McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, All Rights Reserved Chapter 9 Enabling the Organization – Decision Making

9-2 Learning Outcomes 9.1 Define the systems organizations use to make decisions and gain competitive advantages 9.2 Describe the three quantitative models typically used by decision support systems 9.3 Describe the relationship between digital dashboards and executive information systems

9-3 Decision Making Reasons for the growth of decision-making information systems  People need to analyze large amounts of information  People must make decisions quickly  People must apply sophisticated analysis techniques, such as modeling and forecasting, to make good decisions  People must protect the corporate asset of organizational information

9-4 Organizational Levels

9-5 Three main categories of information systems serve different organizational levels: Operational-level systems: support operational managers, keeping track of the elementary activities and transactions Management-level systems: serve the monitoring, controlling, decision-making, and administrative activities - Support middle-level management decision-making Executive-level systems: help senior management tackle and address strategic issues- Support long- range planning of senior management

9-6 Types of Systems vs. Functional Areas

9-7 Operational-level systems –Supports operational managers by keeping track of the elementary activities on daily basis and transactions of the organization such as sales, cash deposits, payroll, credit decisions and the flow of materials in a factory. –To be able answer questions like: How many parts are in inventory? What happened to Mr. X’s payment? –Examples: a system to record bank deposits from an ATM or a system that tracks the number of hours worked each day by employees

9-8 Management-level Systems Supports the monitoring, controlling, decision making, and administrative activities of middle-manager. Provide periodic reports rather than instant ones Example: answers “what if” questions such as What would be the impact on production schedules if we double sales in the month of May? What would happen to our return of investment if our factory schedule were delayed for six months?

9-9 Executive-level systems Supports the long-term planning activities of senior managers Example: answers questions like: What will employment level be in ten years? What products should we be making in five years?

9-10 Hierarchical view of IS in organizations Moving up through the organizational pyramid users move from requiring transactional information to analytical information

9-11 Three Major Types of Systems Transaction Processing Systems (TPS) Decision-Support Systems (DSS) Executive Support Systems (ESS)

9-12 Organizational Levels

9-13 Examples of Information Systems at each organizational level for each functional areas

9-14 Basic business systems that serve operational level A computerized system that performs and records daily routine activities E.g. sales order entry, hotel reservation, payroll, employee record keeping, shipping systems Inputs: Transactions Processing: Sorting, listing, merging, updating Outputs: Detail reports, lists, summaries Users: Operations personnel, supervisors Transaction Processing Systems (TPS)

9-15 Transaction Processing Systems Online transaction processing (OLTP) – the capturing of transaction and event information using technology to (1) process the information according to defined business rules, (2) store the information, (3) update existing information to reflect the new information Online analytical processing (OLAP) [for managers] – the manipulation of information to create business intelligence in support of strategic decision making

9-16 Features of Transaction Processing Systems typically involve large amounts of data stored in large databases require high processing speeds to manipulate large volumes of data capture data used to produce documents and reports for users and managers must ensure a high level of accuracy and security of the data

9-17 A Payroll TPS

9-18 Typical Applications of TPS

9-19 Organizational Levels

9-20 Decision Support Systems (DSS) DSS support management level of organization during the decision-making process Combine data and analytical models INPUTS: Transaction level data PROCESSING: INTERACTIVE, SIMULATION, GRAPHICS OUTPUTS: DECISION ANALYSIS USERS: PROFESSIONALS, STAFF, MANAGERS

9-21 Decision Support Systems Three quantitative models used by DSSs include: 1.Sensitivity analysis – the study of the impact that changes in one (or more) parts of the model have on other parts of the model 2.What-if analysis – checks the impact of a change in an assumption on the proposed solution- 1.What-if analysis is a special case of sensitivity analysis 2.What-if demoWhat-if demo 3.Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of output 1.Goal-seeking demoGoal-seeking demo

9-22 Decision Support Systems What-if analysis

9-23 Decision Support Systems Goal-seeking analysis

9-24 Decision Support Systems Interaction between a TPS and a DSS

9-25 Decision-Support Systems (DSS) (Continued)

9-26 Organizational Levels

9-27 Executive Information Systems (EIS) Serve Executive level of the organization a specialized DSS that supports senior level executives within the organization Support non-routine decision-making Use advanced graphics software to create output for executives Use data from external & internal sources Inputs: Aggregate data from TPS level Processing: Graphics, simulations, interactive Outputs: Projections, response to queries Users: Senior managers

9-28 Executive Information Systems Interaction between a TPS and an EIS

9-29 Executive Information Systems Most EISs offering the following capabilities: –Consolidation – involves the aggregation of information and features simple roll-ups to complex groupings of interrelated information – from regional to global –Drill-down – enables users to get details, and details of details, of information, e.g. viewing monthly, daily, or even hourly information –Slice-and-dice – looks at information from different perspectives

9-30 Executive Information Systems Digital Dashboard – integrates information from multiple components and presents it in a unified display

9-31 Digital Dashboard DemoDemos: