Information Systems for Managerial Decision Making

2000 by Prentice Hall. 10-1

Chapter 10

InformationSystems for

Managerial Decision

Making

Uma GuptaIntroduction to Information Systems


Learning Objectives

After studying this chapter, you will be able to:

Explain how different types of information systems aid decision makers

Outline how transaction processing systems support operational decision making

Specify how management information systems help managers make tactical decisions

Discuss how intelligent support systems support mid- and top-level managerial decision making


The Three Types of Systems That Support Employee Decision Making

TransactionProcessingSystems

ManagementInformationSystems

IntelligentSupportSystems

ORGANIZATION’SINFORMATIONNEEDS

All three types of systems supportdecisionmaking


Transaction Processing System (TPS)

A system that records company transactions, in which a transaction is defined as an exchange between two or more business entities.


Intelligent Support Systems

A set of systems that help managers integrate data, judgement, and intuition with their decision-making models and captures and preserves the knowledge of a company’s employees.


Steps in Processing a Transaction

Enter data

Step 1

Validate data

Step 2

Process thedata intoinformation

Step 3

Store theprocesseddata

Step 4

Generateoutput

Step 5

Support userqueries

Step 6


Source Documents

Documents generated where and when a transaction occurs; the source of data for the transaction processing system.


On-Line Transaction Processing (OLTP)

Transaction data that are processed instantaneously.


Batch Processing

Transactions are accumulated over a certain period of time and processed at periodic intervals.


On-Line versus Batch Transaction Processing

On-line Data input device is linked to the transaction processing system, so data are processed as soon as they are generated.

Data are updated at certain intervals, such as daily, weekly monthly, and so on.

Batch


Characteristics of a Transaction Processing System

Records internal and external transactions that take place in a company

Is used mostly by lower-level managers to make operational decisions

Stores data that are frequently accessed by other systems

Is ideal for routine, repetitive tasks Records transactions in batch mode or on-line Requires six steps to process a transaction—data

entry, validation, data processing, storage, output generation, and query support


Management Information Systems (MIS)

A group of general-purpose, well-integrated systems that monitor and control the internal operations of an organization.


Management Information Systems for Decision Making

Management information systems (MIS) provide middle managers with the information necessary to make semistructured decisions The main input to an MIS is usually the

transaction processing system and other internal company sources

Summary and exception reports are the most common output of a MIS


Summary Report

A report that accumulates data from several transactions and presents the results in a condensed form.


Exception Report

A report that outlines any deviations between actual output and expected output.


Relationship between a TPS and MIS

Goal: Record and Process TransactionsType of Decision Supported: Operational

TRANSACTION PROCESSING SYSTEM

Goal: Produce Summary and Exception Reports

Type of Decision Supported: Tactical

MANAGEMENT INFORMATION SYSTEM

TPS output becomes MIS input


Intelligent Support Systems

Systems that augment a manager’s intelligence and expertise are called intelligent support systems (ISS) Decision support systems (DSS) Executive information systems (EIS) Artificial intelligence and expert

systems (ES)


Decision Support Systems

A set of interactive software programs that provide managers with data, tools, and models to make semistructured decisions.


Components of a Decision Support System

Database management system (DBMS)

Model management system Support tools


A Simple Decision-Making Model

Internal Data

External Data

Decision-makingModels

•What-if Analysis•Goal Seeking•Problem Solving•Generate Alternatives•Assess Risk


Decision Models

Statistical Models Financial and Accounting

Models Production Models Marketing Models Human Resource Models


Group Decision Support Systems (GDSS)

Computer-based systems that enhance group decision making and improve the flow of information among group members.


Key GDSS Features

Electronic questionnaires Filled out on computers rather than paper

Electronic brainstorming tools Tools that allow anonymous expression and sharing of

ideas using computers

Idea organizers Tools that allow groups to coordinate, compile, and

prioritize

Voting tools Tools that allow people to vote for an idea from a set of

choices


Executive Information Systems (EIS)

Software that analyzes and presents information to executive decision makers in a useful, friendly, and customized format.


DSS and EIS Characteristics

DSS and EIS provide middle and top managers with decision support. Both DSS and EIS are intuitive, interactive, user-friendly systems. DSS and EIS are menu-driven and often have excellent color and

graphic capabilities. Both systems use internal and external data to solve problems. A DSS uses internal and external data and different decision-making

models to provide managers with alternatives to a given problem. An EIS provides managers with expert information in the form of analysis and reports.

Both systems are equipped with decision-making tools such as “what-if” analysis and ‘goal seeking”. EIS is also equipped with drill-down capabilities.

A DSS can support both individual and group decision making. DSS that support group decision making are known as group decision support systems (GDSS).


Artificial Intelligence (AI) and Expert Systems (ES)

Artificial intelligence is a field of computer science that studies the design and development of computer systems that mimic human intelligence.

Expert systems are computer programs that capture the knowledge of a human expert and use it to solve complex problems.


Components of an Expert System

User Interface

Knowledge Base(captures expert’s knowledge)

Inference Engine(software that helps the system apply knowledgeto solve problems)


Characteristics of an Expert System

An expert system is a software program that captures the knowledge and problem-solving skills of a human expert.

Expert systems are not targeted at any one level of management.

Expert systems are ideally suited for problems that require knowledge, intuition, and judgment.

Expert systems, unlike DSS and EIS, can replace the decision maker.

The three main components in an expert system are the knowledge base, the inference engine, and the user interface.


Business Guidelines for TPS, MIS, and ISS Success

Get the Commitment of Top Management The CIO must convince top management of the

link between IS and quality managerial decision making

The More Integrated the System, the Greater the Benefits Without integrated systems, decisions will be

made in isolation and the net impact will be delayed and often confused decisions


Business Guidelines for TPS, MIS, and ISS Success (cont.)

Benefits Are More than Just Bottom Line In some cases a simple cost-benefit analysis may not

be sufficient to make the investment decision

Business Drives the Choice of Information Systems Technology, Not the Other Way Around Investing in technology for the sake of technology is a

disaster waiting to happen

T Is for Trust Trust develops when the IS department delivers

successful and meaningful IS and IT services