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Design & Management of

Information System

UNIT – 4 Decision Making


Dr. Archana Raje
Unit 4 : Decision Making

Unstructured, Semi-structured,
Structured Decisions, Stages in Decision
Making process, Decision Tables,
Identifying parameters, Principles of
Information System Design

dgjha@KJ SIMSR _ D & MIS 2


Decision Making and Information Systems
Decision Making and Information Systems
• Business value of improved decision making
– Improving hundreds of thousands of “small” decisions
adds up to large annual value for the business
• Types of decisions:
– Unstructured: Decision maker must provide
judgment, evaluation, and insight to solve problem
– Structured: Repetitive and routine; involve definite
procedure for handling so they do not have to be
treated each time as new
– Semi-structured: Only part of problem has clear-cut
answer provided by accepted procedure
Decision Making and Information Systems
• Senior managers:
– Make many unstructured decisions
– For example: Should we enter a new market?

• Middle managers:
– Make more structured decisions but these may include unstructured
components
– For example: Why is order fulfillment report showing decline in
Minneapolis?

• Operational managers, rank and file employees


– Make more structured decisions
– For example: Does customer meet criteria for credit?
INFORMATION REQUIREMENTS OF KEY DECISION-MAKING GROUPS IN A FIRM

Senior managers, middle managers, operational managers, and employees


have different types of decisions and information requirements.
Decision Making and Information Systems

• The four stages of the decision-making process


1. Intelligence
• Discovering, identifying, and understanding the problems
occurring in the organization
2. Design
• Identifying and exploring solutions to the problem
3. Choice
• Choosing among solution alternatives
4. Implementation
• Making chosen alternative work and continuing to monitor
how well solution is working
STAGES IN DECISION MAKING
The decision-making process is broken down into four stages.
Decision Making and Information Systems
• Three main reasons why investments in information
technology do not always produce positive results
1. Information quality
• High-quality decisions require high-quality information
2. Management filters
• Managers have selective attention and have variety of biases that
reject information that does not conform to prior conceptions
3. Organizational culture
• Strong forces within organizations resist making decisions calling
for major change
Exercise
Applebee’s is the largest casual dining chain in the world, with
1,970 locations throughout the United States and nearly 20
other countries worldwide including China, Japan, South Korea
and Kuwait. The menu features beef, chicken and pork items,
as well as burgers, pasta, and seafood. The Applebee’s CEO
wants to make the restaurant more profitable by developing
menus that are tastier and contain more items that customers
want and are willing to pay for despite rising costs for gasoline
and agricultural products.

How might information systems help management implement


this strategy?

What pieces of data would Applebee’s need to collect?

What kinds of reports would be useful to help management


make decisions on how to improve menus and profitability?
Answer
Applebee’s can use data from transaction processing systems
and point-of-sale systems to track which menu items sell the
best.

The company can use external demographic data to


understand potential customers by accessing data about ages,
income levels, and the number of children per family. The
company can also use external weather data to track which
menu items should be advertised. For instance, if the weather
prediction calls for a snowstorm, the company can feature hot
soups and sandwiches.

Managers can use trend reports to determine which menu


items are selling the best at any particular time. Reports
broken into regions may be helpful since tastes differ based on
geographic location. Grits sell well in the South but poorly in
the Northwest. Reports on how well individual items sell during
specific times of the day or week may be helpful to adjust
marketing campaigns.
Exercise
Take a look at one day’s worth of transactions at an online firm, Online Management
Training Inc. (OMT Inc.), that sells online management training books and streaming
online videos to corporations and individuals who want to improve their
management techniques. On this day, the firm experienced 517 order transactions.
The names of customers and other identifiers have been removed from this list.
A database composed of transaction records (the rows). The fields for each customer
record are: customer ID, region of purchase, payment method, source of contact (e-
mail versus Web banner ad), amount of purchase, the product purchased (either
online training or a book), and time of day (in 24-hour time).

