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Chapter 1:DECISION SUPPORT SYSTEMS AND
BUSINESS INTELLIGENCE
DECISION SUPPORT SYSTEMS AND BUSINESS INTELLIGENCE , Eighth Edition
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Changing Business Environments and Computerized Decision Support
The business pressures-responses-support model
The business environment Business environment factors divided into four
categories: markets, consumer demands, technology, and societal.
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Organizational responses: be reactive, anticipative, adaptive, and proactive Employ strategic planning Use new and innovative business model Restructure business process Use new IT to improve communication. : :
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Changing Business Environments and Computerized Decision Support (cont.)
Decision Support and Business Intelligence Systems, Eighth Edition
Computerized support It used to facilitate closing the gap between the
current performance and the desired performance.
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Changing Business Environments and Computerized Decision Support (cont.)
Decision Support and Business Intelligence Systems, Eighth Edition
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Changing Business Environments and Computerized Decision Support (cont.)
Management Support Systems (MSS) Four major information technologies have been
successfully used to support managers.
DSSs: provide support primarily to analytical, quantitative types of decisions.
Executive (enterprise) support systems: support the informational roles of executives.
Group decision support systems: support managers working in groups.
Intelligent systems: provide mulitfunctional support.
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DSS Definition Decision support system (DSS) are used to make
business decision often based on data collected by On-Line-Analytical-Processing system (OLAP)
Example of data used for making decision : Retail sales transaction detail
DSS as an Umbrella term: Describes any computerized system that supports decision making in an organization
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Why Use of DSS Why use decision support systems?
Speedy computations Improved communication and collaboration Increased productivity of group members Improved data management Managing giant data warehouses Quality support Overcoming cognitive limits in processing and
storing information
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Why Use of DSS(cont.) Using the Web Anywhere, anytime support
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Decision Making and Management Management is a process by which organizational
goals are achieved through the use of resources (people, money, energy, materials, space, time).
These resources are considered to be inputs, and the attainment of the goals is viewed as the output of the process.
Measuring success: Productivity= output/input
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Decision Making and Management (cont.) Management is decsion making
The manager is decsion maker
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Decision Making and Management (cont.) The nature of managers’ work
Interpersonal : figurehead, leader, liaison. Informational: monitor, disseminator,
spokesperson. Decisional: entrepreneur, disturbance handler,
resource allocator, negotiator.
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Decision Making and Management (cont.) Why Managers Need IT Support
processing information manually is growing increasingly difficult
computerized modeling examining numerous alternatives very quickly providing a systematic risk analysis being integrated with communication systems and
databases being used to support group work
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Intelligence PhaseIntelligence Phase
Design PhaseDesign Phase
Choice PhasesChoice Phases
REALITY
Implementationof Solution
Implementationof Solution
SUCCESS
FAILURE
Verification, Testing of Proposed Solution
Verification of the Model
Examination
Phases of the Decision Making
Decision Support and Business Intelligence Systems, Eighth Edition
Phases of the Decision Making (cont.) Intelligence phase
Organizational objectives Search and scanning procedures Data collection Problem identification Problem classification Problem statement
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Result:Reality is examined The problem is identified and defined
Phases of the Decision Making(cont.) Design phase
Formulate a model (Assumption) Set criteria for choice Search for alternative Predict and measure outcomes
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Result:Representative model is constructedThe model is validated and evaluation criteria are set
Phases of the Decision Making(cont.) Choice phase
solution to the model Sensitivity analysis Selection of Best (Good) alternative Plan for implementation Design of control system
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Result:Proposed solution is included to the modelIf reasonable, move to implementation phase.
Phases of the Decision Making(cont.) Implementation phase
Put solution into action
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Result:Solution to the original problem
Decision Support and Business Intelligence Systems, Eighth Edition
Decision Making Processes The process of decision making
1. Defining the problem (i.e., a decision situation that may deal with some difficulty or with an opportunity)
2. Constructing a model that describes the real-world problem
3. Identifying possible solutions to the modeled problem and evaluating the solutions
4. Comparing, choosing, and recommending a potential solution to the problem
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Decision makers: Who are They? Decision maker classification
Individual decision makers can be single person or a computer system
Multiple decision makers can be: Team where members support a single decision
maker Groups where all members have a say in the decision Organization where global agreement is needed.
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Type of Control
Type of Decision
Operational Control Managerial Control StrategicPlanning
Structured
Semi-structured
Unstructured
Accounts Receivable Order entry
Production scheduling inventory control
Selecting a cover for a magazine, buying software approving loans
Support Needed
Budget analysis,short-term forecasting, personnel reports, make-of-buy analysis
Credit evaluation, Budget Preparation, plan layout, project scheduling, rewarded systems design
Negotiating,recruiting and executive,buying hardware,lobbying
Financialmanagement ,warehouse location, distribution systems
Building new plant, mergers and acquisitions, new product planning, compensation planning, quality assurance planning
R & D planning, new technology development social responsibility planning
MISMS modelsF & S models
DSS
DSSES Neural Networks
MIS,MS
MS, DSS, EIS, ES EIS, ES, Neural Networks
1 2 3
4 5 6
7 8 9
Support Needed
Framework for Computerized Decision Support
Decision Support and Business Intelligence Systems, Eighth Edition
Framework for Computerized Decision Support (cont.) Three type of decision :
1- Structured problems: are routine problems for which standard solution method exist. Procedure for obtaining the best solution are known Objective are clearly defined
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Framework for Computerized Decision Support (cont.)
