Decision Support Systems and
Executive Support Systems
Management decisions/problems
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Most management problems for which decisions are sought can be
represented by three standard elements – objectives, decision variables, and
constraints.
These problems can be structured, semi-structured and unstructured in
nature:
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Objective
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Decision variables
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Constraints
– Maximize profit
– Provide earliest entry into market
– Minimize employee discomfort/turnover
– Determine what price to use
– Determine length of time tests should be run on a new product/service
– Determine the responsibilities to assign to each worker
– Can’t charge below cost
– Test enough to meet minimum safety regulations
– Ensure responsibilities are at most shared by two workers
• Is there any connection between the above and strategic formulation
(the strategic formulation process.)
Structured
• Structured decisions are those which are
made according to specified procedures of
rules or structured decisions are those that
are easily made from a given set of inputs.
– Deciding to send a reminder notice to a customer
for an overdue balance is considered to be
structured decision
Semi-structured
• Semi-structured decisions are those for which
information obtained from a computer system
or information system is only a portion of the
total knowledge (information) needed to
make decision.
– Advertise a new product
– how much to spend on MIS.
Unstructured
• Unstructured decisions are novel.
• There is no cut and dried method for handling
the problem because it is novel, it's precise
nature and structure are complex,
• These, types of decisions often , involve a high
degree of freedom- many ways to try and solve
the problem.
• They may require a lot of creativity and intuitions
from the decision maker to tell what factors will
come into play in an unstructured play.
Decision support systems
• A Decision Support System (DSS) is an interactive
computer-based system or subsystem intended
to help decision makers- use information systems
(data, computational processing and output
(report) - identify and solve problems and make
decisions.
• Decision Support System is a general term for any
computer application that enhances a person or
group’s ability to make decisions; can be as
simple as an excel spread sheet to a complicated
system involving large databases, statictical
modelling techniques and applying A.I. to
dervive information.
Information Systems to support
decisions
Management
Information
Systems
Decision Support
Systems
Decision
support
provided
Provide information about
the performance of the
organization
Provide information and
techniques to analyze
specific problems
Information
form and
frequency
Periodic and exception
reports
Interactive enquiries and
responses
Information
format
Prespecified, fixed format
Ad hoc, flexible, and
adaptable format
Information
processing
methodology
Information produced by
extraction and manipulation
(basic analysis) of business
data
Information produced by
analytical modeling of
business data (see next
lecture)
Definition of decision support system
• Decision
Support
Systems (DSS) are a
specific
class
of
computerized
information system that
supports business and
organizational decisionmaking activities.
Examples of their use
Typical information that a decision support
application might gather and present would be:
• Gather information by:
– Accessing all of your current information assets,
including legacy and relational data sources, cubes,
data warehouses, and data marts
• Present information:
– Comparative sales figures between one week and the
next
– Projected revenue figures based on new product sales
assumptions
– The consequences of different decision alternatives,
given past experience in a context that is described
Making decisions
• Four stages of making decisions
1. Intelligence
2. Design
3. Choice
4. Implementation
Please note the close similarity to the strategic
formulation/implementation and evaluation
framework
Intelligence (find what to fix)
Find or recognize for example: a problem, a
requirement, or opportunity.
• Consistent customer requests for new-product
features
• The threat of new competition
• Declining sales
• Skyrocketing costs
• An offer from a company to handle your
distribution needs, and so on
Design (find solutions)
• Consider possible ways of:
– solving the problem,
– filling the need requirement,
– taking advantage of the opportunity.
• In this phase, you develop all the possible
solutions you can.
Choice a solution
Examine and weigh the merits of each solution,
estimate the consequences of each, and choose the
best one. Using factors such as:
• Cost
• Ease of implementation .
• Staffing requirements
• Time to implement solution
This is the prescriptive phase of decision making
Implementation (apply the fix)
• Carry out the chosen solution,
• monitor the results, and make adjustments as
necessary (evaluation and modification of
solution)
• Simply implementing a solution is seldom
enough. Your chosen solution will always need
fine-tuning, especially for complex problems or
changing environments.
Basic Functions of DSS
• Data/Information retrieval
• Data reconfiguration
• Calculator activities (computational processing
of the reconfigured data)
Information retrieval
• Information retrieval in DSS environment refers
to the act of extracting information from a
database for the purpose of making decisions.
