Decision Support System

Rev: Feb, 2012

Euiho (David) Suh, Ph.D.

POSTECH Strategic Management of Information and Technology Laboratory
(POSMIT: http://posmit.postech.ac.kr)

Dept. of Industrial & Management Engineering

POSTECH

Contents

Discussion Questions

Decision Making

Introduction to Decision Support System (DSS)

Development of DSS

Use of DSS

Business Intelligence

Group Decision Support System(GDSS) and Web DSS

Limitation of DSS

Case Study

Discussion Questions
Explain the decision-making process of Simon
Why does a company need computerized support of managerial decision making?
What are two definitions of decision support system? With DSS, what advantages could t
he company obtain?
What are the differences between MIS and DSS? Explain them using your own words.
What are the four types of analytical modeling? Choose one and explain it with an examp
le
Explain the background of BIs emergence and compare BI with DSS
What is GDSS? How is it different from DSS?
In the case study, how did Interpark use DSS in the management?
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Decision Making

1. Decision Making

Definition
Selecting the best solution from two or more alternatives

Levels of Managerial Decision Making

Decision Structure

Information Characteristics

Unstructured

Strategic
Management
Executives and
Directors
Semistructured

Ad Hoc
Unscheduled
Summarized
Infrequent
Forward Looking
External
Wide Scope

Tactical Management
Business Unit Managers
and Self-Directed Teams
Operational Management
Operating Managers
and Self-Directed Teams

Structured
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Prespecified
Scheduled
Detailed
Frequent
Historical
Internal
Narrow Focus

Types of Problems and Decision Style

1. Decision Making

Combinations of the type of problems and the levels of the management activities
[Huff, 1985]
Levels of Management Activities

Typ
es
of
Pro
ble
ms

Operational Control

Management Control

Strategic Planning

Structured

Inventory reordering
quantity

Setting production level

Plants location

Semi-structured

Share trading

Setting budget

Capital acquisition

Unstructured

Package design

Selecting a new manager

Information systems
portfolio

Decision-making Process (Simon, 1977)

1. Decision Making

Feedback

Intelligence Phase

Organization objectives
Search and scanning procedures
Data collection
Problem identification
Problem ownership
Problem classification
Problem statement

Design Phase

Choice Phase
Solution to the model
Sensitivity analysis
Selection of the best(good)
alternative(s)
Plan for implementation

Formulate a model
Set criteria for choice
Search for alternatives
Predict and measure outcomes

Implementation
of solution

END

Yes

Satisfaction?

No

Difficulties in Decision-making

1. Decision Making

Rapidly increasing alternatives

Technology
Information system
Advanced search engines
Globalization

Uncertainty of the future

Government regulations
Need for compliance
Political instability
Terrorism, competition, changing consumer demands

Need to make rapid decisions

Increasing potential costs of trial-and-error learning

Definition of Decision Support System (DSS)

2. Introduction to DSS

DSS as an Umbrella Term

Any computer-based information system that provide interactive information to support decision-m
aking in an organization
e.g. an organization wide knowledge management system, a decision support system specific to an organizational
function (marketing, finance, accounting, manufacturing, planning, SCM, etc.)

DSS as a Specific Application

An interactive, flexible, and adaptable computer-based application using information and model sp
ecially developed for supporting the solution of a semi-structured management problem for improv
ed decision making

Differences between DSS and MIS

2. Introduction to DSS

DSS
Decision support
provided

Information form and

frequency

Information format

Information processing
methodology

MIS

Provide information and decision

support techniques to analyze specific
problems or opportunities

Provide information about the

performance of the organization

Interactive inquiries and responses

Periodic, exception, demand, and push

reports and responses

Flexible, adaptable format

Fixed format

Information produced by analytical

modeling of business data

Information produced by extraction and

manipulation of business data

Structure of DSS

2. Introduction to DSS

Dialog-Data-Models DSS Frameworks

Dialog based management system (DGMS)
All the capabilities of the DSS must be articulated and implemented through dialog subsystem

Data based management system (DBMS)

Performing all data-related tasks(maintains, stores and retrieves data from the database, extracts data from variou
s sources, )

Models based management system (MBMS)

Containing the library of models and routines to maintain and manage them

DBMS

MBMS

DGMS

User

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Composition of DSS

2. Introduction to DSS

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DSS Model

3. Development of DSS

Environment
Individual
problem
solver

Other
group
members

Mathematical
models

Report
writing
software

Database
Decision
support
system

Environment
Data

Communication

Information

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Groupware

Four-stage Process for developing DSS

Decision support
analysis

Structured interviews
Decision analysis
Data analysis
Technical analysis
Conceptual DSS
orientation
Plans and prioritization

3. Development of DSS

DSS software
evaluation and
selection

Identification of
candidate vendors
Feature analysis
Benchmarks
External site surveys

Operational
deployment and
support

Prototype
development
Scoping of prototype
Project evaluation
criteria
Detailed design
System construction
Testing
Demonstration
Evaluation

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Functional orientation
Operational training
Deployment
Maintenance

Types of Analytical Modeling

3. Development of DSS

Type of Analytical Modeling

Activities and Examples

Observing how changes to selected variables affect other variables

What-if Analysis

Sensitivity analysis

Goal-seeking analysis

Optimization analysis

What will happen to the total inventory cost if the cost of carrying
inventories increases by 10 percent?

