INFORMATION SYSTEM

CH-3 INTRODUCTION TO VARIOUS INFORMATION SYSTEMS

BUSINESS INFORMATION SYSTEM
• Business information systems provide information that organizations use
to manage themselves effi ciently and eff ectively, typically using computer
systems and technology.
• Primary components of business information systems include hardware,
software, data, procedures (design, development, and documentation) and
people.
• Business information system as a group of interrelated components that
work collectively to carry out input, processing, output, storage and
control actions in order to convert data into information products that can
be used to support forecasting, planning, control, coordination, decision
making and operational activities in an organisations.
• In terms of the components that undertake this activity, they can be
classifi ed into fi ve basic resources of people, hardware, software,
communications and data.
• People resources include the users and developers of an information
system and those who help maintain and operate the system such as IS
managers and technical support staff.
• Hardware resources include computers and other items such as printers.
Software resources refer to computer programs known as software and
associated instruction manuals.
• Communications resources include networks and the hardware and
software needed to support them. Data resources cover the data that an
organisation has access to such as computer databases and paper fi les.
• In most organisations Business Information Systems (BIS) make extensive
use of information technology, such as personal computers.
• The reasons why computerised BIS have become widespread are evident
in their advantages such as speed, accuracy and dependability. They also
have a high degree of fl exibility due to their ability to be programmed to
carry out a wide variety of tasks.
• There are, however, some disadvantages to BIS such as their lack of
creativity that humans possess and the diffi culty of incorporating other
factors into their decision making such as innovation and intuition.
 Business as a system:
• The system helps the business organisations to achieve their goals.
• A business system is a combination of policies, personnel, equipment and
computer facilities to co-ordinate the activities of a business organisation.
• It establishes the rules and procedures of that organisation, which are to
be governed.
• Business system decides how data must be handled and is methodically
processed. It also controls the procedures of the processed data and the
results to be displayed.
• For e.g. a system may automatically order parts for an inventory, monitor
future corporate profi ts or post credit card sales to the on line customer
accounts. The overall nature of the business system will refl ect the
effi ciency of its designers.
Types of Business Systems

• 1. Payroll business system

• 2. Personnel business system
• 3. Accounts receivable system
• 4. Accounts payable system
• 5. Inventory system.
Principal Function System in Business:

