Enhancing Decision Making

1
Enhancing Decision Making

• Chapter 12 (11 ed)

2
(No Transcript)
3
(No Transcript)
4
Business Value of Improved Decision Making
5
Decision Making at Various Levels of Management
6
The Decision-Making Process

• Simons four stages
• Mintzbergs managerial roles
• Real-world decision making
• Relationship between roles and decision support
• Information quality dimensions
• Management filters
• Organizational inertia and politics

7
Types of Decisions (Simon)

• Structured decisions are repetitive, routine, and
  involve a definite procedure for handling (e.g.,
  restock inventory)
• Unstructured decisions are nonroutine decisions
  in which the decision maker must provide
  judgment, evaluation, and insights there is no
  agreed-upon procedure for making the decision
  (e.g., decide on corporate objectives).
• Semistructured decisions are ones where only part
  of the problem has a clear-cut answer provided by
  an acceptable procedure (e.g., develop a
  marketing plan)

8
Semi-Structured Decisions Related to SCM and CRM

• SCM
• Can we make decisions that match inventory with
  customer demand?
• Can we generate optimal production allocation
  decisions that minimize cost or maximize profit?
• Can we identify points in the SC that generate
  excessive costs?
• CRM
• Who are our most frequent customers? What
  determines a repeat customer?
• Who are our most profitable customers?
• Can we predict and intervene to prevent losing a
  customer?

9
Simons Decision Making Process
Intelligence
Is there a problem?
Design
What are the alternatives?
Choice
Which should you choose?
Implementation
Is the choice working?
10
Mintzbergs Managerial Roles

• Role

• Support System

• Figurehead
• Leader
• Liaison
• Nerve Center
• Disseminator
• Spokesperson
• Entrepreneur
• Disturbance handler
• Recourse allocator
• Negotiator

• None
• None
• E-mail
• MIS, ESS
• Mail, office systems
• Office systems
• None
• None
• DSS
• None

11
Information Quality Dimensions

• Accuracy (representation of reality)
• Integrity
• Consistency
• Completeness
• Validity
• Timeliness
• Accessibility

12
Real World Decision Making

• Often decision support do not work because
• One or more dimensions of information quality are
  poor (e.g., accuracy, completeness, timeliness,
  etc.)
• Managerial filters or bias (only see the good
  news and ignore the bad)
• Organizational inertia (e.g., Britannica, Kodak)

13
Systems for Decision Support

• DSS
• GIS
• CDSS
• ESS
• GDSS (not covered)

14
A Definition of a DSS

• A DSS is a computer system at the management
  level of an organization that combines data,
  sophisticated analytical models, and
  user-friendly software to support semistructured
  and unstructured decision making.

15
Components of a DSS

• DSS database
• collection of current or historical data and
  possibly some external data
• may be small dataset downloaded from corporate
  mainframes to a PC
• may be a massive data warehouse
• DSS software system contains the software tools
  for data analysis, with models, data mining, and
  other analytical tools
• collection of mathematical models (statistical
  models, linear programming, forecasting,
  sensitivity analysis models)
• OLAP or datamining tools
• DSS user interface controls the interaction
  between the user and the tools
• graphical, flexible, and easy to use (e.g.,
  Wizards)

16
Overview of a Decision Support System
17
Characteristics of a DSS

• DSS offer users flexibility, adaptability, and a
  quick response (usually interactive)
• DSS allow users to initiate and control the input
  and output
• DSS operate with little or no assistance from
  professional programmers
• DSS provide support for decisions and problems
  whose solutions cannot be specified in advance
• DSS use sophisticated analysis and modeling tools

18
Some Specifics About How a DSS Can Improve
Managerial Decision Making

• In the intelligence phase
• produce more timely data
• increase the use of quantitative data
• make more data available
• In the design phase
• generate more alternatives
• generate more accurate alternatives
• In the choice phase
• make faster decisions
• sometimes rank the choices