Design important questions to make important decisions

Data File: OMT data


Modeling Logic with - Decision Tables
• A matrix representation of the logic of a
decision
• Specifies the possible conditions and the
resulting actions
• Best used for complicated decision logic
Modeling Logic with - Decision Tables
• Consists of three parts
– Condition stubs
• Lists condition relevant to decision
– Action stubs
• Actions that result from a given set of conditions
– Rules
• Specify which actions are to be followed for a given
set of conditions
• To express the program logic we can use a limited-entry
decision table consisting of 4 areas called the condition
stub, condition entry, action stub and the action entry:
Condition entry

Rule1 Rule2 Rule3 Rule4

Condition1 Yes Yes No No


Condition Condition2 Yes X No X
stub
Condition3 No Yes No X
Condition4 No Yes No Yes
Action1 Yes Yes No No
Action stub Action2 No No Yes No
Action3 No No No Yes
Action Entry
15
Limited Entry Decision Table
• The limited-entry decision table is the
simplest to describe.
• The condition alternatives are simple Boolean
values, and the action entries are check-
marks, representing which of the actions in a
given column are to be performed.
Example- LEDT
A technical support company writes a decision table to diagnose printer problems
based upon symptoms described to them over the phone from their clients.
The following is a balanced decision table

Printer troubleshooter
Rules
Printer prints N N N N Y Y Y Y

Conditions A red light is flashing Y Y N N Y Y N N


Printer is recognized by
N Y N Y N Y N Y
computer
Check the power cable X -
Check the printer-
X X -
computer cable
Actions Ensure printer software is
X X X X -
installed
Check/replace ink X X X -
Check for paper jam X X -
Exercise 1
Applications for admission to an extension course are screened
using the following rules:
For admission, a candidate should be sponsored by his
employer and he should possess prescribed minimum academic
qualifications. If his fee is also paid, then he is sent a letter of
admission. If his fee is not paid, then a letter of provisional
admission is sent. In all other cases a letter of regret is sent.

Decision Table for Admission


R1 R2 ELSE
C1: Is the applicant sponsored? Y Y
C2: Does he possess prescibed
Conditions Y Y
minimum qualifications?
C3: Is the fee paid Y N
A1: Send letter of admission X - -
A2: Send letter of provisional
Actions - X -
admission
A3: Send regret letter - - X
Assignment 1
A Policy to be followed in a store’s inventory system is stated as
follows:
• If the quantity of an item ordered by a customer is available in
the store, then is shipped. The quantity of the specified item
remaining in the store is checked against the reorder level. If it is
below the reorder level then a reorder procedure is initiated.
• If the quantity ordered by the customer is greater than that in
stock, he is asked whether he would be willing to accept partial
shipment. If he is willing, then the available quantity is shipped,
reorder is initiated, and quantity in stock is set to zero. The
quantity to be shipped later is entered in a back-order file. If the
customer does not accept partial shipment, then nothing is
shipped and his entire order is entered in the back-order file and
reorder is initiated.
Prepare Limited entry decision table.
Extended Entry Decision Table
• Conditions entries not necessarily in Yes and
No, Can have multiple answers
• Action entries not necessarily X or –
• Extended Entry Decision Tables(EEDT) more
concise
• EEDT can always be expanded to LEDT
EXTENDED ENTRY DECISION TABLE
A manufacturer markets two products to three types of
customers. He has the following discount policy.
The products are bulbs and fans, and the customers
are classified as retailers distributors and the
government agencies. If the order is from a retailer for
amounts up to Rs. 500, he allows 5% discount. If it is
from a distributor, 7.5% discount is given. On retail
orders exceeding Rs. 500, 7.5% discount is allowed.
For the same order from the distributor, 10% discount
is given. In all the above cases a flat discount of 6% is
given to government agencies. The above policies
apply only to orders for bulbs. A flat discount of 5% is
given on orders for fans regardless of the amount of
purchase or the customer classification.
EXTENDED ENTRY DECISION TABLE
Decision table showing discount policy

R1 R2 R3 R4 R5 R6

C1: Product Code 1 1 1 1 1 2

C2: Customer Code A B A B C -

C3: Order Amount <= 500 <= 500 > 500 > 500 - -

Discount = 5% 7.5% 7.5% 10% 6% 5%

Assignment : Convert the above table in LEDT


MIXED ENTRY DECISION TABLE
Decision table showing discount policy

R1 R2 R3 R4 R5 R6
C1: Product Code = 1? Y Y Y Y Y N
C2: Customer Code A B A B C -
C3: Order Amount <= 500 Y Y N N - -
Discount = 5% 7.50% 7.50% 10% 6% 5%
Case Study- Identifying Parameters (Make
or Buy decision)
Case study – Perfect Mobility Elevators Ltd. (PMEL)
Case Solution - Parameters Identified