Decision Making: Decision Support Systems. In this paper, we explore the decision-making background concepts behind decision support systems, the practical side of implementing and using decision support systems, and an empirical study highlighting the

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Date:  April 8, 2010


Table of Contents

Introduction        4

Decision Support Systems in Theory

Background Concepts behind Decision Support Systems        5

Decision Making Characteristics of a Decision Support System        6

Components of Decision Support Systems        7

Decision Making Models and Decision Support Systems        8

Decision Support Systems in Practice

Users and Uses of Decision Support Systems        10

Types of Decision Support Systems        11

What Decision Makers Need to Know About Decision Support Systems        15

Benefits to Decision Making of Using Decision Support Systems        16

Disadvantages to Decision Making of Using Decision Support Systems        18

A Study of Decision Support Systems Using Decision-Making Support Benefits from ERP Implementation in Organizations

Decision Support Systems for Enterprise Resource Planning        19

Survey, its Objective and its Methodology        19

Survey Results        20

Implication of Survey Results        23

Recommendation        24

APPENDIX

Bibliography

Executive Summary

Decision making is the outcome of mental processes (cognitive process) leading to the selection of a course of action among several alternatives. Today, decision making is increasingly being facilitated by information technology. As automation and technology are becoming a more integral part of the commercial machine nowadays, information systems facilitating decision making are becoming more and more relevant to organizations. Decision support systems (DSS) are a class of information systems that support business and organizational decision-making activities.

In this paper, we explore the decision-making background concepts behind decision support systems, the practical side of implementing and using decision support systems, and an empirical study highlighting the decision making support benefits.

From the first part of survey results in our empirical study of ERP systems, we found out that decision making support is an important objective of an ERP and it should be given greater importance in the future.  From the second part of the results, we found that ERP systems offer significant decision making benefits to the companies using them; on a 7 point scale, the mean of decision making support benefits was calculated to be 4.38, with each benefit listed having a mean near or above the midpoint of the survey scale. The survey findings from the first and second parts were found to be correlated and provide a comprehensive picture regarding the degree of impact that decision making support of ERP systems have on organizations. We suggest that DSS be used as a human consultant in supporting decision makers to gather and analyze information, identify and diagnose problems, as well as, propose possible courses of action. As automation and technology become a more integral part of the commercial machine, it is recommended that further research into artificial intelligence and its applications to the system can help it adapt better to novelties, and ideally the system could perform like an extremely efficient human consultant.

  1.  INTRODUCTION

Decision making has been described as, “An outcome of mental processes (cognitive process) leading to the selection of a course of action among several alternatives. Every decision making process produces a final choice. The output can be an action or an opinion of choice.” (Reason, 1990)  According to the article Decision Making: Going Forward in Reverse, “Each decision is the outcome of a complex process that usually involves two different kinds of thinking: looking backward to understand the past and looking forward to predict the future.”

Today, decision making has been facilitated through the use of information technology.  

Decision support systems (DSS) have been described as, “...a class of information systems that support business and organizational decision-making activities.” A DSS is usually, “...an interactive software-based system intended to help decision makers compile useful information from a combination of raw data, documents, personal knowledge, or business models to identify and solve problems and make decisions.”  (Turban, Aronson and Liang, 2004)  Depending on the nature and uses of a DSS, it can be forward looking, backward looking or be both.

This paper will explore the decision making background concepts behind decision support systems (including decision making theories, characteristics, components and models related to DSS), the practical side of implementing and using decision support systems (including users and uses of DSS, types of DSS, what decision makers should know about DSS, and benefits and disadvantages to decision making of using DSS), and an empirical study highlighting the decision-making support benefits of ERP systems in organizations.  Our recommendations will then be presented.  Certain biases and traps in decision making and the ways DSS help minimize these are included in the Appendix to this paper.

