10. Decision Support SystemRev: Feb, 2013

Euiho (David) Suh, Ph.D.

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

Dept. of Industrial & Management EngineeringPOSTECH

Contents1 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

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

isio

ns

Information

Decision Struc-ture

Information Character-istics

Unstructured

Semistructured

Structured

Ad HocUnscheduledSummarizedInfrequentForward Look-ingExternalWide Scope

PrespecifiedScheduledDetailedFrequentHistoricalInternalNarrow Focus

1. Decision Making

4

Types of Problems and Decision Style

■ Combinations of the type of problems and the levels of the management activ-ities[Huff, 1985]

Levels of Management Activities

Operational Con-trol

Management Con-trol

Strategic Plan-ning

Types of

Problems

Structured Inventory reorder-ing quantity

Setting production level Plant’s location

Semi-struc-tured Share trading Setting budget Capital acquisi-

tion

Unstructured Package design Selecting a new manager

Information sys-tems portfolio

1. Decision Making

5

Decision-making Process (Simon, 1947)

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

6

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

7

Definition of Decision Support System (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 in-

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

2. Introduction to DSS

8

Differences between DSS and MIS

DSS MIS

Decision support provided

Provide information and deci-sion support techniques to an-alyze specific problems or op-portunities

Provide information about the performance of the organiza-tion

Information form and frequency

Interactive inquiries and re-sponses

Periodic, exception, demand, and push reports and re-sponses

Information for-mat Flexible, adaptable format Fixed format

Information pro-cessing

methodology

Information produced by ana-lytical modeling of business data

Information produced by ex-traction and manipulation of business data

2. Introduction to DSS

9

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, ex-

tracts 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

10

Composition of DSS 2. Introduction to DSS

11

DSS Model

Individualproblemsolver

Othergroup

members

Reportwriting

software

Mathematicalmodels

Database

Groupware

Decisionsupportsystem

InformationData Communication

Environment

Environment

3. Development of DSS

12

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 developme

nt

Operational

deployment and

support

3. Development of DSS

13

Types of Analytical Modeling

Type of Analytical Model-ing Activities and Examples

What-if Analysis

Observing how changes to selected variables af-fect other variables

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

Sensitivity analysis

Observing how repeated changes to a single vari-able affect other variables• The impact of changes in external variables and param-eters on the outcome variables

Goal-seeking analysis

Making repeated changes to selected variables un-til 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

14

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

15

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 Warehous-

ing

Data Min-ing

Intelligent Systems

Business Intelligence

4. Use of DSS

16

Business Intelligence (BI)

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

cations, 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

17

DSS and BI

Criteria DSS BI

Architecture Similar since BI evolved from DSS

SupportDirect 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 scratchCommercially available tools

and components

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

5. BI

18

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-ex-

isting system components– Supporting the process of group decision makers by providing automation of subpro-

cesses, 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 behav-

iors, such as destructive conflict, miscommunication, and groupthink

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

groups

6. GDSS and Web DSS

19

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

20

Web DSS

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

vidual 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

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

21

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

22

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

23

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 10

■ 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