Fundamentals

of Information Systems,
Seventh Edition

Chapter 6
Information and Decision
Support Systems

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Principles and Learning Objectives
• Good decision-making and problem-solving
skills are the key to developing effective
information and decision support systems
– Define the stages of decision making
– Discuss the importance of implementation and
monitoring in problem solving

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 Principles and Learning Objectives
(continued)
• The management information system (MIS)
must provide the right information to the right
person in the right format at the right time
– Explain the uses of MISs and describe their inputs
and outputs
– Discuss information systems in the functional
areas of business organizations

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 Principles and Learning Objectives
(continued)
• Decision support systems (DSSs) are used
when the problems are unstructured
– List and discuss important characteristics of DSSs
that give them the potential to be effective
management support tools
– Identify and describe the basic components of a
DSS

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 Principles and Learning Objectives
(continued)
• Specialized support systems, such as group
support systems (GSSs) and executive support
systems (ESSs), use the overall approach of a
DSS in situations such as group and executive
decision making
– State the goals of a GSS and identify the
characteristics that distinguish it from a DSS
– Identify the fundamental uses of an ESS and list
the characteristics of such a system
– List and discuss other special-purpose systems
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 Why Learn About Information and
Decision Support Systems?
• True potential of information systems:
– Is in helping you and your coworkers make more
informed decisions
• The result can be increased revenues, reduced
costs, and the realization of corporate goals

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Decision Making and Problem Solving
• Every organization needs effective decision
making
• In most cases, strategic planning and overall
goals of the organization set the course for
decision making
• Information systems assist with problem
solving, helping people make better decisions
and save lives

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 Decision Making as a Component of
Problem Solving
• Decision-making phase:
– Intelligence stage:
• Identify and define potential problems or opportunities
– Design stage:
• Develop alternative solutions to the problem and
evaluate their feasibility
– Choice stage:
• Select a course of action

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Decision Making as a Component of
Problem Solving (continued)

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 Decision Making as a Component of
Problem Solving (continued)
• Problem solving:
– Includes and goes beyond decision making
– Includes implementation and monitoring stage
• Monitoring stage:
– Decision makers evaluate the implementation
• Were anticipated results achieved
• Is there a need for further modification

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Programmed versus Nonprogrammed
Decisions
• Programmed decisions:
– Made using a rule, procedure, or quantitative
method
– Easy to computerize using traditional information
systems
• Nonprogrammed decisions:
– Decisions that deal with unusual or exceptional
situations
– Not easily quantifiable

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Optimization, Satisficing, and Heuristic
Approaches
• Optimization model:
– Finds the best solution, usually the one that will
best help the organization meet its goals
• Satisficing model:
– Finds a good, but not necessarily the best,
problem solution
• Heuristics:
– Commonly accepted guidelines or procedures
that usually find a good solution
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 The Benefits of Information and
Decision Support Systems
• Decision support systems:
– Performance is typically a function of decision
quality and problem complexity
• Problem complexity:
– Depends on how hard the problem is to solve and
implement

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 The Benefits of Information and
Decision Support Systems (continued)

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 An Overview of Management
Information Systems
• Management information system (MIS):
– Integrated collection of people, procedures,
databases, and devices that provides managers
and decision makers with information to help
achieve organizations goals
– Can give the organization a competitive advantage

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 Management Information Systems in
Perspective
• Purpose of an MIS:
– To help an organization achieve its goals by
providing managers with insight into the regular
operations of the organization
– Provide the right information to the right person
in the right format at the right time
• Business transactions:
– Can enter the organization through traditional
methods, or via the Internet, or via an extranet
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Management Information Systems in
Perspective (continued)

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 Inputs to a Management Information
System
• Internal data sources:
– TPS and ERP systems and related databases
– Data warehouses and data marts
– Specific functional areas throughout the firm
• External data sources:
– Customers, suppliers, competitors, and
stockholders whose data is not already captured
by the TPS and ERP systems
– Internet

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Outputs of a Management Information
System
• Scheduled reports:
– Produced periodically, such as daily, weekly, or
monthly
– Key-indicator report summarizes the previous
day’s critical activities
• Demand reports:
– Developed to provide certain information upon
request

