History

First to appear were the Transaction Processing Systems (TPS), which replaced
manual procedures for clearly structured routine tasks with faster and more accurate
computer-based procedures.
At the end of the 70s, the concept of the Management Information System (MIS)
attempted to meet all the company’s information needs. However, in practice these
systems have not been useful to top-level managers, because they generally have to deal
with new situations that require nonstructured decisions.
Once it had become clear that comprehensive strategic information system models
were not viable, Decision Support Systems (DSS) were introduced.

Definition

DSS have been expressly developed to support the decision-making process. It

provides a tool to deal with less precisely structured or defined problems that arise
sporadically. DSS helps managers who have to take non-structured decisions.
A decision is understood to be nonstructured if there are no clear procedures in place
to take the decision, and it is not possible to identify beforehand all the factors that need
to be considered in the decision.
A decision support system helps in decision-making but does not necessarily give a
decision itself. It is the user who chooses how to tackle the problem and in the final
instance, takes the decision.

Characteristics of a DSS

Facilitation. DSS facilitate and support specific decision-making activities and/or

decision processes.
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.
Ancillary. DSS can support decision makers at any level in an organization. They are
NOT intended to replace decision makers.
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.
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.
Identifiable. DSS may be independent systems that collect or replicate data from other
information systems OR subsystems of a larger, more integrated information system.
Decision Impact. DSS are intended to improve the accuracy, timeliness, quality and
overall effectiveness of a specific decision or a set of related decisions.
Components of a DSS

User Interface Management allows you to combine your know-how with the storage and
processing capabilities of the computer.
Database Management System (DBMS) provides facilities for organizing, storing and
retrieving data.
Model management software (MMS) coordinates the use of models in the DSS.

Classification of a DSS

Text Oriented DSS: It contains textually represented information that could have a
bearing on decision. It allows documents to be electronically created, revised and viewed
as needed.
Database Oriented DSS: Database plays a major role here; it contains organized and
highly structured data.
Spreadsheet Oriented DSS: It contains information in spread sheets that allows create,
view, modify procedural knowledge and also instructs the system to execute self-
contained instructions. The most popular tool is Excel and Lotus 1-2-3.
Solver Oriented DSS: It is based on a solver, which is an algorithm or procedure written
for performing certain calculations and particular program type.
Rules Oriented DSS: It follows certain procedures adopted as rules. Export system is the
example.
Compound DSS: It is built by using two or more of the five structures explained above.

Types of DSS

Status Inquiry System: It helps in taking operational, management level, or middle level
management decisions, for example daily schedules of jobs to machines or machines to
operators.
Data Analysis System: It needs comparative analysis and makes use of formula or an
algorithm, for example cash flow analysis, inventory analysis etc.
Information Analysis System: In this system data is analyzed and the information report
is generated. For example, sales analysis, accounts receivable systems, market analysis
etc.
Accounting System: It keeps track of accounting and finance related information, for
example, final account, accounts receivables, accounts payables, etc. that keep track of
the major aspects of the business.
Model Based System: Simulation models or optimization models used for decision-
making are used infrequently and creates general guidelines for operation or
management.

Advantages

- Improves efficiency and speed of decision-making activities.

- Increases the control, competitiveness and capability of futuristic decision-making of
the organization.
- Since it is mostly used in non-programmed decisions, it reveals new approaches and sets
up new evidences for an unusual decision.
- Helps automate managerial processes.

Disadvantages

Depending too much on a decision support system and placing an unusual amount of
trust in it is not a healthy sign. A lot of uncertainties are associated with DSS, such as:
1. Information Overload: A computerized decision making system may sometimes
result in information overload. Since it analyzes all aspects of a problem, it leaves a user
in a dilemma what to consider and what not to consider. Not each bite of information is
necessary in decision making. But when it’s present, a decision maker finds it difficult to
ignore information that is not a priority.
2. Too much Dependence on DSS
3. Cost of Development: The cost of decision making decreases once a decision
support system is installed. But development and implementation of a DSS requires a
huge monetary investment. Customization may attract higher cost.

Examples

Consider a bank, which provides loans to customers. A customer comes to the bank
to request a mortgage loan to buy a house. The bank will collect information to decide
whether the bank will provide a loan to the customer and under what conditions.
The information collected includes things like the customer's employment, income,
credit score, loan history and other financial information.
Since this loan is to buy a house, the bank also collects information on the property
and trends in the real estate market.
Finally, the bank needs to consider its own internal finances.
A DSS makes it possible for the bank to make an informed decision in a timely
manner that considers all the different internal and external data sources.

Companies using DSS

Starbucks and Zurich U.S. Insurance

Starbucks' employees spend their days handing hot liquid to customers – and we
know how that can leave you open to lawsuits. Remember the woman who spilled hot
coffee in her lap, sued McDonald's and was awarded a lot of money? Starbucks doesn't
want to find itself in the same boat – and neither does the company's insurance company.
To manage and minimize claims, Zurich uses a decision support system that
compares floor designs in its 3,500 locations and then analyzes number and types of
accidents at different times of the day and from different foot-traffic patterns. The system
even compares accident data from different parts of the country and different times of the
year. With decision support, Zurich and Starbucks can determine where their risk is
greatest and take steps to minimize the problem.
American Airlines
American Airlines produced a DSS that helps to decide how much to overbook and
how to set prices for each seat so that a plane is filled and profits are maximized.

Hewlett Packard (HP)

HP has 13 Halo Collaboration Studios installed at its facilities worldwide. HCS is a
high-end video conferencing facility built by HP in partnership with Dreamworks
Animation SKG.

Who Else Can Benefit

- Government
- Farmers
- Doctors
- Students

Insights

- Though DSS can be beneficial to the company, it can result to inaccurate analysis since
it is not designed to eliminate bad decisions.
- DSS are there to facilitate a manager in making operational decisions, but the ultimate
burden of responsibility lies with the manager.
- Decision Support Systems remains a tool that can provide firms with a sustainable
competitive advantage.
- DSS are built to be changed.

References

Power, D. J., Decision Support Systems: Concepts and Resources for Managers,
Westport, CT: Greenwood/Quorum Books, 2002.
Sprague, R. H. and E. D. Carlson. Building Effective Decision Support Systems
Englewood Cliffs, N.J.: Prentice-Hall, Inc.: 1982.
https://www.ll.mit.edu/mission/aviation/wxatmintegration/usedecisionsupport.html
http://dsssystem.blogspot.com/2010/01/advantages-of-decision-support-system.html
http://www.umsl.edu/~sauterv/analysis/488_f02_papers/dss.html
Decision Support System
(DSS)

Cabanag, Lelit
Credo, Alma Mae
Ferrer, Raven Jade
Lao, Daphne
Ontong, Ann Janine
Torres, Nina Shayne Clarette

Mr. Larry Regencia