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Chapter 10 Decision Support Systems Mc. Graw-Hill/Irwin Copyright © 2008, The Mc. Graw-Hill Companies, Chapter 10 Decision Support Systems Mc. Graw-Hill/Irwin Copyright © 2008, The Mc. Graw-Hill Companies, Inc. All rights reserved.

Learning Objectives • Identify the changes taking place in the form and use of Learning Objectives • Identify the changes taking place in the form and use of decision support in business • Identify the role and reporting alternatives of management information systems • Describe how online analytical processing can meet key information needs of managers • Explain the decision support system concept and how it differs from traditional management information systems 3

Learning Objectives • Explain how the following information systems can support the information needs Learning Objectives • Explain how the following information systems can support the information needs of executives, managers, and business professionals • Executive information systems • Enterprise information portals • Knowledge management systems • Identify how neural networks, fuzzy logic, genetic algorithms, virtual reality, and intelligent agents can be used in business 4

Learning Objectives • Give examples of several ways expert systems can be used in Learning Objectives • Give examples of several ways expert systems can be used in business decision-making situations 5

Decision Support in Business • Companies are investing in data-driven decision support application frameworks Decision Support in Business • Companies are investing in data-driven decision support application frameworks to help them respond to • Changing market conditions • Customer needs • This is accomplished by several types of • Management information • Decision support • Other information systems 6

Case 1: Dashboards for Executives • Web-based “dashboards” • Displays critical information in graphic Case 1: Dashboards for Executives • Web-based “dashboards” • Displays critical information in graphic form • Assembled from data pulled in real time from corporate software and databases • Managers see changes almost instantaneously • Now available to smaller companies • Potential problems • Pressure on employees • Divisions in the office • Tendency to hoard information 7

Case Study Questions • What is the attraction of dashboards to CEOs and other Case Study Questions • What is the attraction of dashboards to CEOs and other executives? • What real business value do they provide to executives? • The case emphasizes that managers of small businesses and many business professionals now rely on dashboards. • What business benefits do dashboards provide to this business audience? 8

Case Study Questions • What are several reasons for criticism of the use of Case Study Questions • What are several reasons for criticism of the use of dashboards by executives? • Do you agree with any of this criticism? 9

Levels of Managerial Decision Making 10 Levels of Managerial Decision Making 10

Information Quality • Information products made more valuable by their attributes, characteristics, or qualities Information Quality • Information products made more valuable by their attributes, characteristics, or qualities • Information that is outdated, inaccurate, or hard to understand has much less value • Information has three dimensions • Time • Content • Form 11

Attributes of Information Quality 12 Attributes of Information Quality 12

Decision Structure • Structured (operational) • The procedures to follow when decision is needed Decision Structure • Structured (operational) • The procedures to follow when decision is needed can be specified in advance • Unstructured (strategic) • It is not possible to specify in advance most of the decision procedures to follow • Semi-structured (tactical) • Decision procedures can be pre-specified, but not enough to lead to the correct decision 13

Decision Support Systems Management Information Systems Decision Support Systems Decision support provided Provide information Decision Support Systems Management Information Systems Decision Support Systems Decision support provided Provide information about the performance of the organization Provide information and techniques to analyze specific problems Information form and frequency Periodic, exception, demand, and push reports and responses Interactive inquiries and responses Information format Prespecified, fixed format Ad hoc, flexible, and adaptable format Information produced by extraction and manipulation of business data Information produced by analytical modeling of business data Information processing methodology 14

Decision Support Trends • The emerging class of applications focuses on • • • Decision Support Trends • The emerging class of applications focuses on • • • Personalized decision support Modeling Information retrieval Data warehousing What-if scenarios Reporting 15

Business Intelligence Applications 16 Business Intelligence Applications 16

Decision Support Systems • Decision support systems use the following to support the making Decision Support Systems • Decision support systems use the following to support the making of semi-structured business decisions • • Analytical models Specialized databases A decision-maker’s own insights and judgments An interactive, computer-based modeling process • DSS systems are designed to be ad hoc, quick-response systems that are initiated and controlled by decision makers 17

DSS Components 18 DSS Components 18

DSS Model Base • A software component that consists of models used in computational DSS Model Base • A software component that consists of models used in computational and analytical routines that mathematically express relations among variables • Spreadsheet Examples • Linear programming • Multiple regression forecasting • Capital budgeting present value 19