Usually, the sequence of retrievals made by the
user is unanticipated.
– For example, the manager may see a few startling
pieces of information on the display and, as a result of
these, suddenly produce a report that provides more
detail about the situation: Drill down
Data reconfiguration
• Often managers using a DSS want information in
a form other that that in which the data is
logically represented within the computer system
• The ability to reconfigure data makes it possible
for managers and other decision makers to look
at existing data from alternative perspectives: the
use of online analytical processing and data
warehouse is clearly quite helpful for this DSS
functionality.
Calculator activities
• Business (mathematical) Functions
– Functions : profit = sales – costs; costs = production….
• Analysis: Analysis refer to using a decision
support system (DSS) to review a set of facts and
to assist in drawing conclusions based on there
facts.
– Statistical Tools: regression and correlation analysis
– Optimizing tools
– What if analysis (sensitivity analysis)
Optimizing tools
• Optimizing tools are useful for deriving the
best solution in certain structured decisions
usually at tactical and operational levels.
• Optimizing tools are used where it is required
to optimize the value of a single objective (e.g.
production capacity) where the factors
invoked (e.g. labour hours, machine capacity
etc.) are subject to some constraints or
limitation.
Optimizing tools solve problem which
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Can be stated in numerical terms.
All factors have linear relationships.
Permit a choice between alternatives.
Have one or more restrictions on the factors
involved
What if analysis (sensitivity analysis)
• Assessing risk with the help of DSS tools is known
as sensitivity analysis.
• One object of sensitivity analysis is to identify the
"Critical" or "Sensitive" variables, which are those
variables which have a more than proportionate
effect on the result.
• At its simplest this means, holding all the
variables, bar one, constant and altering that one
variable step by step and noting the effect on the
result.
– A simple example a simulation to determine profit.
Depends on cost per unit, price per unit, volume of
units sold…
– What if price per unit is increased by 0% & 1/2%, 2%
or minus 1% etc. what effect would it have on profit.
Using a DSS for the supply chain
• A DSS can give a Comprehensive examination of
supply management chain
• Searches for most efficient and cost-effective
combination. Normally the most efficient is not always
the most cost effective
• Reduces overall costs
• Increases speed and accuracy of filling customer
orders
DSS for Customer Relationship
Management
• Uses data mining to guide decisions
• Consolidates customer information into
massive data warehouses
• Uses various analytical tools to slice
information into small segments; e.g. using
OLAP software
DSS for customer analysis and
segmentation
Executive support systems (ESS)
• Senior managers use a category
of information systems called executive
support systems (ESS) to make decisions.
• They address unstructured decisions and
create a generalized computing and
communications environment rather than
providing any fixed application or specific
capability
Executive Support Systems (ESS) features
• Tailored to individual executives
– Not to managers in other levels
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Easy to use
Drill down capabilities
Support need for external data
Future-oriented
Linked to value-added processes (business process)
Track critical data from these business processes
Ensure the data/information is available quickly and
when required
Capabilities of Executive support
systems (ESS)
• ESS is designed to incorporate data about external events
such as new tax laws or competitors, but they also draw
summarized information from internal MIS and DSS.
• They filter, compress, and track critical data (sales data),
emphasizing the reduction of time and effort required to
obtain information useful to executives.
• ESS employs the most advanced graphics software and can
deliver graphs and data from many sources immediately to
a senior executive's.
• What software/technology could be used to facilitate these
capabilities.
Sample questions answered by ESS
• What business should we be in?
• What are the competitors doing?
• What new acquisitions' would protect us from
cyclical business swings?
• Which units should we sell to raise cash for
acquisitions?
Question
• Distinguish between structured, semi-structured
and unstructured decisions. (6 marks)
• What are the essential features of a decision
support system. (12 marks)
• Explain, using suitable examples, How can these
features help solve semi-structured and
unstructured decisions. (12 marks)
• An Executive information systems is designed to
solve unstructured problems. Distinguish between
this system and the DSS. (6 marks)
Exam Question
• What are the four steps in a decision making
process.
(8 marks)
• What are the three features of a decision
support system.
(12 marks).
• Explain how these features can be used to
help implement strategies that require a
tighter integration with an organisations
suppliers and customers. (10 marks)