Observing how repeated changes to a single variable affect other

variables
The impact of changes in external variables and parameters on the
outcome variables

Making repeated changes to selected variables until a chosen

variable reaches a target value
What annual R&D budget is needed for an annual growth rate of
15 percent by 2013?
Finding an optimum value for selected variables, given certain
constrains

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Use of DSS

4. Use of DSS

DSS Applications

Corporate financial planning

Marketing analysis
Real estate investments
Mineralogical exploration
Transportation routing
Portfolio analysis

Reasons to use DSS

Speedy computations
Improved communication and collaboration
Increased productivity of group members
Improved data management
Overcoming cognitive limits
Quality support; agility support
Using Web; anywhere, anytime support

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Evolution of DSS into Business Intelligence

4. Use of DSS

Change in the Use of DSS

Specialist Managers Whomever, Whenever, Wherever

Emergence of Business Intelligence

Web Technology
OLAP

Data
Warehousing

Business Intelligence
Data Mining

Intelligent
Systems
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Business Intelligence (BI)

5. BI

Definition
An umbrella term that combines architectures, tools, databases, analytical tools, applications, and m
ethodologies

Objective
To enable easy access to data (and models) to provide business managers with the ability to conduc
t analysis

Data

Business Intelligence

Information

Knowledge

ACTION
Decisions

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DSS and BI

Criteria
Architecture

5. BI

DSS

BI
Similar since BI evolved from DSS

Support

Direct support for

specific decision making

Accurate and timely information,

and indirect support for decision making

Orientation

Analyst-oriented

Executive-and strategy-orientated

Foundation

Built from scratch

Commercially available tools

and components

Core Tools

Data mining, Predictive analysis

(Many tools are used for both)

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Introduction to Group Decision Support Systems (GDSS)

6. GDSS and Web DSS

Definition of GDSS
An interactive computer-based system that facilitates the solution of semi-structured and unstructur
ed problems by a group of decision makers

Characteristics of GDSS
A Specially designed information system, not a configuration of already-existing system components
Supporting the process of group decision makers by providing automation of subprocesses, using in
formation technology tools
Addressing one type of problem or a variety of group level organizational decisions
Encouraging generation of ideas, resolution of conflicts, and freedom of expression
Containing built-in mechanisms that discourage development of negative group behaviors, such as
destructive conflict, miscommunication, and groupthink

c.f. Definition of Group Support System (GSS)

Any combination of hardware and software that supports the collaborative work of groups

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Classification of GDSS

6. GDSS and Web DSS

Group size

Smaller

Decision Room

Face-to-face

Larger

Local Decision Network

Public Screen
Terminal

Terminal
Terminal

Terminal

Member proximity

Terminal
Terminal

Terminal

Terminal

Teleconferencing

Terminal

Terminal

Remote Decision Making

Terminal

Terminal

Terminal

Dispersed

Terminal

Video Camera

Networking

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Web DSS

6. GDSS and Web DSS

Definition
Advanced DSS that supports CSCW (Computer Supported Cooperative Work) of individual or group
decision-maker in web
DSS which have components of the Intelligence Agent and Internet, unlike an existent decision sup
port system

Development cause of Web DSS

Internet

Unified Protocol

Virtual enterprise

Distribution of Position

The problem that solution is impossible to traditional DSS occurs.

Department offering service without the substance
Overcome the regional limitation
The necessity that replaces the existent DSS in the Internet

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DSS & GDSS & Web DSS

6. GDSS and Web DSS

DSS

GDSS

Web DSS

Data base

Data base

(Distributed) Data base

Model base

Model base

(Distributed) Model base

User Interface

User Interface

Internet supporting
User Interface

Personal Decision-maker

Many Decision-maker

Personal or Many
Decision-maker

Group Application Software

Intelligence Agent, Internet

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Problems Facing DSSs

7. Limitation of DSS

Data capture and collection

How to capture and collect data
Non-compatibility of purchased DSSs with existing databases and computer networks

Data integrity and security

Unstructured problems
How to solve unstructured problems which are commonly faced by top executives

Management of DSSs
Cost-effectiveness
Standardization
Data are not independent of spreadsheets
Industrial standard for all spreadsheets
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Case Study

8. Case Study

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Reference
Euiho Suh, DSS/EIS/DW/OLAP (PPT Slide), POSMIT Lab.
(POSTECH Strategic Management of Information and Technology Laboratory)
OBrien & Marakas, Introduction to Information Systems Sixteenth Edition, McGraw Hill, Chapter 9
Efraim Turban, Ramesh Sharda, Dursun Delen,
Decision Support and Business Intelligence systems Ninth Edition, Pearson, Chapter 1, pp.1~35
Efraim Turban, Ramesh Sharda, Dursun Delen
, Decision Support and Business Intelligence systems Ninth Edition, Pearson, Chapter 2, pp.36~69
Efraim Turban, Ramesh Sharda, Dursun Delen
, Decision Support and Business Intelligence systems Ninth Edition, Pearson, Chapter 10, pp.419~470
Yunmi Lee, DSS & ES (PPT Slide), POSMIT Lab.
(POSTECH Strategic Management of Information and Technology Laboratory)
M.C. ER, Decision Support Systems: A Summary, Problems, and Future Trends,Decision
Support Systems 4 (1988) 355-363

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