Decision Support

Chapter 10

OverviewDatabases are really information technology

Decision Support is a business application that actually uses databases

Data to Decisions

Levels of Management Decision Making

Strategic – group of executives develop overall organizational goals, strategies, policies, and objectives as part of a strategic planning processTactical – managers and business professionals in self-directed teams develop short- and medium-range plans, schedules and budgets and specify the policies, procedures and business objectives for their subunitsOperational – managers or members of self-directed teams develop short-range plans such as weekly production schedules

Decision StructureStructured – situations where the procedures to follow when a decision is needed can be specified in advance

Unstructured – decision situations where it is not possible to specify in advance most of the decision procedures to follow

Semi structured - decision procedures that can be prespecified, but not enough to lead to a definite recommended decision

Business Intelligence

Business Intelligence (BI)Text: gathering the right information in a timely manner and usable form.Analyzing information so that it can have a positive impact on business strategy, tactics, or operations.Which markets to enter, customers to target, products to promote ?More about BI later in this course.

It’s a “dog eat dog” world!Competition is intensifying GlobalizationInternet – anywhere, anytime

Competition is a click away!

Speed of change is increasing

Therefore, we need to:Make better decisionsMake faster decisionsOutsmart the competition

We do this by:Empower employees to research their own decisions (not just CEO).Provide easy access to data and tools to analyze the data

Data warehouse – Demand reports!Encourage sharing across

Departments – collective intelligenceThe entire enterprise

BI techniquesData mining – patterns and trends in dataOLAP – online analytical processing

Multidimensional analysisRegion by salesperson by product by time

Decision SupportDrill down /drill up for correct level of detail

Recap: Data MiningDiscovery of patterns in dataTrendsRelationships and behaviors

Using statistics, AIGenerates & tests hypotheses

Data mining vs. OLAPData mining

Looking for patterns in data

Online analytical processing (OLAP)Multidimensional analysis

OLAPTop-down, query drivenMust know data well – interactionRelationships between data:

Geography (Region)Sales person Product

Multidimensional Database

Table 5.6

BI applications:Market Segmentation

Common characteristics of customers who buy the same products from your company.

Customer churnPredicts which customers are likely to leave your company and go to a competitor.

Fraud detectionIdentifies which transactions are likely to be fraudulent.

Direct marketingIdentifies which prospects should be included in a mailing list to obtain the highest response rate.

Market basket analysisIdentifies what products or services are commonly purchased together.

Peanut butter & jellyCereal and milk

Trend analysisReveals the difference between a typical customer this month versus last month.

Department needsSALES

Which products are selling toWhich demographicsWhich marketsWhich sales channel ?

Other needs:Manage Customer relationships

Need a 360 degree view of the customer

Improve product planningproduction planningcontract negotiations with suppliers

Improve marketing and advertising programsReduce costs and find new opportunities !

ExampleAuto maker Fiat found that it was paying 10 cents more for a lug nut for one vehicle than another.Renegotiated contract saving $100,000 per year.Do this for 100 parts…

Decision Support Systems (DSS)Definition:

Computer-based information systems that provide interactive information support to managers and business professionals during the decision-making process using the following to make semi structured business decisions

Analytical modelsSpecialized databasesA decision maker’s own insights and judgmentsAn interactive, computer-based modeling process

DSS Components