2- Unstructured problems: are fuzzy, complex problem for which there are no cut-and direct solution methods. Have no structure phase Often solved with human intuition
3- Semi-structured problem: is a decision problem in which some but not all phases are structured. In between solve with standard solution procedure
and human judgment
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Framework for Computerized Decision Support (cont.) Types of control in all managerial activities
Strategic planning the long-range goals & policies for resource
allocation;
Management control the acquisition & efficient utilization of resources
in the accomplishment of organizational goals
Operational control the efficient & effective execution of specific tasks.
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Framework for Computerized Decision Support (cont.) The decision support matrix
For semistructured decisions and unstructured decisions, conventional MIS and MS tools are insufficient ; BUT Decision support systems (DSS) are used.
Computer support for structured decisions Management science (MS) or operations research
(OR) are used . Automated decision systems (ADS) is used.
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Framework for Computerized Decision Support (cont.) Management science (MS) or operations
research (OR) The application of a scientific approach and mathematical models to the analysis and solution of managerial decision situations (e.g., problems, opportunities) It adds new step 2 to the process of decision
making, that is classify the problem into standard category.
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Framework for Computerized Decision Support (cont.) Automated decision systems (ADS) A business
rules-based system that uses intelligence to recommend solutions to repetitive decisions (such as pricing)
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Architecture of a decision system
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Architecture of a decision system(cont.) The architecture of DSS
Data Models manipulate data as related to a specific situation Knowledge component User interface
* The user themselves are also important components of the architecture
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Structure of a decision system A SYSTEM is a collection of object such as
people, resources, concepts and procedure intended to perform an identifiable function or to serve a goal.
Three Distinct Parts of Systems Inputs Processes Outputs
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Structure of a decision system (cont.)
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Processes
Input(s) output(s)
Feedback (flow of information
Decision Support and Business Intelligence Systems, Eighth Edition
Structure of a decision system (cont.) Inputs are the element that enter the system Processes convert or transform inputs into outputs Outputs describe finished products or
consequences of being in the system Feedback is the flow of information from the
output to decision maker, who many modify the inputs or the processes (closed loop)
The Environment contains the elements that lie outside but impact the system performance
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Modeling in DSS DSS is “ model-base set of procedures for
processing data and judgment to assist manager in his decision making”
A model is simplified representation or abstraction of (complex) reality.
With modeling, one can perform virtual experiments and an analysis on a model of reality, rather than on reality itself.
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Modeling in DSS (cont.) Four groups of models:
Iconic (scale) Model An iconic model—the least abstract model—is a
physical replica of a system.
Analog Model does not look like the real system but behaves like it.
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Modeling in DSS (cont.) Mathematical Model
Use mathematical relationship to represent complexity used in most DSS analysis
Mental models provide a description of how a person thinks
about a situation
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Modeling in DSS (cont.) Benefits of Models:
Time compression Low cost construction Models allow for the simulated compression of time. Manipulating the model (by changing variables) is much
easier than manipulating the real system. Can model large and extermely complex system with
possibly infinite soultion. Low cosst excustion
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Modeling in DSS (cont.) Modeling process and solution approach
Trail and Error
Simulation
Optimization
Heuristics
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Decision analysis Decision analysis allow us to select a decision from
set of possible decision alternatives when uncertainties regarding the future exist.
The goal is to optimize the resulting return (payoff) in term of decision criteria.
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Decision analysis (cont.) Type of decision analysis models:
Decision making under certainty Decision making under uncertainty Decision making under risk Decision making with perfect information Decision making with imperfect
information(Bayesian Theory) Decision making in light of competitive action
(Game Theory)
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DSS and Data Warehouse Data warehouse is a decision support database.
The data warehouse is an integrated, subject-oriented, time-variant, non-volatile database that provide support for decision making.
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DSS and Data Warehouse Integrated: the data warehouse is centralized,
consolidated database that integrates data retrieved from the entire organization.
Subject- oriented: data of data warehouse is arranged and optimized to provide answer to questions coming from diverse functional area within a company.
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DSS and Data Warehouse Time-variant: the data warehouse represent the
flow of data through time
Non-volatile: once data enter the data warehouse, they are never removed.
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On-Line Analytical Processing (OLAP) It is an element of DSS. It is support ad-hoc querying for business analyst. Multidimensional view of data is foundation of
OLAP
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Multidimensional data
DSS knowledge base Any true decision requires information.
The knowledge base is where all information is stored.
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CASE STUDY
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Case: Managing Global Business at 3M Corporation The Business Problem
The company had difficulties responding
to new customers and markets in the global economy as each business unit kept separate databases and conducted independent decision support activities
The Solution The Company created a global enterprise data
warehouse (GEDW)
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Case: Managing Global Business at 3M Corporation (cont.) The Results
Distributors and retailers, as well as end-users, now receive information in minutes instead of weeks or months, including the delivery of rich multimedia
Customers can find all their information in one place
Inventories are lower, and better and quicker inventory decisions are made, even in globally remote locations
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Case: Managing Global Business at 3M Corporation (cont.) What have we learned from this case??
The case demonstrates the existence of vast amounts of important data in organizations, and the importance of organizing that data for optimum use
The case shows the need to share a company’s data internally and with business partners and customers, and to make it available in a format that enables end users to process data quickly
The case explains the data warehouse, and its role in supporting managerial decision making
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Duty # 1 Each group have present one case study; under these
conditions:
define organization
Define business problem
Provide possible solutions
The result.
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