Applications of Statistics and Modeling • Supply Chain: simulate and optimize supply chain flows, Applications of Statistics and Modeling • Supply Chain: simulate and optimize supply chain flows, reduce inventory, reduce stock-outs • Pricing: identify the price that maximizes yield or profit • Product and Service Quality: detect quality problems early in order to minimize them • Research and Development: improve quality, efficacy, and safety of products and services 20

Management Information Systems • The original type of information system that supported managerial decision Management Information Systems • The original type of information system that supported managerial decision making • Produces information products that support many day-to-day decision-making needs • Produces reports, display, and responses • Satisfies needs of operational and tactical decision makers who face structured decisions 21

Management Reporting Alternatives • Periodic Scheduled Reports • Prespecified format on a regular basis Management Reporting Alternatives • Periodic Scheduled Reports • Prespecified format on a regular basis • Exception Reports • Reports about exceptional conditions • May be produced regularly or when an exception occurs • Demand Reports and Responses • Information is available on demand • Push Reporting • Information is pushed to a networked computer 22

Example of Push Reporting 23 Example of Push Reporting 23

Online Analytical Processing • OLAP • Enables managers and analysts to examine and manipulate Online Analytical Processing • OLAP • Enables managers and analysts to examine and manipulate large amounts of detailed and consolidated data from many perspectives • Done interactively, in real time, with rapid response to queries 24

Online Analytical Operations • Consolidation • Aggregation of data • Example: data about sales Online Analytical Operations • Consolidation • Aggregation of data • Example: data about sales offices rolled up to the district level • Drill-Down • Display underlying detail data • Example: sales figures by individual product • Slicing and Dicing • Viewing database from different viewpoints • Often performed along a time axis 25

OLAP Configuration 26 OLAP Configuration 26

Geographic Information Systems • GIS • DSS uses geographic databases to construct and display Geographic Information Systems • GIS • DSS uses geographic databases to construct and display maps and other graphic displays • Supports decisions affecting the geographic distribution of people and other resources • Often used with Global Positioning Systems (GPS) devices 27

Data Visualization Systems • DVS • Represents complex data using interactive, three-dimensional graphical forms Data Visualization Systems • DVS • Represents complex data using interactive, three-dimensional graphical forms (charts, graphs, maps) • Helps users interactively sort, subdivide, combine, and organize data while it is in its graphical form 28

DVS Example 29 DVS Example 29

Using Decision Support Systems • Using a decision support system involves an interactive analytical Using Decision Support Systems • Using a decision support system involves an interactive analytical modeling process • Decision makers are not demanding pre-specified information • They are exploring possible alternatives • What-If Analysis • Observing how changes to selected variables affect other variables 30

Using Decision Support Systems • Sensitivity Analysis • Observing how repeated changes to a Using Decision Support Systems • Sensitivity Analysis • Observing how repeated changes to a single variable affect other variables • Goal-seeking Analysis • Making repeated changes to selected variables until a chosen variable reaches a target value • Optimization Analysis • Finding an optimum value for selected variables, given certain constraints 31

Data Mining • Provides decision support through knowledge discovery • Analyzes vast stores of Data Mining • Provides decision support through knowledge discovery • Analyzes vast stores of historical business data • Looks for patterns, trends, and correlations • Goal is to improve business performance • Types of analysis • • • Regression Decision tree Neural network Cluster detection Market basket analysis 32

Analysis of Customer Demographics 33 Analysis of Customer Demographics 33

Market Basket Analysis • One of the most common uses for data mining • Market Basket Analysis • One of the most common uses for data mining • Determines what products customers purchase together with other products • Results affect how companies • • • Market products Place merchandise in the store Lay out catalogs and order forms Determine what new products to offer Customize solicitation phone calls 34

Executive Information Systems • EIS • Combines many features of MIS and DSS • Executive Information Systems • EIS • Combines many features of MIS and DSS • Provide top executives with immediate and easy access to information • Identify factors that are critical to accomplishing strategic objectives (critical success factors) • So popular that it has been expanded to managers, analysis, and other knowledge workers 35

Features of an EIS • Information presented in forms tailored to the preferences of Features of an EIS • Information presented in forms tailored to the preferences of the executives using the system • • Customizable graphical user interfaces Exception reports Trend analysis Drill down capability 36

Enterprise Information Portals • An EIP is a Web-based interface and integration of MIS, Enterprise Information Portals • An EIP is a Web-based interface and integration of MIS, DSS, EIS, and other technologies • Available to all intranet users and select extranet users • Provides access to a variety of internal and external business applications and services • Typically tailored or personalized to the user or groups of users • Often has a digital dashboard • Also called enterprise knowledge portals 37

