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Decision Support Chapter 10 Overview Databases 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 process Tactical – managers and business professionals in selfdirected teams develop short- and medium-range plans, schedules and budgets and specify the policies, procedures and business objectives for their subunits Operational – managers or members of self-directed teams develop short-range plans such as weekly production schedules Decision Structure Structured – 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 Globalization Internet – anywhere, anytime Competition is a click away! Speed of change is increasing Therefore, we need to: Make better decisions Make faster decisions Outsmart 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 intelligence The entire enterprise BI techniques Data mining – patterns and trends in data OLAP – online analytical processing Multidimensional analysis Region by salesperson by product by time Decision Support Drill down /drill up for correct level of detail Recap: Data Mining Discovery of patterns in data Trends Relationships and behaviors Using statistics, AI Generates & tests hypotheses Data mining vs. OLAP Data mining Looking for patterns in data Online analytical processing (OLAP) Multidimensional analysis OLAP Top-down, query driven Must know data well – interaction Relationships 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 churn Predicts which customers are likely to leave your company and go to a competitor. Fraud detection Identifies which transactions are likely to be fraudulent. Direct marketing Identifies which prospects should be included in a mailing list to obtain the highest response rate. Market basket analysis Identifies what products or services are commonly purchased together. Peanut butter & jelly Cereal and milk Trend analysis Reveals the difference between a typical customer this month versus last month. Department needs SALES Which products are selling to Which demographics Which markets Which sales channel ? Other needs: Manage Customer relationships Need a 360 degree view of the customer Improve product planning production planning contract negotiations with suppliers Improve marketing and advertising programs Reduce costs and find new opportunities ! Example Auto 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 models Specialized databases A decision maker’s own insights and judgments An interactive, computer-based modeling process DSS Components