Chapter 10 Information AND Decision Support Systems PDF

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DECISION MAKING, SUPPORT SYSTEMS...

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CHAPTER 10: Information and Decision Support Systems Good decision-making and problem-solving skills are the key to developing effective information and decision support systems.

Every organization needs effective decision making and problem solving to reach its objectives and goals. Problem solving begins with decision making. A well-known model developed by Herbert Simon divides the decision-making phase of the problem-solving process into three stages: intelligence, design, and choice. During the intelligence stage, potential problems or opportunities are identified and defined. Information is gathered that relates to the cause and scope of the problem. Constraints on the possible solution and the problem environment are investigated. In the design stage, alternative solutions to the problem are developed and explored. In addition, the feasibility and implications of these alternatives are evaluated. Finally, the choice stage involves selecting the best course of action. In this stage, the decision makers evaluate the implementation of the solution to determine whether the anticipated results were achieved and to modify the process in light of new information learned during the implementation stage.

Decision making is a component of problem solving. In addition to the intelligence, design, and choice steps of decision making, problem solving also includes implementation and monitoring. Implementation places the solution into effect. After a decision has been implemented, it is monitored and modified if necessary. Decisions can be programmed or nonprogrammed. Programmed decisions are made using a rule, procedure, or quantitative method. Ordering more inventory when the level drops to 100 units or fewer is an example of a programmed decision. A nonprogrammed decision deals with unusual or exceptional situations.

Determining the best training program for a new employee is an example of a nonprogrammed decision. Decisions can use optimization, satisficing, or heuristic approaches. Optimization finds the best solution. Optimization problems often have an objective such as maximizing profits given production and material constraints. When a problem is too complex for optimization, satisficing is often used. Satisficing finds a good, but not necessarily the best, decision. Finally, a heuristic is a “rule of thumb” or commonly used guideline or procedure used to find a good decision.

The management information system (MIS) must provide the right information to the right person in the right format at the right time.

A management information system is an integrated collection of people, procedures, databases, and devices that provides managers and decision makers with information to help achieve organizational goals. An MIS can help an organization achieve its goals by providing managers with insight into the regular operations of the organization so that they can control, organize, and plan more effectively and efficiently.

The primary difference between the reports generated by the TPS and those generated by the MIS is that MIS reports support managerial decision making at the higher levels of management. Data that enters the MIS originates from both internal and external sources. The most significant internal sources of data for the MIS are the organization’s various TPSs and ERP systems. Data warehouses and data marts also provide important input data for the MIS. External sources of data for the MIS include extranets, customers, suppliers, competitors, and stockholders. The output of most MISs is a collection of reports that are distributed to managers. These reports include scheduled reports, key-indicator reports, demand reports, exception reports, and drill-down reports. Scheduled reports are produced periodically, or on a schedule, such as daily, weekly, or monthly. A key-indicator report is a special type of scheduled report. Demand reports are developed to provide certain information at a manager’s request. Exception reports are automatically produced when a situation is unusual or requires management action. Drill-down reports provide increasingly detailed data about situations. Management information systems have a number of common characteristics, including producing scheduled, demand, exception, and drill-down reports; producing reports with fixed and standard formats; producing hard-copy and soft-copy reports; using internal data stored in organizational computerized databases; and having reports developed and implemented by IS personnel or end users. Increasingly, MIS reports are being delivered over the Internet and through mobile devices, such as cell phones. Most MISs are organized along the functional lines of an organization. Typical functional management information systems include financial, manufacturing, marketing, human resources, and other specialized systems. Each system is composed of inputs, processing subsystems, and outputs. The primary sources of input to functional MISs include the corporate strategic plan, data from the ERP system and TPS, information from supply chain and business transactions, and external sources including the Internet and extranets.

