Enterprise manage information systems 6th by laudon ch12

Chapter 12

Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Enhancing Management Decision Making
for the Digital Firm

12.1

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Objectives

1.

How can information systems help individual
managers make better decisions when the
problems are nonroutine and constantly
changing?

2.

How can information systems help people
working in a group make decisions more
efficiently?

12.2

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Objectives

3.

Are there any special systems that can facilitate
decision making among senior managers?
Exactly what can these systems do to help
high-level management?

4.

What value can systems to support
management decision making provide for the
organization as a whole?

12.3

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Management Challenges

1. Building information systems that can
actually fulfill executive information
requirements
2. Create meaningful reporting and
management decision-making processes

12.4

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)

• Computer system at the management level
of an organization
• Combines data, analytical tools, and
models
• Supports semistructured and unstructured
decision making
12.5

© 2005 by Prentice Hall

Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
MIS and DSS

MIS

• Provides reports based on routine flow
of data
• Assists in general control of the
organization

12.6

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
MIS and DSS

DSS

• Emphasizes change, flexibility, rapid
response, models, assumptions, ad-hoc
queries, and display graphics

12.7

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
Types of Decision-Support Systems

Model-Driven DSS

• Primarily stand-alone
• Uses model to perform “what-if” and other
kinds of analysis

12.8

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
Types of Decision-Support Systems

• Data-driven DSS: Supports decision making

by allowing users to extract and analyze
useful information previously buried in
large databases
• Datamining: Finds hidden patterns and

relationships in large databases to infer
rules from them and predict future
behavior
12.9

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
Window on Organizations

Data Drive Customer Care at Intrawest

• How does this customer care DSS help
Intrawest make decisions?
• How has it provided value for the firm?

12.10

© 2005 by Prentice Hall

Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
Cargo revenue optimization of Continental Airlines

Figure 12-1
12.11

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
Types of Decision-Support Systems

• Associations: Occurrences linked to a single

event
• Sequences: Events linked over time

12.12

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
Types of Decision-Support Systems

• Classification: Recognizing patterns that

describe the group to which an item
belongs
• Clustering: Similar to classification when no

groups have yet been defined. Discovers
different groupings within data

12.13

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
Overview of a decision-support system (DSS)

Figure 12-2
12.14

© 2005 by Prentice Hall

Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
Components of DSS

• DSS Database: Collection of current or

historical data from a number of
applications or groups. Can be a small PC
database or a massive data warehouse

12.15

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
Components of DSS

• DSS Software System: Collection of software

tools used for data analysis, such as
OLAP tools, datamining tools, or a
collections of mathematical and analytical
models

12.16

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
Components of DSS

• Model: Abstract representation illustrating
components or relationships of a phenomenon
• Sensitivity Analysis: Models that ask “what-if”
questions repeatedly to determine the impact of
changes in one or more factors on the outcomes

12.17

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
Sensitivity analysis

Figure 12-3
12.18

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
DSS Applications and the Digital Firm

Examples of Decision-Support Systems
• General Accident Insurance: Customer
buying patterns and fraud detection
• Bank of America: Customer profiles
• Frito-Lay, Inc.: Price, advertising, and
promotion selection
12.19

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
DSS Applications and the Digital Firm

Examples of Decision-Support Systems
• Southern Railway: Train dispatching and routing
• Texas Oil and Gas Corporation: Evaluation of

potential drilling sites
• The Gap: Inventory stocking and merchandising

12.20

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
DSS Applications and the Digital Firm

Examples of Decision-Support
Systems
• United Airlines: Flight scheduling,
passenger demand forecasting
• U.S. Department of Defense: Defense
contract analysis
12.21

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
DSS for Pricing Decisions

• By analyzing several years of sales data
for similar items, the software estimates a
“seasonal demand curve” for each item
and predicts how many units would sell
each week at various prices.
• The software uses sales history to predict
how sensitive customer demand will be to
price changes
12.22

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
DSS for Supply Chain Management

• Can help firms model inventory stocking
levels, production schedules, or
transportation plans
• Can provide firms with information on key
performance indicators such as lead time,
cycle time, inventory turns, or total supply
chain costs
12.23

© 2005 by Prentice Hall

Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
Window on Technology

A DSS Makes Subaru More Parts-Savvy

• How does the Servigistics system provide
value for Subaru of New England?
• How did it change the way the company
ran its business?

12.24

© 2005 by Prentice Hall


Essentials of Management Information Systems, 6e
Chapter 12 Enhancing Management Decision Making for the Digital Firm

Decision-Support Systems (DSS)
DSS for customer analysis and segmentation

Figure 12-4
12.25

© 2005 by Prentice Hall