19
Types of DSS

• Model-driven DSS are primarily standalone systems
  that use some type of quantitative model to
  perform what-if and other types of analysis.
• Data-driven DSS are systems that analyze large
  pools of data collected stored in a data
  warehouse these systems permit managers to
  extract useful relationships that are hidden in
  the data. Two techniques are used
• On-line analytical processing (OLAP)
• Datamining as knowledge discovery (search for
  hidden patterns)
• Web-based DSS exist for both types (customer
  decision support systems)

20
The Electronic Spreadsheet A DSS Tool

• Most widely used tool for decision support
  because it is widely accessible to both
  experienced and inexperienced users
• Features of spreadsheets that support DSS
  construction
• Pivot tables for OLAP
• Data tables for sensitivity analysis (what-if)
• Preprogrammed functions enable the use of many
  mathematical models
• Built in IF-THEN function
• Ability to use Visual Basic for Applications
• Charts,

21
Customer DSS (CDSS)

• A CDSS is a special type of DSS designed to
  support the buying decisions of an existing or
  potential customer. Most current CDSS are Web
  based
• Support exists for both the individual consumer
  (B2C) and businesses (B2B)
• Complexity of products and sophistication of the
  buyer often determine the nature of a CDSS
• Examples of model driven CDSSs
• Bankrate (www.bankrate.com )
• Vanguard (www.vanguard.com) see planning and
  education
• Examples of data driven CDSSs
• PriceGrabber ( www.pricegrabber.com)
• Buying tires (www.tirerack.com)

22
Geographic Information Systems (GIS)

• A GIS is a DSS for decision aid for map-related
  decisions
• Typical GIS contains
• Database of quantitative and qualitative data
• Database of maps
• Program to display information on maps
• Applications of GIS
• Identifying the best site to locate a branch
  office
• Targeting pockets of potential customers
• Repositioning promotions and advertising
• Tracking the spread of disease or crime

23
Web Sites for GIS

• HUD environmental maps http//198.102.62.140/emaps
  /SearchFrame.asp
• A major GIS vendor
• http//maps.esri.com
• An example of how a state can use a GIS
• http//www.state.ma.us/mgis/muniapps.htm
• An example of how Groton, MA uses a GIS
• http//host.appgeo.com/groton/Search.asp
• An example from San Francisco, CA
• http//www.sfprospector.com/site/sfprospector_inde
  x.asp
• Use APN 8719003 in SFprospector demographic and
  business report for Mission Bay South location
• An example from Mecklenburg County, NC
• http//gischamber.mecklenburgcountync.gov/Default.
  aspx

24
Executive Support Systems (ESS)

• Systems specifically designed to support
  unstructured and semi-structured decisions of
  senior management
• Major features
• Drill down
• Integration of data from multiple internal
  sources
• Integration of data from external sources
• Availability of modeling tools with little
  required training
• Balanced score card and key performance
  indicators
• Often used at lower levels of management

25
Balanced Score Card and KPI
26
Business Value of ESS

• Ability to analyze, compare, and highlight trends
• Graphical interface enables users to review data
  more quickly and with more insight, speeding
  decision making.
• Timeliness and availability of data enables more
  timely decision making, helping businesses move
  toward a sense-and-respond strategy.
• Increases upper management span of control,
  better monitoring
• ESS based on enterprise-wide data can be used for
  decentralization of decision making or increase
  management centralization.

27
Web Sites With DSS or ESS Products

• Examples of DSS software
• http//cdss.state.co.us/
• http//www.vanguardsw.com
• DecisionScript enables you to build Web-based
  DSS or CDSS
• DecisionPro can be used for free 15-day trial
• http//www.outlooksoft.com
• Has a live demo of a product OutlookSoft CPM
• Look at product functionality (corporate perf.
  Mgmt)
• Examples of ESS
• http//www.camsys.com/ontar03.htm
• What-if tools some OLAP
• http//www.meditech.com/productbriefs/pages/Produc
  tBriefsCSESS.htm
• Drill down, customized views, individualized
  reporting