Supporting Management

1
Chapter 10

• Supporting Management
• Decision Making

2
Learning Objectives

• Describe the concepts of management, decision
  making, and computerized support for decision
  making.
• Justify the role of models in decision making.
• Describe the framework for computerized decision
  support classify problems support according
  to the framework.
• Describe decision support systems and their
  benefits, and analyze their role in management
  support.

3
Learning Objectives (cont.)

• Compare regular (personal) decision support
  systems with group and organizational decision
  support systems and analyze the major
  differences.
• Describe enterprise and executive information
  systems, and analyze their role in management
  support.
• Explain how networks and the Web can enhance
  managerial decision making.

4
Case Web-based Data Analysis at Shopko

• Problem
• The information systems that supported ShopKos
  business in the past were highly fragmented,
  ineffective, and inflexible.
• Forecasts were inaccurate, and wrong decisions
  were frequently made.
• Solution
• The company installed comprehensive decision
  support system (DSS) software (DSS Agent, from
  MicroStrategy).
• This system includes a data warehouse and online
  analytical processing.
• Results
• ShopKos investment into sophisticated web-based
  data analysis enabled stores to carry the right
  merchandise at the right place time.

5
Lessons from the Case

• A solution to complex decisions can be enhanced
  with the use of computer programs called a
  decision support system (DSS).
• Decisions are supported both in the sales and
  inventory areas.
• Much of the support is based around the concepts
  of data warehousing and online analytical
  processing.
• The Web is playing an increasing role in
  facilitating purchasing.

6
Managers Decision Making

• Management is a process by which organizational
  goals are achieved through the use of resources
  (people, money, energy, materials, space, time).
• These resources are considered to be inputs, and
  the attainment of the goals is viewed as the
  output of the process.
• Managers oversee this process in an attempt to
  optimize it.

7
The Managers Job

• 3 Categories
• (Mintzberg ,1973)
• 1. Interpersonal roles figurehead, leader,
  liaison.
• 2. Informational roles monitor, disseminator,
  spokesperson.
• 3. Decisional roles entrepreneur, disturbance
  handler, resource allocator, negotiator.

8
The Managers Decision Role
9
Managerial Decisions Computerized Support

• The success of management depends on the skillful
  execution of managerial functions such as
  planning, organizing, directing, and controlling.
• To carry out these functions, managers engage in
  the continuous process of making decisions.
• Managers must learn how to use the new tools and
  techniques that can help them make decisions.
• Computerized techniques support qualitative and
  quantitative decision making.

10
The Decision Making Process
11
Modeling Models

• A model (in decision making) is a simplified
  representation or abstraction of reality.
• With modeling, one can perform virtual
  experiments and an analysis on a model of
  reality, rather than on reality itself.
• Some Benefits of Modelling
• The cost of virtual experimentation is much lower
  than the cost of experimentation conducted with a
  real system.
• Models allow for the simulated compression of
  time.
• Manipulating the model (by changing variables) is
  much easier than manipulating the real system.
• The cost of making mistakes during a real
  trial-and-error experiment is much lower.

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4 Types of Models

• Iconic (Scale) Models. An iconic modelthe least
  abstract modelis a physical replica of a system,
  usually based on a different scale from the
  original.
• Analog Models. An analog model, in contrast to an
  iconic model, does not look like the real system
  but behaves like it.

• Mathematical (Quantitative) Models. The
  complexity of relationships in many systems
  cannot conveniently be represented. A more
  abstract model is possible with the aid of
  mathematics.
• Mental models provide a subjective description of
  how a person thinks about a situation.

13
Why do Managers Need the Support of IT?

• Making decisions while processing information
  manually is growing increasingly difficult due
  to the following trends
• The number of alternatives to be considered is
  ever increasing.
• Many decisions must be made under time pressure.
• Due to increased fluctuations uncertainty in
  the decision environment, it is frequently
  necessary to conduct a sophisticated analysis to
  make a good decision.
• It is often necessary to access remote
  information, consult with experts, or have a
  group decision-making session, all quickly in
  expensively.

14
Determining the Information Needs of Managers

• Wetherbe approach (1991) Two-phase process.
• Phase I a structured interview is conducted to
  determine managers perceived information needs.
  