• In most of manufacturing enterprise principal functional system follows

Purchasing, Receiving, Inventory, Production, Sales, Distribution, Billing,
Payment Collection etc.
• 1) Purchasing: Purchasing from Vendor goods and material required for
business
• 2) Receiving: Checking the goods and material delivered by vendor after
inspecting and taking delivery
• 3) Inventory: Storing the received goods and material which have been
received from vendor
• 4) Production: Manufacturing of goods as per the plans
• 5) Sales: Marketing the goods produced.
• 6) Distribution: Supplying the customer with goods sold from product
which is produced from fi nished goods inventory.
• 7) Billing: Sending the statement of account owed to customer
• 8) Payment Collection: To received payments from customer through
various mode of payment
• 9) Paying: Making payment to the people those whom the business owes
the money like vendors, employees
ENTERPRISE RESOURCE PLANNING (ERP)
• “The ERP is a packaged business software system that enables a company
to manage the effi cient and eff ective use of resources (fi nance, materials,
manufacturing capacity and human resource) by providing an integrated
solution for the organization.”
• A collection of software packages, which ties all of an enterprise's various
functions into a cohesive database. These packages aff ect everything from
order capture to accounting and procurement (verifi cation) to
warehousing.
• Employees enter information only once and that information is then
available to all systems company-wide. This means everyone in the
company can make decisions based on accurate, real-time information.
• It provides real-time monitoring of business functions. Real-time
monitoring of business functions, permits timely analysis of Quality,
Availability, Customer satisfaction, Performance, Profi tability. For e.g.
• The sales force enters an order on a computer, and the transaction
propagates through the entire company.
• Inventory lists and parts supplies are updated automatically, worldwide.
• The ERP system determines whether the product should come from
current fi nished goods in a warehouse, work in process, scheduled
production, or new production.
• It is a set of integrated programs that manage a company’s vital business
operations for an entire multisite, global organization.
• ERP systems typically attempt to cover all basic functions of an
organization, regardless of the organization's business or charter.
Business, not-for-profi t organizations, governments, and other large
entities utilize ERP.
• At the core of the ERP system is a database that is shared by all users.
• Mid- to large-size businesses with multiple departments and cost centers
benefi t most signifi cantly from ERP systems.
• Examples of modules in an ERP which formerly would have been stand-
alone applications include:
• Manufacturing,
• Supply Chain,
• Financials,
• CRM,
• Human Resources
• Warehouse Management
• Data services
• Access control
 Advantages of ERP:
• 1) Time-saving integration and automation: A centralized management
solution streamlines and strengthens data management. Data is easily
entered, accessed and analysed when it’s within easy reach. Workfl ows,
electronic signatures and other audit features save time and protect the
integrity of your data.
• 2) Business intelligence: Many ERP systems off er powerful business
intelligence (BI) features ranging from role-tailored dashboards, advanced
analytics, innovative reporting features, and other ways to easily highlight
and visualize data
• 3) Connect people, processes and data: Integrated ERP solutions
deliver key performance indicators (KPIs) and metrics to leaders. Armed
with reliable, real-time data, managers and business leaders can identify
new ways to grow the business, improve operations, and work effi ciently,
improving both productivity and profi tability
• 4) Increase effi ciencies: ERP systems off er built-in and customizable
workfl ows to streamline common, daily tasks. These automations reduce
redundant tasks, optimize labour and resource use, and improve
productivity. ERP also enables mobility so employees can enter, access and
use data whether working from the offi ce or in the fi eld.
• 5) Strengthen strategic decision-making: Quick access to up-to-the-
minute data empowers managers and executives to uncover strategic
ways to lower costs, reduce wasteful spending, and protect profi t margins
through changing marketplace trends and customer behaviours.
• 6) Improve customer experience: Centralizing data makes it easier for
employees to reach when it’s needed. Sales and customer services teams
can access product, inventory and customer information on the spot.
Responding quickly to customer needs goes a long way toward improving
customer satisfaction and their overall experience with your company
Disadvantages of ERP
• 1) ERP doesn’t solve policy problems: Ineffi cient policies and processes
can’t be solved by technology alone. Redundant processes, too many
layers of managerial oversite, and bottlenecks need to be corrected before
new technology is introduced.
• 2) Choosing the wrong ERP system: There are many diff erent ERP
solutions in the marketplace today. Each off er diff erent features and
functions, some can be customized to meet unique needs and others are
already tailored for common industry sectors. Choosing too big of a
system or skimping on one will cause problems in the long run. It’s
important to work with a reputable and knowledgeable solutions provider
to choose the right ERP system for your unique requirements.
• 3) User adoption is critical: Deploying ERP off ers no guarantee that
your people will use the system or use it properly. Training, buy-in and
support from the top down will improve user acceptance and user
adoption, ensuring you get the best returns from your ERP investment.
Management Information Systems:

• MIS is the use of information technology, people, and business processes

to record, store and process data to produce information that decision
makers can use to make day to day decisions. The full form of MIS is
Management Information Systems.
• The purpose of MIS is to extract data from varied sources and derive
insights that drive business growth. Management information system can
thus be analyze as follows −
• Management: Management covers the planning, control, and
administration of the operations of a concern. The top management
handles planning; the middle management concentrates on controlling;
and the lower management is concerned with actual administration.
• Information: Information, in MIS, means the processed data that helps
the management in planning, controlling and operations.
• Data means all the facts arising out of the operations of the concern.
Data is processed i.e. recorded, summarized, compared and fi nally
presented to the management in the form of MIS report.
• System: Data is processed into information with the help of a system.
• A system is made up of inputs, processing, output and feedback or
control.
• Thus MIS means a system for processing data in order to give proper
information to the management for performing its functions.
• Defi nition :
• Management Information System or 'MIS' is a planned system of
collecting, storing, and disseminating data in the form of information
needed to carry out the functions of management.
• Objectives of MIS : The goals of an MIS are to implement the
organizational structure and dynamics of the enterprise for the purpose of
managing the organization in a better way and capturing the potential of
the information system for competitive advantage.
• Following are the basic objectives of an MIS −
•  Capturing Data − Capturing contextual data, or operational
information that will contribute in decision making from various internal
and external sources of organization.
•  Processing Data − The captured data is processed into information
needed for planning, organizing, coordinating, directing and controlling
functionalities at strategic, tactical and operational level.
• Processing data means −
•  making calculations with the data
•  sorting data
•  classifying data
•  summarizing data
• Information Storage − Information or processed data need to be stored
for future use.
• Information Retrieval − System should be able to retrieve this
information from the storage as and when required by various users.
• Information Propagation − Information or the fi nished product of the
MIS should be circulated to its users periodically using the organizational
network.
Components of MIS :

