LECTURE ONE

Introduction and Basics of DSS.

 In the early 1970s, Scott Morton first articulated the major concepts of DSS. He defined DSS as
"interactive computer-based systems, which help decision-makers utilize data and models to solve
unstructured problems" (Gorry and Scott Morton, 1971).

Another classic DSS definition, provided by Keen and Scott Morton (1978), is:
 It is a computer-based support system for management decision makers who deal with semi-
structured problems.

 It is an interactive computer-based system or subsystem intended to help decision makers use

communications technologies, data, documents, knowledge and/or models to identify and solve
problems, complete decision process tasks, and make decision.

 It’s a general term for any computer application that enhances a person or group’s ability to make
decisions. Enhances a person or group’s ability to make decisions.

 The term DSS is also sometimes used as an umbrella term to describe any computerized system
that supports decision-making in an organization.

 a computer-based system that represents and processes knowledge in ways that allow decision
making to be more productive, agile, innovative, and/or reputable productive, agile, innovative,
and/or reputable

Decision: a reasoned choice among alternatives

Examples:
 Where to advertise a new product
 What stock to buy  What movie to see
 Where to go for dinner

Decision Making: a process of choosing among alternative courses of action for the purpose of attaining a
goal or goals

The decision-making process is a three-phase process of intelligence, design, and choice,

 Intelligence: searching for conditions that call for decisions
 Design: inventing, developing, and analyzing possible courses of action
 Choice: selecting a course of action from those available

Type of Decisions
Structured –semi structured -Unstructured
Structured processes are routine and typically repetitive problems for which standard solution methods
exist. Unstructured processes are fuzzy, complex problems for which there are no cut-and-dried solution
methods e.g. planning for new services.

DSS should be:

 interactive computer-based system
 enhances a person or group’s ability to make decisions
 More productive, agile, innovative, and/or reputable

A computerized decision support system may be needed for various reasons. For example:
• Speedy computations. A computer lets the decision-maker perform many computations quickly and at a
low cost. Timely decisions are critical for many situations, ranging from a physician in an emergency room
to a stock trader on the trading floor.
• Improved communication. Groups can collaborate and communicate readily with ,Web-based tools.
Collaboration is especially important along the supply chain, where customers all the way through to
vendors must share information.
• Increased productivity. Assembling a group of decision-makers, especially experts, may be costly.
Computerized support can reduce the size of the group and enable its members to be at different
locations (saving travel costs). In addition, the productivity of staff support (such as financial and legal
analysts) may be increased. Productivity may also be increased by using optimization tools that determine
the best way to run a business. See the' Chapter 4 Case Applications; Sodhi, 2001; Keskinocak and Tayur,
2001, Geoffrion and Krishnan, 2001; Warren et al., 2002.
• Technical support. Many decisions involve complex computations. Data can be stored in different
databases and at Web sites anywhere in the organization and even possibly outside the organization. The
data may include text, sound, graphics, and video. It may be necessary to transmit them quickly from
distant locations. Computers can search, store, and transmit needed data quickly, economically, and
transparently.
• Data warehouse access. Large data warehouses, like the one operated by Wal-Mart, contain petabytes
of data. Special methods, and sometimes parallel computing, are needed to organize and search the data.
• Quality support. Computers can improve the quality of the decisions made. For example, more data can
be accessed, more alternatives can be evaluated, risk analysis can be performed quickly, and the views of
experts (some of whom are in remote locations) can be collected quickly and at a lower cost. Expertise
can even be derived directly from a computer system through artificial intelligence methods. With
computers, decision-makers can perform complex simulations, check many possible scenarios, and assess
diverse impacts quickly and economically (see Saltzman and Mehrotra, 2001). All these capabilities lead to
better decisions.
• Competitive edge: enterprise resource management and empowerment. Competitive pressures make
the job of decision-making difficult. Competition is based not just on price but on quality, timeliness,
customization of products, and customer support. Organizations must be able to frequently and rapidly
change their mode of operation, reengineer processes and structures, empower employees, and
innovate. Decision-support technologies such as expert systems can create meaningful empowerment by
allowing people to make good decisions quickly, even if they lack some knowledge. Enterprise resource
management (ERM) systems are a type of decision support system that describes an entire organization,
and help manage it. Finally, optimizing the supply chain requires special tools (see Keskinocak and Tayur,
2001; and Sodhi, 2001).
• Overcoming cognitive limits in processing and storage. According to Simon (1977), the human mind has
only a limited ability to process and store information.

People may sometimes find it difficult to recall and use information in an error free fashion. Most
decision-support methods provide for quick data queries and use models to convert the data into usable
information for consideration by a decision-maker. For example, data can be fed into a forecasting model
where they are converted into a forecast. The resulting forecast may be used as information for decision-
making. It may be further converted by another model, thereby providing, and additional information for
decision-making.

Management Support Systems overview.