• Phase I a prototype of the information system
  is quickly constructed.
• Critical success factor (CSF) approach
• Watson and Frolick approach (1992) is based on
  the following strategies
• determining information requirements
• asking (the interview approach)
• deriving the needs from an existing information
  system
• synthesizing from characteristics of the systems
• and discovering via evolving systems
  (prototyping)

15
Management Support Systems (MSS

• Four major information technologies have been
  successfully used to support managers.
• DSSs provide support primarily to analytical,
  quantitative types of decisions.
• Executive (enterprise) support systems support
  the informational roles of executives.
• Group decision support systems support
  managers working in groups.
• Intelligent systems provide mulitfunctional
  support.

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Framework for Computerized Decisions

• Managerial problems fall under 3 categories
  (Source Simon,1977)
• Structured problems all phasesintelligence,
  design, and choiceare structured the
  procedures for obtaining the best solution are
  known.
• Unstructured problems none of the three
  phasesintelligence, design, or choiceis
  structured, and human intuition is frequently the
  basis for decision making.
• Semistructured problems requires a combination
  of standard solution procedures and individual
  judgment.

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Framework for Computerized Decisions (cont.)

• There are 3 broad categories that encompass all
  managerial activities (Part ii Source
  Anthony,1965)
• Strategic planning the long-range goals
  policies for resource allocation
• Management control the acquisition efficient
  utilization of resources in the accomplishment of
  organizational goals
• Operational control the efficient effective
  execution of specific tasks.

18
Management Science

• The Management Science approach maintains that
  managers can follow a fairly systematic process
  for solving problems.
• Defining the problem (a decision situation that
  may deal with a setback or with an opportunity).
• Classifying the problem into a standard category.
• Constructing a standard mathematical model that
  describes the real-life problem.
• Finding potential solutions to the modeled
  problem and evaluating them.
• Choosing recommending a solution to the
  problem.

19
Decision Support Systems DSS

• Decision Support System (DSS) a computer-based
  information system that combines models and data
  in an attempt to solve semistructure problems
  with extensive user involvement.
• The term decision support systems (DSS), like the
  terms MIS and MSS, means different things to
  different people.
• DSS can be viewed as an approach or a philosophy
  rather than a precise methodology.

20
Case Using DSS to Determine Risk

• Problem
• Houston Oil Minerals Corporation was interested
  in a proposed joint venture but requried a risk
  analysis.
• Solution
• Houston Oil built a DSS by means of a specialized
  planning language. The results suggested that the
  project be accepted.
• Results
• The executive vice president, using his
  experience, judgment, and intuition, decided to
  reverse the decision and rejected the project.
• The DSS was flexible and responsive enough to
  allow managerial intuition and judgment to be
  incorporated into the analysis.
• .

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Characteristics of DSSs

• Provides support for decision makers at all
  management levels, whether individuals or groups,
  by bringing together human judgment and objective
  information.
• Supports several interdependent and/or sequential
  decisions.
• Supports all phases of the decision-making
  process intelligence, design, choice, and
  implementationas well as a variety of
  decision-making processes and styles.
• Is adaptable by the user over time to deal with
  changing conditions.

.
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Characteristics of DSSs (cont.)

• Is easy to construct and use in many cases.
• Promotes learning, which leads to new demands
  refinement of the application, which leads to
  additional learning, and so forth.
• Utilizes quantitative models (standard and/or
  custom made).
• Advanced DSSs are equipped with a knowledge
  management component that allows the efficient
  and effective solution of very complex problems.
• Can be disseminated for use via the Web.
• Allows the easy execution of sensitivity
  analyses.

23
Components of a DSS System

• Data Management Subsystem contains all the
  necessary data that flow from several sources and
  are extracted prior to their entry to a DSS
  database.
• Model Management Subsystem contains completed
  models models building blocks necessary to
  develop DSS applications.
• This includes standard software with financial,
  statistical, management science, or other
  quantitative models.
• Model Base Management System (MBMS) creates DSS
  models easily and quickly, either from scratch,
  existing models, or building blocks.

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DSS Users

• Staff Assistant. This person has specialized
  knowledge about management problems and some
  experience with decision support technology.
• Expert Tool User. This person is skilled in the
  application of one or more types of specialized
  problem-solving tools. This user performs tasks
  for which the manager does not have the necessary
  skills or training.