• People – these are the users who use the information system to record
the day to day business transactions. The users are usually qualifi ed
professionals such as accountants, human resource managers, etc. The
ICT department usually has the support staff who ensure that the system
is running properly.
• Business Procedures – these are agreed upon best practices that guide
the users and all other components on how to work effi ciently. Business
procedures are developed by the people i.e. users, consultants, etc.
• Data – the recorded day to day business transactions. For a bank, data is
collected from activities such as deposits, withdrawals, etc.
• Hardware – hardware is made up of the computers, printers, networking
devices, etc. The hardware provides the computing power for processing
data. It also provides networking and printing capabilities. The hardware
speeds up the processing of data into information.
• Software – these are programs that run on the hardware. The software
is broken down into two major categories namely system software and
applications software. System software refers to the operating system i.e.
Windows, Mac OS, and Ubuntu, etc. Applications software refers to
specialized software for accomplishing business tasks such as a Payroll
program, banking system, point of sale system, etc
Characteristics of MIS :
• It should be based on a long-term planning.
• It should provide a holistic view of the dynamics and the structure of the
organization.
• It should work as a complete and comprehensive system covering all
interconnecting sub-systems within the organization.
• It should be planned in a top-down way, as the decision makers or the
management should actively take part and provide clear direction at the
development stage of the MIS.
• It should be based on need of strategic, operational and tactical
information of managers of an organization.
• It should also take care of exceptional situations by reporting such
situations
• It should be able to make forecasts and estimates, and generate
advanced information, thus providing a competitive advantage. Decision
makers can take actions on the basis of such predictions.
• It should create linkage between all sub-systems within the organization,
so that the decision makers can take the right decision based on an
integrated view.
• It should allow easy fl ow of information through various sub-systems,
thus avoiding redundancy and duplicity of data. It should simplify the
operations with as much practicability as possible.
• Although the MIS is an integrated, complete system, it should be made in
such a fl exible way that it could be easily split into smaller sub-systems as
and when required.
• A central database is the backbone of a well-built MIS.
Characteristics of Computerized MIS