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Outputs of a Management Information
System (continued)
• Exception reports:
– Automatically produced when a situation is
unusual or requires management action
– Trigger points should be set carefully
• Drill-down reports:
– Provide increasingly detailed data about a
situation

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 Characteristics of a Management
Information System
• MISs perform the following functions:
– Provide reports with fixed and standard formats
– Produce hard-copy and soft-copy reports
– Use internal data stored in computer system
– Allow users to develop custom reports
– Require user requests for reports developed by
systems personnel

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 Functional Aspects of the MIS
• Most organizations are structured along
functional areas
• MIS can be divided along functional lines to
produce reports tailored to individual
functions

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 Financial Management Information
Systems
• Financial MIS:
– Provides financial information to executives and
others
• Some financial MIS subsystems and outputs:
– Profit/loss and cost systems
– Auditing
– Uses and management of funds

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 Manufacturing Management
Information Systems
• Manufacturing MIS subsystems and outputs:
– Used to monitor and control the flow of materials,
products, and services through the organization
• Common information subsystems and outputs
used in manufacturing:
– Design and engineering
– Master production scheduling
– Inventory control
– Process control
– Quality control and testing
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 Marketing Management Information
Systems
• Marketing MIS:
– Supports product development, distribution, pricing
decisions, promotional effectiveness, and sales forecasting
– Marketing functions increasingly being performed on the
Internet and mobile devices
• Subsystems:
– Marketing research
– Product development and delivery
– Promotion and advertising
– Product pricing
– Sales analysis

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 Human Resource Management
Information Systems
• Concerned with activities related to previous,
current and potential employees
• Subsystems:
– Human resource planning
– Personnel selection and recruiting
– Training and skills inventory
– Scheduling and job placement
– Wage and salary administration
– Outplacement

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 Other Management Information
Systems
• Accounting MIS:
– Provides aggregate information on accounts
payable, accounts receivable, payroll, and many
other applications
• Geographic information system (GIS):
– Capable of assembling, storing, manipulating, and
displaying geographically referenced information

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 An Overview of Decision Support
Systems
• DSS:
– Organized collection of people, procedures,
software, databases, and devices used to help
make decisions that solve problems
• Focus of a DSS:
– Is on decision-making effectiveness regarding
unstructured or semistructured business problems

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 Characteristics of a Decision Support
System
• Some important characteristics:
– Provide rapid access to information
– Handle large amounts of data from different
sources
– Provide report and presentation flexibility
– Offer both textual and graphical orientation
– Support drill-down analysis

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 Characteristics of a Decision Support
System (continued)
• Perform complex, sophisticated analysis and
comparisons using advanced software
• Support optimization, satisficing, and heuristic
approaches
• Perform simulation analysis
• Forecast a future opportunity or problem

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 Capabilities of a Decision Support
System
• Support problem-solving phases:
– A specific DSS might support only one or a few
phases
• Support various decision frequencies:
– Ad hoc DSS is concerned with situations or
decisions that come up only a few times
– Institutional DSS handles situations or decisions
that occur more than once

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 Capabilities of a Decision Support
System (continued)
• Support various problem structures:
– Highly structured problems are straightforward,
requiring known facts and relationships
– Semistructured or unstructured problems are
more complex
• Support various decision-making levels:
– DSSs can provide help for managers at various
levels within the organization – operational,
tactical, and strategic
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Capabilities of a Decision Support
System (continued)

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 A Comparison of DSS and MIS
• DSS differs from an MIS in numerous ways,
including:
– The type of problems solved
– The support given to users
– The decision emphasis and approach
– The type, speed, output, and development of the
system used

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 A Comparison of DSS and MIS
(continued)

Fundamentals of Information
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Systems, Seventh Edition
 Components of a Decision Support
System
• At the core of a DSS are a database and a
model base
• User interface (dialogue manager):
– Allows decision makers to easily access and
manipulate the DSS and to use common business
terms and phrases
• Access to the Internet, networks, and other
computer-based systems

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Components of a Decision Support
System (continued)