The primary output of these functional MISs are summary reports that assist in managerial decision making. A financial management information system provides financial information to all financial managers within an organization, including the chief financial officer (CFO). Subsystems are profit/loss and cost systems, auditing, and use and management of funds. A manufacturing MIS accepts inputs from the strategic plan, the ERP system and TPS, and external sources, such as supply chain and business transactions. The systems involved support the business processes associated with the receiving and inspecting of raw material and supplies; inventory tracking of raw materials, work in process, and finished goods; labor and personnel management; management of assembly lines, equipment, and machinery; inspection and maintenance; and order processing. The subsystems involved are design and engineering, master production scheduling and inventory control, process control, and quality control and testing. A marketing MIS supports managerial activities in the areas of product development, distribution, pricing decisions, promotional effectiveness, and sales forecasting. Subsystems include marketing research, product development, promotion and advertising, and product pricing. A human resource MIS is concerned with activities related to employees of the

organization. Subsystems include human resource planning, personnel selection and recruiting, training and skills inventories, scheduling and job placement, wage and salary administration, and outplacement. An accounting MIS performs a number of important activities, providing aggregate information on accounts payable, accounts receivable, payroll, and many other applications. The organization’s ERP system or TPS captures accounting data, which is also used by most other functional information systems. Geographic information systems provide regional data in graphical form.

Decision support systems (DSSs) are used when the problems are unstructured. A decision support system (DSS) is an organized collection of people, procedures, software, databases, and devices working to support managerial decision making. DSS characteristics include the ability to handle large amounts of data; obtain and process data from different sources; provide report and presentation flexibility; support drill-down analysis; perform complex statistical analysis; offer textual and graphical orientations; support optimization, satisficing, and heuristic approaches; and perform what-if, simulation, and goal-seeking analysis. DSSs provide support assistance through all phases of the problem-solving process. Different decision frequencies also require DSS support. An ad hoc DSS addresses unique, infrequent decision situations; an institutional DSS handles routine decisions. Highly structured problems, semistructured problems, and unstructured problems can be supported by a DSS. A DSS can also support different managerial levels, including strategic, tactical, and operational managers. A common database is often the link that ties together a company’s TPS, MIS, and DSS. The components of a DSS are the database, model base, user interface or dialogue manager, and a link to external databases, the Internet, the corporate intranet, extranets, networks, and other systems. The database can use data warehouses and data marts. A data-driven DSS primarily performs qualitative analysis based on the company’s databases. Data-driven DSSs tap into vast stores of information contained in the corporate database, retrieving information on inventory, sales, personnel, production, finance, accounting, and other areas. Data mining is often used in a data-driven DSS. The model base contains the models used by the decision maker, such as financial, statistical, graphical, and project-management models. A model-driven DSS primarily performs mathematical or quantitative analysis. Model management software (MMS) is often used to coordinate the use of models in a DSS. The user interface provides a dialogue management facility to assist in communications between the system and the user. Access to other computer-based systems permits the DSS to tie into other powerful systems, including the TPS or function-specific subsystems.

Specialized support systems, such as group support systems (GSSs) and executive support systems (ESSs), use the overall approach of a DSS in situations such as group and executive decision making. A group support system (GSS), also called a computerized collaborative work system, consists of most of the elements in a DSS, plus software to provide effective support in group decisionmaking settings. GSSs are typically easy to learn and use and can offer specific or general decision-making support. GSS software, also called groupware, is specially designed to help generate lists of decision alternatives and perform data analysis. These packages let people work on joint documents and files over a network. Newer Web 2.0 technologies are being used to a greater extent in delivering group decisionmaking support. Text messages and the Internet are also commonly used in a GSS. The frequency of GSS use and the location of the decision makers will influence the GSS alternative chosen. The decision room alternative supports users in a single location who meet infrequently. Local area networks can be used when group members are located in the same geographic area and users meet regularly. Teleconferencing is used when decision frequency is low and the location of group members is distant. A wide area network is used when the decision frequency is high and the location of group members is distant. Executive support systems (ESSs) are specialized decision support systems designed to meet the needs of senior management. They serve to indicate issues of importance to the organization, indicate new directions the company might take, and help executives monitor the company’s progress. ESSs are typically easy to use, offer a wide range of computer resources, and handle a variety of internal and external data. In addition, the ESS performs sophisticated data analysis, offers a high degree of specialization, and provides flexibility and comprehensive communications capabilities. An ESS also supports individual decision-making styles. Some of the major decision-making areas that can be supported through an ESS are providing an overall vision, strategic planning and organizing, strategic control, and crisis management....