Information Systems for Managerial Decision Support

Introduction

Information, Decisions, and Management

Decision Support Technologies

OLAP and DSS

DSS Applications in Corporate Functional Management

Practitioners of Management Science

Achieving Success with Analytics

$ROI

Raw Data

Standard Reports

Ad Hoc Reports and OLAP

Descriptive Modeling

Predictive Modeling

Data Information Intelligence

Optimization Modeling

Decision Support

What happened?

What will happen?

What is the best that could happen?

Decision Guidance

Why did it happen?Why did it happen?

Where are we?

3

The Web

Databases

SQL

Data

HTML or XML Data

Automated Data Acquisition using VBA

Decision Modeling with Excel

HTTP Request

Data Models

Changes in the Analytical Landscape

Analytical Modelers

Management

IT Ops

Data Integrators

Business

Governance

STAKEHOLDERSNow…

CustomerService

Retail

Logistics

Promotions

OPERATIONS TARGET

Customers

Stockholders

Introduction Management

– A process by which organizational goals are achieved through the use of resources

Resources: Inputs Goal Attainment: Output Measuring Success:

Productivity = Outputs / Inputs

Introduction cont. Management is decision making The manager is a decision maker Now fast changing, complex environment Factors affecting decision making

o Technology/Information/Computerso Structural Complexity/Competitiono International Markets/Political Stabilityo Consumerism/Changes, Fluctuations

Information, Decisions, and Management

Informationo Type of information required is directly related to the

level of management and the amount of structure in the decision situation

Levels of managerial decision-makingo Strategic Managemento Tactical Managemento Operational Management

Strategic Management Monitor the strategic performance of the organization and its

overall direction in the political, economic, and competitive business environment

Unstructured Decisionso Not possible to specify in advance most of the decision

procedures to followo Decision maker must provide judgement, evaluation and

insights to a novel, important and nonroutine-type decision

Require more summarized, ad hoc, unscheduled reports, forecasts, and external intelligence to support their more unstructured planning and policy-making responsibilities

Tactical Management Allocate resources and monitor the performance of their

organizational subunits, including departments, divisions, process teams, and other workgroups

Semistructured Decisionso Some decision procedures can be prespecified, but not

enough to lead to a definite recommended decisiono Only part of the decision has a clear-cut answer provided

by an accepted procedure

Require information from both the operational level and the strategic level to support their semistructured decision making responsibilities

Operational Management Direct the use of resources and the performance of tasks

according to procedures and established budgets and schedules

Structured Decisionso The procedures to follow when a decision is needed can be

specified in advanceo Involves a repetitive and routine-type decision where there

is a definite procedure to follow

Require more prespecified internal reports emphasizing detailed current and historical data comparisons that support day-to-day operations

Decision Support Technologies Management Information Systems (MIS) Decision Support Systems (DSS) Enterprise (Executive) Information Systems (EIS) Enterprise Resource Planning (ERP) and Supply-

Chain Management (SCM) Knowledge Management Systems Expert Systems (ES) Artificial Neural Networks (ANN)

OLAP Online Analytical Processing (OLAP)

o A capability of management, decision support, and executive information systems that enables managers and analysts to interactively examine and manipulate large amounts of detailed and consolidated data from many perspectives

Basic analytical operations includeo Consolidation: aggregation of datao Drill-Down: display detail datao Slicing & Dicing: produce different views from

database

Decision Support Systems Computer-based information systems that provide

interactive information support to managers during the decision-making process

DSS use:o Analytical modelso Specialized databaseso Decision makers’ own insights and judgementso Interactive, computer-based modeling processes to support the

making of semistructured and unstructured decisions by individual managers

o Data mining analysis of large pools of data to find patterns and rules that can be used to guide decision making and predict future behavior

Decision Support Systems Using a DSS involves four basic types of modeling activities:

o What-if Analysisan end user makes changes to variables, or relationships among variables, and observes the resulting changes in the value of other variables

o Sensitivitiy Analysisa special case of what-if analysis—the value of only one variable is changed repeatedly, and the resulting changes on other variables are observed.

o Goal Seeking Analysissets a target value for a variable and then repeatedly changes other variables until the target value is achieved

o Optimization Analysisthe goal is to find the optimum value for one or more target variables, given certain constraints

DSS Applications

According to a recent survey, computer-based DSS are widely applied in both profit making and non-profit organizations. In corporate functional management fields, production and operations management contain the largest number of application articles, followed by management information systems, marketing, finance, strategic management and multifunctional areas. The following website list some of the important application examples from the survey.

http://cstl-hcb.semo.edu/eom/ORINSIHT.HTM

Management Science

The Problem Solving Process

Identify Problem

Formulate & Implement

ModelAnalyze Model

Test Results

Implement Solution

unsatisfactoryresults

A field of study that uses computers, statistics, and mathematics to analyze and solve business problems

Computer Model: A set of mathematical relationships and logical assumptions implemented in a computer as an abstract representation of a real-world object or phenomenon

A Generic Mathematical Model

Y = f(X1, X2, …, Xk)

Y = dependent variable (a bottom line performance measure)

Xi = independent variables (inputs having an impact on Y)

f(.) = function defining the relationship between the Xi and Y

Where:

Categories of Mathematical Models

Prescriptive known, known or under LP, Networks, IP,

well-defined decision maker’s CPM, EOQ, NLP,

control GP, MOLP

Predictive unknown, known or under Regression Analysis,

ill-defined decision maker’s Time Series Analysis,

control Discriminant Analysis

Descriptive known, unknown or Simulation, PERT,well-defined uncertain Queueing,

Inventory Models

Model Independent OR/MS

Category Form of f(.) Variables Techniques