• It should be able to process data accurately and with high speed, using
various techniques like operations research, simulation, heuristics, etc.
• It should be able to collect, organize, manipulate, and update large
amount of raw data of both related and unrelated nature, coming from
various internal and external sources at diff erent periods of time.
• It should provide real time information on ongoing events without any
delay.
• It should support various output formats and follow latest rules and
regulations in practice.
• It should provide organized and relevant information for all levels of
management: strategic, operational, and tactical.
• It should aim at extreme fl exibility in data storage and retrieval
MIS Reports :
• MIS report can be described as a system that provides important
information for the management of your company.
• MIS collaborates with people, technology, and business processes within
an organization. It also describes how the relationship with other
organizations and people aff ect your company.
• An MIS report is used to highlight the day to day business activities, which
enables you to monitor your organization’s progress.
• These reports provide critical insights during decision making. It serves as
a reference point to monitor your business and communication.
• In this new era of emerging technologies, management information
systems have become a vital part of successfully running a company.
Types of MIS Reports :
• 1. The Summary Reports:
• Summary reports are a type of MIS reports used to visualize aggregate
data and provide a summary.
• The report is presented in a format that can be understood by the
company’s management.
• Example, an inventory summary, which summarizes the cost of stocking
inventory and their purchase value.
• 2. The Trend Reports:
• Trend Reports are types of MIS reports that allow your company to see the
trends and patterns among diff erent categories. Trend reports are also
used to compare diff erent products or services. Example, a sales trend
report, which will highlight the product sales across diff erent
demographics and diff erent time periods.
• 3. The Exception Reports:
• An exception report is a type of MIS reports that is an aggregate report of
exceptions, which are abnormal or unusual circumstances within a
company. The exceptions report will collect instances of all such conditions
within diff erent departments in your company, and present them to the
management in a uniform format.
• Example, an inventory that is seriously understocked, which has to be
refi lled on an urgent basis; or a product which is underperforming and
needs to be scrapped.
• 4. On-Demand Reports:
• The on-demand report is a type of MIS reports that are produced on
specifi c demands from your company’s management team.
• There is no fi xed criteria or format that must be included in an on-demand
report.
• Example, a sales manager may want to know the peak sales season for a
particular product in a particular location.
• 5. Schedule Report:
• A scheduled report is produced on a regular interval, such as every day,
week or month. For example, a manager of a production fl oor may want to
see weekly payroll reports to keep track of labor costs.
• Reports typically focus on a number of key indicators, such as inventory
levels, production activity or sales volume.Often, these indicators are
compared to numbers from prior reporting periods or to targets set by the
organization.
• This gives mangers the opportunity to implement any corrective actions
where necessary.
• 6. Key-indicator report:
• summarizes the previous day’s critical activities and istypically available at
the beginning of each workday.
• 7. Drill-down reports:
• provide increasingly detailed data about a situation.
Development Process of MIS:
• 1. Planning for the MIS
• 2. Designing the MIS
• 3.Implementing MIS
• 4. Improving the MIS
Benefi ts of MIS:
• 1. Core Competencies
• 2. Enhance Supply Chain Management
• 3. Quick Refl exes
Functional Aspects of The Management
Information System:
• A) Financial Management Information System
• B) Manufacturing Management Information System
• C)Marketing Management Information System
• D) Human Resource Management Information System
• E) Accounting Management Information System
• F) Geographic Information System (GIS)
A) Financial Management Information
System
• Financial management function has a primary objective of meeting the
fi nancial needs of the business.
• The second objective of FM is to meet the statutory compliance by way of
declaring the auditing fi nancial result, submitting reports and returns to
the govt. and Tax authorities and fulfi ll the obligations to the
shareholders.
• FM uses variety of tools and techniques like Break Even Analysis, ABC
Analysis, Ratio Analysis, Management Accounting and Cost Analysis.
• Input Documents:
• o Receipts from customers, authorities, employees, share holders,
fi nancial institution and others.
• o Payment to suppliers, authorities, share holders, fi nancial institutions
and others.
• o Data from stock exchange on the shares prices consolidated fi nancial
results of the other companies etc.
• Transactions are payments and receipts and they are documented
through journal vouchers, bills, debit notes, credit notes, receipts and
transfer documents.
Financial MIS Subsystems and Outputs:
• Profi t /loss and cost systems
• Auditing
 Internal Auditing
 External Auditing
• Uses and management of Funds
B) Manufacturing Management Information
System
• The objective of production management function is to provide manufacturing
services to the organization.
• This involves the manufacturing of products of a certain specifi ed quality and
within certain costs in a stipulated time, fulfi lling the promises given to the
customer.
• The production management function is supported by other functions like
production, planning and control, industrial engineering, maintenance and
quality control.
• It has a very strong interface with materials management function. The
organization of production management diff ers according to the types of
production i.e. job shop or continuous.
• It also varies with the production policy of the organization, like whether the
production is initiated against a customer order or for stock.
Inputs of Production Management Information
System:
• The production management is conducted through innumerable
transaction. They relate to planning, issuing and controlling the various
task involved in the course of production.
• i) Process Planning Sheet
• ii) Quality Assurance Rating Form
• iii) Production Schedule
• iv) Process Planning Sheet
• v) Job Cards
• vi) Finished Goods Advice
• vii) Material Requisition
• viii) Customer Order
• ix) Breakdown Advice
• x) Material requirement
• xi) Production Programme .
• The production management also uses standards and norms extensively
developed over a period of time as input in the system.
• These are generally known as production rate available capacity, labor
components, material usage standards, rejection norms etc.
Manufacturing MIS Subsystems and Outputs:
• Design and engineering
• Master Production Scheduling
• Inventory Control
• Manufacturing resource planning
• Just –in – time inventory and manufacturing
• Process control
• Computer –integrated manufacturing (CIM)
• Quality control and testing
C)Marketing Management Information System
• In order to pursue market opportunities as well as anticipate marketing problem,
manager need to collect comprehensive and reliable information.
• Managers cannot carryout marketing analysis, planning, implementation and control
without monitoring and researching customers, competitors, dealers and their sales
and cost data.
• Every fi rm has many information fl ows of interest to marketing management. Many
companies are studying their executive‘s information needs and design information
system for marketing to meet these needs.
• Instead of plethora of unrelated data, an MIS combines various inputs and present
integrated reports.
• Defi nition: Marketing Information System is a continuing and interacting structure of
people, equipment and procedures to gather, sort, analyze, evaluate, and distribute
pertinent, timely and accurate information for use by marketing decision makers to
improve their marketing planning, implementation and control activities.
Components of Marketing Information System:

• As shown in fi gure below, the box on the left shows components of the marketing
environment that manager must monitor.
• Trends in the marketing environment are picked up and analyzed through four
subsystems making up the marketing information system- Internal Accounting System,
Marketing Intelligence System, Marketing Research System and Analytical Marketing
System.
Marketing MIS Subsystems and Outputs:
• Marketing research
• Product development
• Promotion and advertising
• Product Pricing
D) Human Resource Management Information
System (Personnel MIS)
• Personnel management has the primary objective of providing suitable manpower in
number and with certain ability, skills and knowledge, as the business organization
demands from time to time.
• Its goal is to control personnel cost through continuous increase in manpower
productivity resorting to the following techniques:
• a) Motivation through Leadership and Job Enrichment
• b) Grievance Handling
• c) Structuring the Organization
• d) Promotion and Rewards through Performance Appraisal
• e) HRM through Training and Upgrading the Skills
• There is need to cope with incredible volume of information and maintaining it.
There is need to classify, reclassify and cross this information.
• This can be achieved by computerized personnel system which enables
personnel management to manage more effi ciently and eff ectively and to
provide more positive services to the organization.
• Input for Personnel Development:
• Productivity Data on the Job
• Industry Data on Manpower, Skills, Qualifi cation
•  Bio-Data of Self and Family
•  Personnel Application Form
•  Attendance and Leave Record
•  Appraisal Form
•  Appointment Letter
•  Wage / Agreement
•  Record Sources of Manpower, University, Institutes, and Companies
Human resource MIS Subsystems and Outputs :

• Human resource Planning

• Personnel selection and recruiting
• Training and skills inventory
• Scheduling and job placement
• Wage and salary administration
 E) Accounting Management Information
System