Dashboard Example 38 Dashboard Example 38

Enterprise Information Portal Components 39 Enterprise Information Portal Components 39

Enterprise Knowledge Portal 40 Enterprise Knowledge Portal 40

Case 2: Automated Decision Making • Automated decision making has been slow to materialize Case 2: Automated Decision Making • Automated decision making has been slow to materialize • Early applications were just solutions looking for problems, contributing little to improved organizational performance • A new generation of AI applications • Easier to create and manage • Decision making triggered without human intervention • Can translate decisions into action quickly, accurately, and efficiently 41

Case 2: Automated Decision Making • AI is best suited for • Decisions that Case 2: Automated Decision Making • AI is best suited for • Decisions that must be made quickly and frequently, using electronic data • Highly structured decision criteria • High-quality data • Common users of AI • Transportation industry • Hotels • Investment firms and lenders 42

Case Study Questions • Why did some previous attempts to use artificial intelligence technologies Case Study Questions • Why did some previous attempts to use artificial intelligence technologies fail? • What key differences of the new AI-based applications versus the old cause the authors to declare that automated decision making is coming of age? • What types of decisions are best suited for automated decision making? 43

Case Study Questions • What role do humans plan in automated decision -making applications? Case Study Questions • What role do humans plan in automated decision -making applications? • What are some of the challenges faced by managers where automated decision-making systems are being used? • What solutions are needed to meet such challenges? 44

Artificial Intelligence (AI) • AI is a field of science and technology based on Artificial Intelligence (AI) • AI is a field of science and technology based on • • • Computer science Biology Psychology Linguistics Mathematics Engineering • The goal is to develop computers than can simulate the ability to think • And see, hear, walk, talk, and feel as well 45

Attributes of Intelligent Behavior • Some of the attributes of intelligent behavior • • Attributes of Intelligent Behavior • Some of the attributes of intelligent behavior • • • Think and reason Use reason to solve problems Learn or understand from experience Acquire and apply knowledge Exhibit creativity and imagination Deal with complex or perplexing situations 46

Attributes of Intelligent Behavior • Attributes of intelligent behavior (continued) • Respond quickly and Attributes of Intelligent Behavior • Attributes of intelligent behavior (continued) • Respond quickly and successfully to new situations • Recognize the relative importance of elements in a situation • Handle ambiguous, incomplete, or erroneous information 47

Domains of Artificial Intelligence 48 Domains of Artificial Intelligence 48

Cognitive Science • Applications in the cognitive science of AI • • Expert systems Cognitive Science • Applications in the cognitive science of AI • • Expert systems Knowledge-based systems Adaptive learning systems Fuzzy logic systems Neural networks Genetic algorithm software Intelligent agents • Focuses on how the human brain works and how humans think and learn 49

Robotics • AI, engineering, and physiology are the basic disciplines of robotics • Produces Robotics • AI, engineering, and physiology are the basic disciplines of robotics • Produces robot machines with computer intelligence and humanlike physical capabilities • This area include applications designed to give robots the powers of • • • Sight or visual perception Touch Dexterity Locomotion Navigation 50

Natural Interfaces • Major thrusts in the area of AI and the development of Natural Interfaces • Major thrusts in the area of AI and the development of natural interfaces • Natural languages • Speech recognition • Virtual reality • Involves research and development in • • Linguistics Psychology Computer science Other disciplines 51

Latest Commercial Applications of AI • Decision Support • Helps capture the why as Latest Commercial Applications of AI • Decision Support • Helps capture the why as well as the what of engineered design and decision making • Information Retrieval • Distills tidal waves of information into simple presentations • Natural language technology • Database mining 52

Latest Commercial Applications of AI • Virtual Reality • X-ray-like vision enabled by enhanced-reality Latest Commercial Applications of AI • Virtual Reality • X-ray-like vision enabled by enhanced-reality visualization helps surgeons • Automated animation and haptic interfaces allow users to interact with virtual objects • Robotics • Machine-vision inspections systems • Cutting-edge robotics systems • From micro robots and hands and legs, to cognitive and trainable modular vision systems 53

Expert Systems • An Expert System (ES) • A knowledge-based information system • Contain Expert Systems • An Expert System (ES) • A knowledge-based information system • Contain knowledge about a specific, complex application area • Acts as an expert consultant to end users 54