  1.  BACKGROUND CONCEPTS BEHIND DECISION SUPPORT SYSTEMS
  1.   Decision Making Theory Behind Decision Support Systems

In his article What is the theory of decision support systems?, DSS expert Dr. Dan Power lists certain propositions (theories) regarding decision making that are behind the very origin of DSS.  The propositions were taken from the work of Nobel Laureate Economist Herbert Simon and are as follows:

Proposition 1:  “Information stored in computers can increase human rationality if it is accessible when it is needed for the making of decisions.”  (Power, 2001)  This is all the more important as even though most of us believe that we make decisions rationally and objectively, we are prone to certain biases that influence the decisions we make.  (Hammond, Keeney and Raiffa, 1998)

Proposition 2:  “Specialization of decision-making functions is largely dependent upon the possibility of developing adequate channels of communication to and from decision centers.”  (Power, 2001)

Proposition 3:  “Where a particular item of knowledge is needed repeatedly in making decisions, the organization can anticipate this need and, by providing the individual with this knowledge prior to decision, can extend his area of rationality. This is particularly important when there are time limits on making decisions.”  (Power, 2001)  DSS become all the more important in these situations due to their increasing ability to learn from the outcomes of predicted events, and then provide models based on this learning to assist users in decision making by providing them rational basis for their decisions.  (Einhorn and Hogarth, 1987)  Rational basis for decision making by DSS users can be defined as, “...hard to disagree with arguments which support their particularistic point of view of choice, or behaviour.”  (Brindle, 1999)

Proposition 4:  “In the post-industrial society, the central problem is not how to organize to produce efficiently (although this will always remain an important consideration), but how to organize to make decisions – that is, to process information.”  (Power, 2001)

To sum up, DSS are most useful when there is high prospect for the system to provide relevant and quality information to decision makers in a timely manner, thereby enhancing the ultimate decision (product).

  1. Decision Making Characteristics of a Decision Support System

The following are decision making related characteristics of a DSS as compiled by Dr. Power from his own research and that of other DSS scholars:

Facilitation:  “DSS facilitate and support specific decision-making activities and/or decision processes.”  (Power, 2003) (Alter, 1980)

 Interaction”  “DSS are computer-based systems designed for interactive use by decision makers or staff users who control the sequence of interaction and the operations performed.”  (Power, 2003) (Holsapple and Whinston, 1996)

Ancillary:  “DSS can support decision makers at any level in an organization. They are not intended to replace decision makers.”  (Power, 2003) (Alter, 1980)

Repeated Use:  “DSS are intended for repeated use. A specific DSS may be used routinely or used as needed for ad hoc decision support tasks.”  (Power, 2003) (Alter, 1980)

Task-oriented:  “DSS provide specific capabilities that support one or more tasks related to decision-making, including: intelligence and data analysis; identification and design of alternatives; choice among alternatives; and decision implementation.”  (Power, 2003)

Identifiable:  “DSS may be independent systems that collect or replicate data from other information systems or subsystems of a larger, more integrated information system.”  (Power, 2003)

  1. Components of a Decision Support System

The components of a typical DSS include: 

  • Inputs: “Factors, numbers, and characteristics to analyze.”
  • User Knowledge and Expertise: “Inputs requiring manual analysis by the user.”
  • Outputs: “Transformed data from which DSS ‘decisions’ are generated.”
  • Decisions: “Results generated by the DSS based on user criteria.”  (Sprague, 1980) (Power, 2005)  


Furthermore, “Inputs come from users. Outputs are intended for users and decisions are made by users using a DSS.”  (Power, 2005)  This definition is useful due to its identification of similarities and differences when it comes to the different types of DSS.  These types will be discussed in detail later in the paper.

The following Figure 1 represents a routine decision making process, where Input corresponds to Situation and Choose, User Knowledge and Expertise relates to Evaluate, Outputs relate to Options and Decisions correspond to Act.

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Figure 1:  Decision making flow chart

  1. Decision Making Models and Decision Support Systems

As part of effective decision making, it is important for DSS developers and even managers to understand decision making models related to the design and use of DSS.  Decision making models help fit the DSS being used to the needs and constraints of its user, i.e. the decision maker.  There are four decision making models generally considered to be related to the design and use of DSS.  In his article How do decision making models relate to the design and use of DSS?, Dr. Power ...

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