• Business (System) Analyst. This person has a
  general knowledge of the application area, formal
  business administration education, and
  considerable skill in DSS construction tools.
• Group Facilitator. When group decisions are
  supported by IT, it is frequently beneficial to
  use a process facilitator.

25
The DSS Model
26
Group Decision Support Systems

• Group decision support system (GDSS) an
  interactive computer-based system that
  facilitates the solution of semistructured and
  unstructured problems by a group of decision
  makers.
• The goal of GDSS is to improve the productivity
  of decision-making meetings, either by speeding
  up the decision-making process or by improving
  the quality of the resulting decisions, or both.
• The first generation of GDSS was designed to
  support face-to-face meetings in what is called a
  decision room.
• Such a GDSS is composed of hardware, software,
  people and procedures.

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GDSS Components

• Hardware. A group can use two types of hardware
  configurations.
• a GDSS facility designed for electronic meetings.
• a collection of PCs, equipped with keypads for
  voting and other groupware activities.
• Software.  Typical GDSS software is a collection
  of about a dozen tools or packages, which are
  integrated into a comprehensive system.

• People. The group members and
• a facilitator.

• Procedures. The procedures that
• allow for ease of operation and
• effective use of the technology
• by group members.

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Case The World Economic Forum (WEF)

• Problem
• WEF is a consortium of top business, government,
  academic, and media leaders from virtually every
  country in the world.
• Until 1998 the members conferred privately or
  debated global issues at meetings. Follow-up was
  difficult.
• Solution
• WEF developed a collaborative computing system
  called the World Electronic Community (WELCOM).
• Provides members with a secure channel to send
  e-mail, read reports communicate in
  videoconferences.
• Results
• By 2001 the system was completely on the Web.

29
Enterprise Decision Support

• There are two main types of enterprise decision
  support system
• Organizational decision support systems (ODSS)
  which focus on an organizational task or activity
  involving a sequence of operations and decision
  makers
• Computer-based systems can be developed to
  provide decision support at the individual group
  or organization levels (Hackathorn and Keen,
  1981).
• Executive information system (EIS), also known as
  an Executive support system (ESS), is a
  technology designed in response to managers
  specific needs.

30
Characteristics of EISs

• The drill down capability enables users to get
  details, and details of details, of any given
  information.
• Critical success factors (CSFs) Key Performance
  Indicators are identified.
• In a status access mode, the latest data or
  reports on the status of key indicators or other
  factors can be accessed at any time.

• Trend analysis can be done using forecasting
  models, which are included in many ESSs
• Executive support systems provide for ad hoc
  analysis capabilities, in which executives can
  make specific requests for data analysis as
  needed.

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Characteristics of EISs (cont.)

• Exception reporting is based on the concept of
  management by exception, in which an executive
  gives attention to significant deviations from
  standards.
• In order to save the executives time in
  conducting a drill down, finding exceptions, or
  identifying trends, an intelligent EIS has been
  developed.

• Integration with DSS. Executive information
  systems are useful in identifying problems and
  opportunities.
• With the introduction of the Intranet corporate
  portals, the traditional EIS has become a part of
  an enterprise information system, and it now
  often appears under the name of business
  intelligence.

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Benefits of DSS for the User

• Users can access DSS from anywhere.
• Many DSSs are now deployed on the corporate
  Intranet, making them accessible to all
  employees.
• The Web supports interactive DSS-related queries
  and ad hoc report generation.
• Users can select a list of variables from a
  pull-down menu when executing a predefined query
  or report.
• Web-based application servers can download Java
  applets that execute functions on desktop DSS
  programs.
• This gives users the capabilities of advanced DSS
  applications without requiring client software to
  be loaded.

33
Benefits of DSS for the Builder

• A DSS developer (builder) can access Web pages
  with data related to the project, the software
  used, the users etc., thus cutting development
  time.
• A DSS developer can collaborate with end-users
  for quicker prototyping of DSS applications.
• A DSS developer can collaborate with vendors over
  the Web.
• DSS software and applications are available from
  ASPs over the Web. In such a case there is no
  need to program the DSS, but the developer must
  work with the vendor.

34
Benefits Web-Based DSSs

• Able to reach rich resources of data with simple
  data entry analysis procedure.
• Can easily retrieve data in sophisticated ways.
• Is easy to use.
• Reduces paperwork

• Contributes to better decision making.
• Enables easier use of ready-made DSS.
• Cuts development costs.