• An accounting management information system performs a number of

important activities , providing aggregate information on accounts,
account receivables, payrolls & many other applications.
• The Organization’s transaction processing system captures accounting
data which is also used by most other functional information system.
• Some smaller companies hire outside accounting fi rms to assist them with
their accounting functions. The outside accounting fi rms produces reports
for fi rm using raw accounting data.
• Depending on the needs of the small organization & its personnel’s
computer experience , using these computerized accounting systems can
be very cost eff ective approach to managing information.
F) Geographic Information System (GIS)
• A geographic information system (GIS) is a computer system for
capturing, storing, checking, and displaying data related to positions on
Earth’s surface. By relating seemingly unrelated data, GIS can help
individuals and organizations better understand spatial patterns and
relationships.
• GIS can use any information that includes location. The location can be
expressed in many diff erent ways, such as latitude and longitude, address,
or ZIP code.
• GIS is a computer system capable of assembling , storing, manipulating &
displaying geographically referenced information that is data identifi ed
according to their location.
• A GIS enables users to pair predawn maps or map outlines with tabular
data to describes aspects of a particular geographic region.
• For example sales managers may want to plot total sales for each country
in the states they serve. Using GIS, they can specify that each country
drawn with a degree of shading that indicates the relative amount of
sales.
Decision Support System:
• Decision support systems couple the intellectual resources of individuals
with the capabilities of the computer to improve the quality of decisions.
It is a computer-based support system for management decision makers
who deal with semi-structured problems.
• Decision support system off ers the potential to generate higher profi ts,
lower costs and better products & services.
• A decision support system (DSS) is a computer program application used
to improve a company's decision-making capabilities. It analyzes large
amounts of data and presents an organization with the best possible
options available.
• Decision support systems bring together data and knowledge from
diff erent areas and sources to provide users with information beyond the
usual reports and summaries. This is intended to help people make
informed decisions.
• Typical information a decision support application might gather and
present include the following:
• comparative sales fi gures between one week and the next;
• projected revenue fi gures based on new product sales assumptions; and
• the consequences of diff erent decisions.
• A decision support system is an informational application as opposed to an
operational application. Informational applications provide users with
relevant information based on a variety of data sources to support better-
informed decision-making.
• Operational applications, by contrast, record the details of business
transactions, including the data required for the decision-support needs of
a business.
• The 3 Parts That Make Up DSS/Decision Analysis by Analytical Modeling:
1.) Sensitivity analysis:
• It is the study of how diff erent variables aff ect, when change only one
variable is changed and rest are kept unchanged..
• For example, Amazon, when dvd players become cheaper due to a new
technology such as a blu-ray player, dvd sales are aff ected. A change in
the sales of dvd's, will aff ect the sale of dvd players.
• Sales could decrease due to the new technology, or sales could increase
due to the falling price on dvd players. This analysis helps to understand
the signifi cance of variable in decision making and improves the quality of
decision making
• 2.) What-If analysis : It is the process of making hypothetical changes to
problem data and observing the impact on the results.
• In what-if analysis you test the eff ect on solution by changing the value
of number of variables or changing the relations between them.
• For example, say that I aim to sell 1,000 blu-ray players, within one
month, over Amazon.com. In addition, say that I aim to lower, the prices
of the players by 20% to increase the sales and reach my quota. What-if
analysis comes into play, but showing what the possible outcomes could
be. Blu-ray could become more popular or less popular and sales could
remain constant regardless of the given discount
• 3.) Goal-Seeking analysis :
• It collects all of the given data and determines what inputs and
constraints are required to reach specifi c goals.
• The decision makers can use this analysis to work on constraints and
resources and fi nd ways to improve upon solutions to seek highest goal.

• Applications of DSS:
• DSS are used by both government and in Business.
• 1) Institutional DSS
• 2) Adhoc DSS
• 3) Airline DSS
• 4) Real Estate DSS
• 5) Geographic DSS
Types of Problems:
• Structured Problem:
• Structured problems are routine in nature. They commonly occur in a
similar or recognizable way within the organization. In this way,
structured problems are easily understood by the organization.
• Unstructured Problems :
• Unstructured problems are novel and infrequent in nature. These types of
problems may be diffi cult to recognize upon initial occurrence. Further,
they may require specifi c analysis and research to fully understand.
• Semi Structured Problems:
• Semi structured problem situations are those where pure managerial
judgment alone is not adequate, and which are not understood well
enough to permit a complete, usually analytical, solution. Strategic
planning is a managerial area where semi structured problems frequently
exist.
Types of decisions :
• 1. UNSTRUCTURED DECISION/STRATEGIC LEVEL DECISIONS:
• Such decisions are taken by top level managers. These decisions defi ne
the broad objectives and strategic planning of an organization for profi t
making.
• These are called unstructured because they are not well defi ned, and
there is ample scope of various sub decisions based on these decisions.
• There is no specifi c set of rules and procedure followed in these decisions.
stead the focus is on solving the problems, which are complex, non
routine, and are long term requirements of the organization.
• The decision maker at this level includes President, Chief Executive Offi cer
(CEO), and board of directors. Example: the decision of entry into a new
market segment
• 2. SEMI-STRUCTURED DECISION/MANAGERIALDECISIONS:
• Management control decisions are taken by managers at the control level
(middle level) of business.
• The decisions at this level are neither structured nor unstructured,
because these can be pre-specifi ed to the extent their nature allows.
• Decision making at this level is said to be semi structured because
problems and solutions are clear, and expertise is also required in taking
these decisions.
• Managers at this level focus on monitoring and controlling activities of
operational level and providing information to the business level
management.
• For example: introduction of a new feature in an existing product.
• 3. STRUCTURED /OPERATIONAL DECISIONS:
• These decisions are taken by the managers at operational level (bottom
level) of the organization.
• The decisions taken at this level are based on certain rules and predefi ned
procedures which are specifi ed in advance before taking the decisions.
• Decisions taken at this level are highly structured, repetitive and are
related to day to day activities.
• Example: determination of quantity of raw material.
 CHARACTERISTICS OF A DSS :
• Support for decision-makers in semi-structured and unstructured
problems.
• • Support for managers at various managerial levels, ranging from top
executive to line managers.
• • Support for individuals and groups. Less structured problems often
require the involvement of several individuals from diff erent departments
and organization level.
• • DSS helps in analyzing the future. Example: DSS can forecast the market
bulls and bears in the coming month.
• • DSS Support for interdependent or sequential decisions.
• • DSS Support for intelligence, design, choice, and implementation.
• • DSS Support for variety of decision processes and styles.
• • DSSs are adaptive over time.
• • DSS is able to interact with the end user while providing information
BENEFITS OF DSS
• • DSS Improves effi ciency and speed of decision-making activities.
• • DSS helps in Increasing Organizational Control and capability of
futuristic decision making of the organization.
• • DSS Facilitates interpersonal communication.
• • DSS Encourages learning or training.
• • It allows the organization to perform a what-if analysis.
• • DSS helps automate managerial processes.
• • DSS will Improve Effi ciency and increase productivity of the
organization
LIMITATIONS OF DSS
• 1. DSS have small memories and limited storage capacities.
• 2. It is comparatively slow.
• 3. DSS provides limited information sharing.
• 4. Inadequate understanding of task or users
• 5. can stop the users from thinking
• 6.Inadequate modeling of “reality”
 COMPONENTS OF DSS:
• DSS facilitates the decision-making process of an organization due to the
various components involved in it.
• These components perform diff erent types of work. The components of
DSS are:
• 1. Database management system.
• 2. Knowledge-base management system.
• 3. Model Management system.
• 4. User Interface Management System
• DATABASE MANAGEMENT SYSTEM:
• Database is a collection of data obtained from various internal and
external sources by an organization.
• Managing huge database manually is not possible so organizations use
DBMS for huge data.
• DBMS helps in reducing cost and data redundancy and increase data
control and sharing. There are diff erent data model for the database like,
network model, relational model, hierarchical model.
• KNOWLEDGE-BASE MANAGEMENT SYSTEM:
• It provides intelligence and support for collecting useful information. A
large number of decisions are made on a day-to day basis, which range
from simple to complex.
• These decisions involves the use of knowledge, which forms the basis of
the decision making process.
• A billing and document management system is an example of knowledge-
base management system.
• MODEL MANAGEMENT SYSTEM:
• It provides various techniques and skills to produce reliable, insightful,
and useful results.
• A model is the abstract representation for any subject or thing.The
modeling component gives decision maker the ability to analyze the
problem.
• It supports by giving access to various models for decision support.
Various techniques provided by DSS may include statistical method,
sensitivity analysis and computer simulation.
• There are 4 Types of Model
• 1. Financial Model
• 2. Statistical Analysis Model
• 3. Graphical Model
• 4.Project Management Model
• HERBERT SIMON’S MODEL:
• Herbert Simon made key contributions to enhance understanding of the
decision-making process. In fact, he pioneered (master) the fi eld of
