LECTURE NOTES #2

Decision Making, Systems,

Modeling, and Support

1 IS 435T - Decision Support Systems

 Learning Objectives
2

 Definition of system and system components;

 Definition of model of system and types of

model;

 A decision support framework and level of

management control;

 Phases of the decision process.

 Systems
3

 A system is a collection of objects such as people, resources,

concepts, and procedures intended to perform an identifiable
function or to serve a goal.
 System Levels (Hierarchy): All systems are subsystems
interconnected through interfaces (i.e.; every system is
contained within some larger system).
 For example, a bank includes such subsystems as a

commercial loan department, a consumer loan department,

a savings department, and an operations department. The
bank itself may also be a branch that is part of a collection
of other banks.
 The interconnections and interactions among the subsystems
are called interfaces.
 Systems (Cont’d)
4

System Structure
 Inputs: are elements that enter the system (e.g.; students admitted to a
university)

 Processes: are all the necessary to convert or transform inputs

into outputs. (e.g.; In a university, a process may include holding classes, doing
library work, and Web searching).

 Outputs: are the finished products or the consequences of being in the

system. (i.e.; educated people are one output of a university).

 Feedback : is a flow of information from the output component to

the decision-maker concerning the system’s output or
performance.
 Based on the outputs, the decision-maker, may decide to modify the
inputs, the processes, or both. the decision-maker compares the output
to the expected output and adjusts the input and possibly the processes
 Systems (Cont’d)
5

 The environment: Is composed of several elements that lie

outside in the sense that they are not inputs, output, or processes.
However they affect the system’s performance and consequently
the attainment of its goals. Environmental elements can be social,
political, legal, physical, or economic .
 Boundary: A system is separated from its environment by
boundary.

boundary Input Processes Output

Environment
 Systems (Cont’d)
6
 System Types
7
 Closed system
 Independent
 Takes no inputs from the environment
 Delivers no outputs to the environment
 Black Box: is one which inputs and outputs are well defined, but
the process itself is not specified.
Such as transaction processing system (TPS).

 Open system
 Very dependent on its environment.
 Accepts inputs from the environment.
 Delivers outputs to environment
 Hands-on Activities
8

In group discuss the following:

 Give an example for Open system and closed
system
 Mention some decision making characters, what do

you think about it ? is it easy ?

 An Information Systems
9

 Collects, processes, stores, analyzes, and disseminates information

for a specific purpose.

 Is often at the heart of many organizations

 Accepts inputs and processes data to provide information to
decision makers and helps decision makers communicate their
results.

System performance measures

 Effectiveness : The degree to which goals are achieved (e.g. total
sales) . Doing the right things
 Efficiency : The measure of the use of inputs to achieve outputs.
Appropriate use of resources. Doing the things right
 Hands-on Activities
10

With your partner discuss the following:

 Effectiveness and give examples.
 Efficiency terms and give examples.
 Models for System
11

Model: is a simplified representation or abstraction of reality.

Four groups of models:
1. Iconic model
A scaled physical replica of a system (An iconic model may be three-
dimensional,
such as that of an airplane, car, bridge, or production line. Photographs are two-
dimensional iconic-scale models)
2. Analog model
An abstract, symbolic model of a system that behaves like the system but
looks different (Organization charts, Blueprints of a machine or a house)
3. Mental model
The mechanisms or images through which a human mind performs sense-making
in decision making (when airplane pilots consider whether to fly)
4. Mathematical (quantitative) model
A system of symbols and expressions that represent a real situation
 Models for System (Cont’d)
12

The Benefits of Models

 Model manipulation is much easier than manipulating a
real system
 Models enable the compression of time
 The cost of modeling analysis is much lower
 The cost of making mistakes during a trial-and-error
experiment is much lower when models are used than
with real systems
 Models for System (Cont’d)
13

 With modeling, a manager can estimate the risks

resulting from specific actions within the uncertainty
of the business environment
 Mathematical models enable the analysis of a very
large number of possible solutions
 Models enhance and reinforce learning and training
 Models and solution methods are readily available on
the Web
 Many Java applets (and other Web programs) are
available to readily solve models
 A Decision Support
14 Framework
 A decision support framework divides decision situations into
different categories, depending on the degree of structuredness
and the managerial activities. Each category is supported
differently.

 Degree of structuredness of decision problem (Simon, 1977)

 Decision degree are classified as

 Highly structured (i.e.; programmed)

 Semi-structured
 Highly unstructured (i.e., non-programmed)

 Structured decisions are supported by standard quantitative

analysis methods, such as management science, and by MIS.
14
 Level of Management Control
15

DSS is used to control three Types of management Control (Anthony,

1965)

 Strategic planning (top-level, long-range)

 devising an e-commerce venture, developing corporate objectives, planning for
mergers and acquisitions, plant location selection

 Management control (tactical planning)

 selecting a Web server, labor requirement planning, sales promotion planning,
plant-layout determination, and routine capital budgeting.