Components of an Expert System • Knowledge Base • Facts about a specific subject Components of an Expert System • Knowledge Base • Facts about a specific subject area • Heuristics that express the reasoning procedures of an expert (rules of thumb) • Software Resources • An inference engine processes the knowledge and recommends a course of action • User interface programs communicate with the end user • Explanation programs explain the reasoning process to the end user 55

Components of an Expert System 56 Components of an Expert System 56

Methods of Knowledge Representation • Case-Based • Knowledge organized in the form of cases Methods of Knowledge Representation • Case-Based • Knowledge organized in the form of cases • Cases are examples of past performance, occurrences, and experiences • Frame-Based • Knowledge organized in a hierarchy or network of frames • A frame is a collection of knowledge about an entity, consisting of a complex package of data values describing its attributes 57

Methods of Knowledge Representation • Object-Based • Knowledge represented as a network of objects Methods of Knowledge Representation • Object-Based • Knowledge represented as a network of objects • An object is a data element that includes both data and the methods or processes that act on those data • Rule-Based • Knowledge represented in the form of rules and statements of fact • Rules are statements that typically take the form of a premise and a conclusion (If, Then) 58

Expert System Application Categories • Decision Management • Loan portfolio analysis • Employee performance Expert System Application Categories • Decision Management • Loan portfolio analysis • Employee performance evaluation • Insurance underwriting • Diagnostic/Troubleshooting • • Equipment calibration Help desk operations Medical diagnosis Software debugging 59

Expert System Application Categories • Design/Configuration • Computer option installation • Manufacturability studies • Expert System Application Categories • Design/Configuration • Computer option installation • Manufacturability studies • Communications networks • Selection/Classification • • Material selection Delinquent account identification Information classification Suspect identification • Process Monitoring/Control 60

Expert System Application Categories • Process Monitoring/Control • • Machine control (including robotics) Inventory Expert System Application Categories • Process Monitoring/Control • • Machine control (including robotics) Inventory control Production monitoring Chemical testing 61

Benefits of Expert Systems • Captures the expertise of an expert or group of Benefits of Expert Systems • Captures the expertise of an expert or group of experts in a computer-based information system • • • Faster and more consistent than an expert Can contain knowledge of multiple experts Does not get tired or distracted Cannot be overworked or stressed Helps preserve and reproduce the knowledge of human experts 62

Limitations of Expert Systems • The major limitations of expert systems • • • Limitations of Expert Systems • The major limitations of expert systems • • • Limited focus Inability to learn Maintenance problems Development cost Can only solve specific types of problems in a limited domain of knowledge 63

Developing Expert Systems • Suitability Criteria for Expert Systems • Domain: the domain or Developing Expert Systems • Suitability Criteria for Expert Systems • Domain: the domain or subject area of the problem is small and well-defined • Expertise: a body of knowledge, techniques, and intuition is needed that only a few people possess • Complexity: solving the problem is a complex task that requires logical inference processing 64

Developing Expert Systems • Suitability Criteria for Expert Systems • Structure: the solution process Developing Expert Systems • Suitability Criteria for Expert Systems • Structure: the solution process must be able to cope with ill-structured, uncertain, missing, and conflicting data and a changing problem situation • Availability: an expert exists who is articulate, cooperative, and supported by the management and end users involved in the development process 65

Development Tool • Expert System Shell • The easiest way to develop an expert Development Tool • Expert System Shell • The easiest way to develop an expert system • A software package consisting of an expert system without its knowledge base • Has an inference engine and user interface programs 66

Knowledge Engineering • A knowledge engineer • Works with experts to capture the knowledge Knowledge Engineering • A knowledge engineer • Works with experts to capture the knowledge (facts and rules of thumb) they possess • Builds the knowledge base, and if necessary, the rest of the expert system • Performs a role similar to that of systems analysts in conventional information systems development 67

Neural Networks • Computing systems modeled after the brain’s mesh-like network of interconnected processing Neural Networks • Computing systems modeled after the brain’s mesh-like network of interconnected processing elements (neurons) • Interconnected processors operate in parallel and interact with each other • Allows the network to learn from the data it processes 68

Fuzzy Logic • Fuzzy logic • Resembles human reasoning • Allows for approximate values Fuzzy Logic • Fuzzy logic • Resembles human reasoning • Allows for approximate values and inferences and incomplete or ambiguous data • Uses terms such as “very high” instead of precise measures • Used more often in Japan than in the U. S. • Used in fuzzy process controllers used in subway trains, elevators, and cars 69