decision support systems.
• According to (Simon 1960) and his later work with (Newell 1972),
decision-making is a process with distinct stages.
• He suggested for the fi rst time the decision-making model of human
beings. His model of decision-making has three stages:
• 1. INTELLIGENCE: It deals with the problem identifi cation and the data
collection on the problem.
• 2. DESIGN: It deals with the generation of alternative solutions to the
problem at hand.
• 3. CHOICE: It deals with the selection the 'best' solution from amongst
the alternative solutions using some criterion
• 1) Intelligence Phase:
• This is the fi rst step towards the decision-making process. In this step the
decision maker identifi es the problem.
• A problem in the managerial context is detecting anything that is not
according to the plan, rule or standard.
• An example of problem is the detection of sudden very high cut for the
present month by a HR manager among workers.
• Opportunity seeking on the other hand is the identifi cation of a capable
circumstance (opportunity) that might lead to better results.
• An example of identifi cation of opportunity is-a marketing manager gets to
know that two of his competitors will shut down operations (demand being
constant) for some reason in the next three months, this means that he
will be able to sell more in the market.
• Thus, we see that either in the case of a problem or for the purpose of
opportunity seeking the decision-making process is initiated
• .The fi rst stage deals with the complete understanding of the
problem /opportunity. Intelligence phase of decision-making process
involves:
• a. Problem-Searching
• b. Problem Formulation
• a. Problem-Searching :
• For searching the problem, the reality or actual is compared to some
standards. Diff erences are measured & the diff erences are evaluated to
determine whether there is Any problem or not.
• b. Problem Formulation:
• When the problem is identifi ed, there is always a risk of solving the wrong
problem. In problem we compare the found problem to previous problem
to get rid of solving wrong problem
• 2) Design Phase:
• Design is the process of designing solution outlines for the problem.
Alternative solutions are designed to solve the same problem.
• Each alternative solution is evaluated after gathering data about the
solution. The evaluation is done on the basic of criteria to identify the
positive and negative aspects of each solution.
• Quantitative tools and models are used to get solutions. At this stage a lot
of creativity and innovation is required to design solutions.
• 3) Choice Phase:
• It is the stage in which the possible solutions are compared against one
another to fi nd out the most suitable solution.
• The 'best' solution may be identifi ed using quantitative tools like decision
tree analysis or qualitative tools like the six thinking hats technique, force
fi eld analysis, etc.
• This is not as easy as it sounds because each solution presents a scenario
and the problem itself may have multiple objectives making the choice
process a very diffi cult one.
• USER INTERFACE MANAGEMENT SYSTEM:
• It is a framework where an interaction between human beings and
computers takes place.
• User interface refers to a system that provides a means of:
• Input: allows users to manipulate the system.
• Output: allows the system to give the results of the user’s manipulation.
GROUP DECISION SUPPORT SYSTEM (GDSS)
• In group decision-making, various individuals in a group take part in joint
decisionmaking.
• Group Decision Support System (GDSS) is a decision support system that
provides support in decision making by a group of people.
• It facilitates the free fl ow and exchange of ideas and information among
the group members.
• Decisions are made with a higher degree of agreement resulting in a
higher possibility of implementation.
• An organization can design GDSS according to the requirements of the
decisionmaking group.
• GDSS enables group communication; it provides interactive support to the
whole group or team of decision makers. A number of diff erent
architectures are there for GDSS are developed.
• The architecture which is to be used depends upon the task, recurrency
and geographic proximity of the problem. Here we are discussing few of
them.
• (1) For limited adhoc and intermittent group DSS when members can meet in
same physical location, decision room environment can be recommended. In
this case members each a computer station that can use used to
communicate with one another, to store the data obtained and to alter the
display on the screen.
• (2) For limited adhoc and intermittent group DSS where members physically
distributed in this case teleconferencing is recommended. In this case
diff erent rooms are connected with video displays.
• (3) For recurring GDSS where the members are in same physical locations,
microcomputer workstations connected with LAN or WAN can be
recommended. The recurring need for GDSS justifi es the expenses of
maintaining the LAN and WAN connections.
• (4) For recurring GDSS where the members are geographically disbursed
users, uninterrupted communication between remote decision stations can be
recommended. In this case WAN is preferred.
Components of GDSS :

• Components of GDSS includes hardware, software, people, procedures.

These components are arrange in order to support people in context of
supporting the decisions making meeting. Components of GDSS are
• (1) DSS Tools
• (2) DSS Generator
• (3) DSS software for specifi c application
• Specifi c DSS application can be constructed using DSS generator
supported by DSS tools.
• (1) DSS Tools: - Construction of DSS applications or DSS generator is
facilitated by special software elements which are called DSS tools. This
tools can include (a) Colour Graphics (b) Software (c) Special Editors, (d)
Random number generator
• (2) DSS Generators:- DSS Generators is a package of software which used
to build special DSS applications.
• (3) DSS Software:- DSS software can be developed in many areas like
• (a) Industry oriented e.g Hospital and fi nancial planning, banks portfolio
management, airlines planning and control
• (b) Marketing area, operation Management areas of Industries etc.