-stage Process for developing DSS
Decision support
analysis
Structured interviews
Decision analysis
Data analysis
Technical analysis
Conceptual DSS
orientation
• Plans and
prioritization
•
•
•
•
•
DSS software
evaluation
and selection
• Identification of
candidate vendors
• Feature analysis
• Benchmarks
• External site surveys
3. Development of DSS
Operational
deployment
and support
Prototype
development
• Scoping of prototype
• Project evaluation
criteria
• Detailed design
• System construction
• Testing
• Demonstration
• Evaluation
13
•
•
•
•
Functional orientation
Operational training
Deployment
Maintenance
Types of Analytical Modeling
3. Development of DSS
Type of Analytical Modeling
What-if Analysis
Sensitivity analysis
Activities and Examples
Observing how changes to selected variables affect
other variables
• What will happen to the total inventory cost if the cost of
carrying inventories increases by 10 percent?
Observing how repeated changes to a single variable
affect 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
14
Use of DSS
4. 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
15
Evolution of DSS into Business Intelligence
4. Use of DSS
■ Change in the Use of DSS
– Specialist → Managers → Whomever, Whenever, Wherever
■ Emergence of “Business Intelligence”
Web Technology
OLAP
Data
Warehousing
Business Intelligence
Data Mining
Intelligent
Systems
16
Business Intelligence (BI)
5. BI
■ Definition
– An umbrella term that combines architectures, tools, databases, analytical tools, applications,
and methodologies
■ Objective
– To enable easy access to data (and models) to provide business managers with the ability to
conduct analysis
Data
Business Intelligence
Information
Knowledge
ACTION
Decisions
17
DSS and BI
Criteria
Architecture
5. BI
DSS
BI
Similar since BI evolved from DSS
Support
Direct support for
specific decision making
Accurate and timely information,
and indirect support for decision making
Orientation
Analyst-oriented
Executive-and strategy-orientated
Foundation
Built from scratch
Commercially available tools
and components
Core Tools
Data mining, Predictive analysis
(Many tools are used for both)
18
Introduction to Group Decision Support Systems (GDSS)
6. GDSS and Web DSS
■ 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
19
Classification of GDSS
6. GDSS and Web DSS
Group size
Smaller
Decision Room
Face-to-face
Larger
Local Decision Network
Public Screen
Terminal
Terminal
Terminal
Terminal
Member proximity
Terminal
Terminal
Terminal
Terminal
Teleconferencing
Terminal
Terminal
Remote Decision Making
Terminal
Terminal
Terminal
Dispersed
Terminal
Video Camera
Networking
20
Web DSS
6. GDSS and 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 decision
support system
■ Development cause of Web DSS
Internet
Unified Protocol
Virtual enterprise
Distribution of Position
The problem that solution is impossible to traditional DSS occurs.
Department offering service without the substance
Overcome the regional limitation
The necessity that replaces the existent DSS in the Internet
21
DSS & GDSS & Web DSS
6. GDSS and 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 supporting
User Interface
Personal Decision-maker
Many Decision-maker
Personal or Many
Decision-maker
Group Application Software
Intelligence Agent, Internet
22
Problems Facing DSSs
7. Limitation of DSS
■ 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
23
Case Study
8. Case Study
24
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
25