Example of Fuzzy Logic Rules and Query 70 Example of Fuzzy Logic Rules and Query 70

Genetic Algorithms • Genetic algorithm software • Uses Darwinian, randomizing, and other mathematical functions Genetic Algorithms • Genetic algorithm software • Uses Darwinian, randomizing, and other mathematical functions • Simulates an evolutionary process, yielding increasingly better solutions to a problem • Being uses to model a variety of scientific, technical, and business processes • Especially useful for situations in which thousands of solutions are possible 71

Virtual Reality (VR) • Virtual reality is a computer-simulated reality • Fast-growing area of Virtual Reality (VR) • Virtual reality is a computer-simulated reality • Fast-growing area of artificial intelligence • Originated from efforts to build natural, realistic, multi-sensory human-computer interfaces • Relies on multi-sensory input/output devices • Creates a three-dimensional world through sight, sound, and touch • Also called telepresence 72

Typical VR Applications • Current applications of virtual reality • • Computer-aided design Medical Typical VR Applications • Current applications of virtual reality • • Computer-aided design Medical diagnostics and treatment Scientific experimentation Flight simulation Product demonstrations Employee training Entertainment 73

Intelligent Agents • A software surrogate for an end user or a process that Intelligent Agents • A software surrogate for an end user or a process that fulfills a stated need or activity • Uses built-in and learned knowledge base to make decisions and accomplish tasks in a way that fulfills the intentions of a user • Also call software robots or bots 74

User Interface Agents • Interface Tutors – observe user computer operations, correct user mistakes, User Interface Agents • Interface Tutors – observe user computer operations, correct user mistakes, provide hints/advice on efficient software use • Presentation Agents – show information in a variety of forms/media based on user preferences • Network Navigation Agents – discover paths to information, provide ways to view it based on user preferences • Role-Playing – play what-if games and other roles to help users understand information and make better decisions 75

Information Management Agents • Search Agents – help users find files and databases, search Information Management Agents • Search Agents – help users find files and databases, search for information, and suggest and find new types of information products, media, resources • Information Brokers – provide commercial services to discover and develop information resources that fit business or personal needs • Information Filters – Receive, find, filter, discard, save, forward, and notify users about products received or desired, including e-mail, voice mail, and other information media 76

Case 3: Centralized Business Intelligence • A reinventing-the-wheel approach to business intelligence implementations can Case 3: Centralized Business Intelligence • A reinventing-the-wheel approach to business intelligence implementations can result in • High development costs • High support costs • Incompatible business intelligence systems • A more strategic approach • Standardize on fewer business intelligence tools • Make them available throughout the organization, even before projects are planned 77

Case 3: Centralized Business Intelligence • About 10 percent of the 2, 000 largest Case 3: Centralized Business Intelligence • About 10 percent of the 2, 000 largest companies have a business intelligence competency center • Centralized or virtual • Part of the IT department or independent • Cost reduction is often the driving force behind creating competency centers and consolidating business intelligence systems • Despite the potential savings, funding for creating and running a BI center can be an issue 78

Case Study Questions • What is business intelligence? • Why are business intelligence systems Case Study Questions • What is business intelligence? • Why are business intelligence systems such a popular business application of IT? • What is the business value of the various BI applications discussed in the case? • Is the business intelligence system an MIS or a DSS? 79

Case 4: Robots, the Common Denominator • In early 2004, 22 patients underwent complex Case 4: Robots, the Common Denominator • In early 2004, 22 patients underwent complex laparoscopic operations • The operations included colon cancer procedures and hernia repairs • The primary surgeon was 250 miles away • A three-armed robot was used to perform the procedures • Left arm, right arm, camera arm 80

Case 4: Robots, the Common Denominator • Automakers heavily use robotics • Ford has Case 4: Robots, the Common Denominator • Automakers heavily use robotics • Ford has a completely wireless assembly factory • It also have a completely automated body shop • BMW has two wireless plants in Europe and is setting one up in the U. S. • Vehicle tracking and material replenishment are automated as well 81

Case Study Questions • What is the current and future business value of robotics? Case Study Questions • What is the current and future business value of robotics? • Would you be comfortable with a robot performing surgery on you? • The robotics being used by Ford Motor Co. are contributing to a streamlining of its supply chain • What other applications of robots can you envision to improve supply chain management beyond those described in the case? 82