35
Requirements for Web-Based DSS

• A study by Business Objects Corporation
  (businessobjects.com) identified five key
  requirements for the successful delivery of
  Web-based DSS.

• Self-service data access
• High availability performance
• Zero-administration clients
• Security
• Unified meta data

36
Simulation for Decision Makers

• In DSS, simulation refers to a technique for
  conducting experiments with a computer on a model
  of a management system.
• Characteristics of Simulation
• While models in general represent reality,
  simulation usually imitates it closely.
• It is a technique for conducting experiments.
• It can describe and/or predict the
  characteristics of a given system under different
  circumstances.
• It can be used for complex decision making

37
Case Simulation Saves Siemens Millions

• Problem
• Siemens Solar Industries (SSI), the worlds
  largest maker of solar electric products,
  suffered continuous problems in poor material
  flow, unbalanced resource use, bottlenecks in
  throughput schedule delays.
• Solution
• SSI built a cleanroom contamination-control
  technology.
• The simulation provided a virtual laboratory for
  engineers to experiment with various
  configurations before the physical systems were
  constructed.
• Results
• SSI improved their manufacturing process
  significantly.
• The cleanroom facility saved SSI over 75
  million/ year.

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Advantages of Simulation

• 1. Allows for inclusion of the real-life
  complexities of problems.
• 2. Is descriptive, enabling managers to ask
  what-if type questions.
• 3. Can handle an extremely wide variation in
  problem types, such as inventory staffing, as
  well as higher managerial-level tasks like
  long-range planning.

• 4. Can show the effect of compressing time,
  giving the manager in a matter of minutes the
  long-term effects of various policies.
• 5. Can be conducted from anywhere using Web
  tools on the corporate portal or extranet.

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Examples of DSSs

• PriceWaterhouseCoopers (pcwglobal.com) offers
  online DSSs in retailing, financial services,
  etc. Of special interest are the risk management
  and self insurance decisions.
• Microsofts Office Small Business edition
  (microsoft.com) contains what-ifwizards that
  can be used to view the financial impacts of
  decisions, such as price and inventory decisions.
  
• IBM (software.ibm.com) offers many tools ranging
  from market-basket analysis to financial
  manufacturing decision support
• Brios (brio.com) revenue optimization
  application helps companies to identify
  capture the full potential of revenue across
  product lines market segments.

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Frontline Decision Making

• Frontline decision making is the process by which
  companies automate decision processes and push
  them down into the organization sometimes out
  to partners.
• Frontline decision making serves business users
  such as line managers, sales executives, and
  call-center representatives by incorporating
  decision making into their daily work.
• Frontline software that started to appear on the
  market in late 1999 can solve standard problems
• According to Forrester Research Inc., such
  systems are essential for the survival of many
  companies, but it is expected to take five years
  for the technology to mature.

41
DSS Failures

• Over the years there have been many cases of
  failures of all types of decision support
  systems. Here are some examples
• The ill-fated Challeger Shuttle mission was
  partially attributed to a flawed GDSS. NASA used
  a mismanaged GDSS session in which anonymity was
  not allowed and other procedures were violated.
• In an international congress on airports,
  failures in Denver, Hong Kong, and Malaysia
  airports have been attributed to failed DSSs.
• Brezillon and Pomerol (1997) describe some
  failures in intelligent DSSs.

42
Managerial Issues

• Intangible benefits. Management support systems
  are difficult to justify because they generate
  mostly intangible benefits, such as the ability
  to solve problems faster.
• Documenting personal DSS. Many employees develop
  their own DSS to increase their productivity. It
  is advisable to have an inventory of these DSSs
  so that if the employee leaves the organization,
  the productivity tool remains.

• Security. Decision support systems may contain
  extremely important information for the
  livelihood of organizations.

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Managerial Issues (cont.)

• Ready-made commercial DSS. With the increased use
  of Web-based system and ASPs, it is possible to
  find more and more DSS applications sold off the
  shelf, frequently online.
• Organizational culture. The more people recognize
  the benefits of DSS and the more support is given
  to it by top management, the more DSS will be
  used.

• Intelligent DSS. Introducing intelligent agents
  into a DSS application can greatly increase its
  functionality.
• Ethical issues. Corporations with management
  support systems may need to address some serious
  ethical issues such as privacy accountability.
  Human judgment is another important issue DSS.