Management is a process by which organizational goals are achieved using resources. The resources are
considered inputs, and attainment of goals is viewed as the output of the process. The degree of success
of the organization and the manager's job is often measured by the ratio of outputs to inputs. This ratio is
an indication of the organization's productivity.

 Productivity is a major concern for any organization because it determines the well-being of the
organization and its members.
 Productivity is also a very important issue at the national level.
 National productivity is the aggregate of the productivity of all the people and organizations in the
country, and it determines the country's standard of living, employment level, and economic
health.
 The level of productivity, or the success of management, depends on the performance of
managerial functions, such as planning, organizing, directing, and controlling.
 In addition, the Web improves productivity by providing, among other things, data, environmental
scanning, and portals that lead to better decisions, and thus, increased productivity.
 To perform their functions, managers are engaged in a continuous process of making decisions.

All managerial activities revolve around decision-making. The manager is primarily a decision-maker
Organizations are filled with decision makers at various levels.

Computer applications have moved from transaction processing and monitoring activities to problem
analysis and solution applications, where much of the activity is handled over the Web. Topics such as
data warehousing, data mining, online analytical processing, and the use of the Web via the Internet,
intranets and extranets for decision support are the cornerstones of high-tech modern management at
the start of the twenty-first century. Managers must have high speed, networked information systems to
assist them directly with their most important task: making decisions (see Hoch, 2001).

MANAGEMEN T SUPPORT SYSTEM TECHNOLOGIES (TOOLS)

 Decision support systems
 Management science (MS)/operations research (OR) models and techniques
The management science process is based on mathematical modeling (algebraic expressions that
describe the problem). Modeling involves transforming the real-world problem into an appropriate
prototype structure (model). There are computerized methodologies that find solutions to this
model quickly and efficiently. Some of these are deployed directly over the Web). Less structured
problems can be handled only by a DSS that includes customized modeling capabilities.
 Business analytics
Business analytics (BA) refers to all the methods and techniques that are used by an organization
to measure performance. Business analytics are made up of statistical methods that can be applied
to a specific project, process or product. Business analytics can also be used to evaluate an entire
company. Business analytics are performed in order to identify weaknesses in existing processes
and highlight meaningful data that will help an organization prepare for future growth and
challenges.
The need for good business analytics has spurred the creation of business analytics software and
enterprise platforms that mine an organization’s data in order to automate some of these
measures and pick out meaningful insights.
 Data mining
Data mining is the process of sorting through large data sets to identify patterns and establish
relationships to solve problems through data analysis. Data mining tools allow enterprises to
predict future trends.
 Data warehousing
In computing, a data warehouse (DW or DWH), also known as an enterprise data
warehouse (EDW), is a system used for reporting and data analysis, and is considered a core
component of business intelligence. DWs are central repositories of integrated data from one or
more disparate sources. A data warehouse is a federated repository for all the data collected by an
enterprise's various operational systems, be they physical or logical. Data warehousing emphasizes
the capture of data from diverse sources for access and analysis rather than for transaction
processing.
 Business intelligence
This involves examining historical data to get a sense of how a business department, team or staff
member performed over a particular time. This is a mature practice that most enterprises are fairly
accomplished at using.
 Online analytical processing (OLAP)
OLTP (online transaction processing) is a class of software programs capable of
supporting transaction-oriented applications on the Internet. Typically, OLTP systems are used for
order entry, financial transactions, customer relationship management (CRM) and retail sales.
Such systems have a large number of users who conduct short transactions. Database queries are
usually simple, require sub-second response times and return relatively few records.