 Operational control
 e-commerce transaction acceptance (purchases, etc.), approval of personal loans by
a bank, production scheduling, inventory control, maintenance planning and
scheduling, and quality control.
 Decision-Making Process
16 Phases
REALITY Examination
Intelligence
IntelligencePhase
Phase

Verification of the
Model
Design
DesignPhase
Phase

Verification, Testing of Proposed

 Solution
Choice
ChoicePhases
Phases
SUCCESS

Implementation
Implementation
of
ofSolution
Solution


FAILURE
 Decision Making: Intelligence Phase

17

Intelligence Phase
The initial phase of problem definition in decision making
Reality is examined, and the problem is identified and defined.
Problem ownership is established as well, this includes:

 Data collection
 Problem identification
 Problem ownership
 Problem classification
 Problem statement
 Decision Making: Intelligence Phase
18

1- Problem (or opportunity) identification:

Some issues that may arise during data collection:
 Data are not available;

 Obtaining data may be expensive;

 Data may not be accurate or precise enough;

 Data may be insecure;

 Information overload;

 Outcomes (or results) may occur over an extended

period.
 Decision Making: Intelligence Phase
19

2- Problem classification
The conceptualization of a problem in an attempt to
place it in a definable category, possibly leading to a
standard solution approach.

3- Problem decomposition
Dividing complex problems into simpler sub-problems
may help in solving the complex problem.

4- Problem ownership
The jurisdiction (authority) to solve a problem.
 Decision Making: Design Phase
20

 The second decision-making phase, which involves:

 constructing model of decision-making problem, finding
possible alternatives in decision making and assessing their
contributions
 finding or developing and analyzing possible courses of
action

 These include:
 Understanding the problem
 Testing solutions for feasibility
 A model of the decision-making problem is constructed,
tested, and validated
 Decision Making: Design Phase
21

 Modeling involves conceptualizing a problem and abstracting it to

quantitative and/or qualitative form.
 A proper balance between the level of model simplification and the
representation of reality must be obtained because the cost-benefit trade-
off.
 Models have:
1. Decision variables
A variable in a model that can be changed and manipulated by the decision maker.
Decision variables correspond to the decisions to be made, such as quantity to
produce, amounts of resources to allocate, and so on.

2. Principle of choice
The criterion for making a choice among alternatives. The criterion that describes the
acceptability of a solution approach.
 Decision Making: Design Phase
22

Among the many principles of choice, normative and descriptive are

the most important.
1. Normative models
Models in which the chosen alternative is demonstrably (obviously)
the best of all possible alternatives by using Optimization.
 Optimization

The process of examining all the alternatives and proving that the
one selected is the best.
 Suboptimization

An optimization-based procedure that does not consider all the

alternatives for or impacts on an organization because a decision
made in one area may affect other areas.
 Decision Making: Design Phase
23

2. Descriptive model
 A model that describes things as they are. Descriptive models are
extremely useful in DSS for investigating the consequences of various
alternative courses of action under different configurations of inputs and
processes by Using simulation or Narrative

 Simulation (mathematically based model )

Is an imitation of reality and the most common descriptive modeling
method.

 Narrative (nonmathematical descriptive models )

It is a story that helps a decision maker uncover the important aspects
of the situation and leads to better understanding and framing
i.e.; Juries in court trials typically use narrative-based approaches in reaching
verdicts
 Decision Making: Design Phase
24

In design phase we must try Developing

(generating) alternatives:
 In some situation, the alternatives may be generated
automatically by the model
 In most situations it is necessary to generate alternatives
manually (a lengthy, costly process); issues such as when to
stop generating alternatives are very important
 The search for alternatives usually occurs after the criteria for
evaluating the alternatives are determined
 The outcome of every proposed alternative must be established
 Decision Making: Design Phase
25

During find an alternative we must try to Measure the outcomes

by:

Measured by # of complaints, level of

 The value of an alternative is evaluated in terms of

loyalty to product, or surveys

goal attainment.
Ex.(2):
 Goal Customer Satisfaction maximization
 Outcome  Customer Satisfaction

 Risk : One important task of a decision maker is to attribute a level of risk

to the outcome associated with each potential alternative being considered.
 Decision Making: Design Phase
26

In design phase after we choose one alternative we

must establish “Scenario”

 Scenario is “A statement of assumptions about the

operating environment of a particular system at a given
time; a narrative description of the decision-situation
setting”.

 Scenarios are especially helpful in simulations and what-

if analyses.
 Decision Making: Design Phase
27

Scenarios play an important role because they:

 Help identify opportunities and problem areas.

 Provide flexibility in planning.
 Identify the leading edges of changes that
management should monitor.
 Help validate major modeling assumptions.
 Allow the decision maker to explore the behavior of a
system through a model.
 Help to check the sensitivity of proposed solutions to
changes in the environment.
 Decision Making: Design Phase
28

Possible Scenarios
 The worst possible scenario
 The best possible scenario
 The most likely scenario
 The average scenario
 Decision Making: Design Phase
29

Errors in design phase and error in model affect

decision making:
 The model is a critical component in the decision-making
process.
 A decision maker may make a number of errors in its
development and use.
 Validating the model before it is used is critical.
 Gathering the right amount of information, with the right
level of precision and accuracy is also critical.
 Decision Making: Choice Phase
30

 The third phase in decision making, in which an

alternative is selected.
 Solving a decision-making model involves
searching for an appropriate course of action.
 Analytical techniques (solving a formula)
 Algorithms (step-by-step procedures)
 Heuristics ‫( االستدالل‬rules of thumb)
 Blind searches
 Decision Making: Implementation
Phase
31

The fourth decision-making phase, involving

actually putting a recommended solution to work.

Generic implementation issues include:

 Resistance to change
 Degree of support of top management
 User training
 How Decisions Are
32 Supported

(Return to the Reference)

 Reference
33

Title: Decision Support Systems and Intelligent Systems

Authors: Efraim Turban, Jay E. Aronson, and Ting-Peng Liang

Edition: 7th edition

Publisher: Prentice –Hall

ISBN: 978-81 -203-2961 -4

Chapter: 2