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 The Database
• Database management system:
– Allows managers and decision makers to perform
qualitative analysis on data stored in company’s
databases, data warehouses, and data marts
– Can also be used to connect to external databases
• Data-driven DSS:
– Often employs data mining and business
intelligence

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 The Model Base
• Model base:
– Allows managers and decision makers to perform
quantitative analysis on both internal and external
data
• Model-driven DSS:
– Performs mathematical or quantitative analysis
• Model management software (MMS):
– Coordinates the use of models in a DSS

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The Model Base (continued)

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 The User Interface or Dialogue
Manager
• Allows users to interact with the DSS to obtain
information
• Assists with all aspects of communications
between user and hardware and software that
constitute the DSS

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 Group Support Systems
• Group support system (GSS):
– Also known as group decision support system and
computerized collaborative work system
– Consists of most elements in a DSS, plus software
to provide effective support in group decision
making
– Also called group decision support system or
computerized collaborative work system

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Group Support Systems (continued)

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 Characteristics of a GSS That Enhance
Decision Making
• Special design
• Ease of use
• Flexibility
• Decision-making support:
– Delphi approach
– Brainstorming
– Group consensus approach
– Nominal group technique
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 Characteristics of a GSS That Enhance
Decision Making (continued)
• Anonymous input
• Reduction of negative group behavior
• Parallel and unified communication
• Automated record keeping

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 GSS Hardware and Software Tools
• GSS hardware includes computers, laptops,
tablet computers, smartphones, and other
devices
• Advanced video devices

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 GSS Hardware and Software Tools
(continued)
• GSS software often called groupware or
workgroup software
• Helps with joint work group scheduling,
communication, and management
• GSS software packages:
– Lotus Notes
– Office Communicator
– Sharepoint
– WebOffice
– BaseCamp
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 GSS Hardware and Software Tools
(continued)
• GSSs use a number of tools, including:
– E-mail, instant messaging (IM), and text messaging
(TM)
– Videoconferencing
– Group scheduling
– Project management
– Document sharing

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 GSS Alternatives
• Decision room:
– Decision makers are located in the same building
or geographic area
– Combines face-to-face verbal interaction with
technology
• Local area decision network:
– Group members are located in the same building
or geographic area under conditions where group
decision making is frequent
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GSS Alternatives (continued)

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 GSS Alternatives (continued)
• Teleconferencing:
– Decision frequency is low
– Location of group members is distant
• Wide area decision network:
– Decision frequency is high
– Location of group members is distant

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 Executive Support Systems
• Executive support system (ESS):
– Specialized DSS
– Includes hardware, software, data, procedures,
and people used to assist senior-level executives
– Also called an executive information system (EIS)

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Executive Support Systems (continued)

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 Executive Support Systems in
Perspective
• ESS is special type of DSS
– DSS provides variety of modeling and analysis
tools to enable users to answer questions
– ESS presents structured information about aspects
of the organization that executives consider
important

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 Capabilities of Executive Support
Systems

• ESS provides support for:

– Defining overall vision
– Strategic planning
– Strategic organizing and staffing
– Strategic control
– Crisis management

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 Summary
• Problem solving:
– Begins with decision making
– Includes implementation and monitoring
– Decision making is a component
• Management information system:
– Integrated collection of people, procedures,
databases, and devices
• Data that enters the MIS:
– Originates from both internal and external sources
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 Summary (continued)
• Output of most MISs:
– Scheduled reports, key-indicator reports
– Demand reports, exception reports
– Drill-down reports
• Primary sources of input to functional MISs:
– Corporate strategic plan
– Data from the ERP system and TPS
– Information from supply chain and business
transactions
– External sources including the Internet and extranets
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 Summary (continued)
• Components of a DSS:
– The database, model base, extranets, networks
– User interface or dialogue manager
– Link to external databases, the Internet
– The corporate intranet, extranets, networks
• Group support system (GSS):
– Consists of most of the elements in a DSS, plus
software to provide effective support in group
decision-making settings

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 Summary (continued)
• Executive support systems (ESSs)
– Specialized decision support systems designed to
meet the needs of senior management
– Typically easy to use, offer a wide range of
computer resources, and handle a variety of
internal and external data

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