 Group support systems (GSS)/collaborative computing

Groups make many major decisions in organizations. Getting a group together in one place and at
one time can be difficult and expensive. Furthermore, traditional meetings can last a long time,
and any resulting decisions may be mediocre. Attempts to improve the work of groups with the aid
of information technology have been described as collaborative computing systems, groupware,
electronic meeting systems, and GSS (see DSS in Action 1.6). Most groupware currently runs over
the Web and provides both videoconferencing and audio conferencing, in addition to meeting
tools like electronic brainstorming, voting, and document sharing. Groupware includes Group
systems, Groove, Place Ware, WebEx. NetMeeting and even distance learning courseware tools,
such as Blackboard.
 Enterprise information systems (EIS)
 enterprise information portals (EIP)
Enterprise information systems (EIS) evolved from executive information systems combined with
Web technologies. Enterprise information portals are now utilized to view information that spans
the entire organization. Enterprise information systems give access to relevant enterprise-wide
information that individuals need to perform their tasks.
 Provide an organizational view of operations
 Provide an extremely user-friendly interface through portals, sometimes
compatible with individual decision styles
 Provide timely and effective corporate level tracking and control
 Provide quick access to detailed information behind text, numbers, or graphics
through drill-down
 Filter, compress, and track critical data and information
 Identify problems (opportunities).
 Enterprise resource management (ERM)/enterprise resource planning (ERP) systems
enterprise resource planning (ERP) (also called enterprise resource management) tries to
integrate, within one organization, repetitive transaction processing systems, such as ordering,
producing, packaging, costing, delivery, and billing. Such integration involves many decisions that
can be facilitated by DSS or provide a fertile ground for DSS applications.
 Customer resource management (CRM) systems
Customer relationship management (CRM) is a term that refers to practices, strategies and
technologies that companies use to manage and analyze customer interactions and data
throughout the customer lifecycle, with the goal of improving customer service relationships and
assisting in customer retention and driving.
 Supply-chain management (SCM)
Supply chain management (SCM) attempts to improve tasks within the various segments of the
supply chain, such as manufacturing and human resource management, as well as along the entire
extended chain. The previously described decision support tools can enhance SCM, especially
management science methods that can be used to optimize the supply chain and group support
systems that enhance collaboration from vendors through to customers. SCM involves many non-
routine decisions. These topics are related to enterprise systems, such as organizational decision
support systems, EIS, and intranet applications
 Knowledge management systems (KMS)
Knowledge management systems (KMS) and their associated technologies deal with these issues.
Knowledge is organized and stored in a knowledge repository, a kind of textual database. When a
problem has to be solved, or an opportunity to be assessed, the relevant knowledge can be found
and extracted from the knowledge repository.
 Expert systems (ES)
When an organization has a complex decision to make or a problem to solve, it often turns to
experts for advice. The experts it selects have specific knowledge about and experience in the
problem area. They are aware of the alternatives, the chances of success, and the benefits and
costs the business may incur. Expert systems attempt to mimic human experts' problem-solving
abilities. Typically, an expert system (ES) is a decision-making or problem-solving software package
that can reach a level of performance comparable to—or even exceeding—that of a human expert
in some specialized and usually narrow problem area. The basic idea behind an ES, an applied
artificial intelligence technology, is simple. Expertise is transferred from the expert to a computer.
This knowledge is then stored in the computer, and users run the computer for specific advice as
needed. The ES asks for facts and can make inferences and arrive at a specific conclusion. Then,
like a human consultant, it advises non-experts and explains, if necessary, the logic behind the
advice
 Artificial neural networks (ANN)
The application of the technologies mentioned above was based on the use of explicit data,
information, or knowledge stored in a computer and manipulated as needed. However, in the
complex real world we may not have explicit data, information, or knowledge. People often must
make decisions based on partial, incomplete, or inexact information. Such conditions are created
in rapidly changing environments.
Decision makers use their experiences to handle these situations; that is, they recall similar
experiences and learn from them what to do with similar new situations for which exact replicas
are unavailable. When this approach to problem-solving is computerized, we call it machine
learning, and its primary tools are artificial neural networks (ANN) and case-based reasoning.
Neural computing, or an artificial neural network (ANN), uses a pattern-recognition approach to
problem-solving, and they have been employed successfully in many business applications

An ANN learns patterns in data presented during training and can apply what it has learned to new
cases. One important application is that of bank loan approval. An ANN can learn to identify
potential loan defaulters from patterns. One of the most successful applications of an ANN is in
detecting unusual credit card spending patterns, thus identifying fraudulent charges. This is
especially important for the many Web-based transactions of e-commerce
 genetic algorithms
At the cutting edge of applied artificial intelligence are several exciting technologies that assist
decision-makers. These include genetic algorithms, fuzzy logic, and intelligent agents (IA). Genetic
algorithms solve problems in an evolutionary way. They mimic the process of evolution and search
for an extremely good solution. Survival of the fittest guides this method. Genetic algorithms have
been used to maximize advertising profit at television stations, and facilities layout among other
applications. Genetic algorithms have been implemented directly in Java applets (and other Web
technology), and in spreadsheets (e.g., evolver from Palisade Software).
 fuzzy logic
Approaches problems the way people do. It can handle the imprecise nature of how humans
communicate information. For example, you might say, "The weather is really hot!" on a hot day.
Consider how hot is hot? Would one degree cooler still be really hot, or simply hot? This
imprecision can be handled mathematically in a precise way to assist decision-makers in solving
problems with imprecise statements of their parameters. Usually fuzzy logic methods are
combined with other artificial intelligence methods, such as expert systems and artificial neural
networks, to boost their accuracy in their decision-making.
 hybrid intelligent support systems
The 'objective of a computer-based information system (CBIS), regardless of its name or nature, is
to assist management in solving managerial or organizational problems faster and better than is
possible without computers. To attain this objective, the system may use one or more information
technologies. Every type of CBIS has certain advantages and disadvantages. By integrating
technologies, we can improve decision-making, because one technology can provide advantages
where another is weak.
 Intelligent systems over the Internet (intelligent agents)
Intelligent agents (intelligent software agents, softbots) help in automating various tasks,
increasing productivity and quality. Most intelligent systems include expert systems or another
intelligent component. Intelligent agents play an increasingly important role in electronic
commerce. Like a good human agent (travel agent, real estate agent, etc.), these systems learn
what you want to do, and eventually take over and can perform many of your mundane tasks.