MIS & Decision Making

By: Vishnu Gupta

Sanjeev Bruwa
Shubham Sharma
DECISION MAKING
 Decision making is the developing
concepts leading to the selection of a
course of action among variations.
Every decision making process
produces a final choice
 It can be an action or an opinion. It
begins when we need to do something
but we do not know what
 e.g. Decision to raise a Purchase Order
Decision making in business and
management
In general, business and management systems should be set
up to allow decision making at the lowest possible level.
Several decision making models or practices for business include:
– SWOT Analysis - Evaluation by the decision making
individual or organization of Strengths, Weaknesses,
Opportunities and Threats with respect to desired end state or
objective.
– Buyer decision processes - transaction before, during, and
after a purchase
• Corporate finance:
• The investment decision
• The financing decision
• The dividend decision
• working capital management decisions
– Cost-benefit analysis - process of weighing the
total expected costs vs. the total expected benefits
Types of Decisions

 Unstructured/ Nonprogrammed
 Structured/ Programmed
 Semi-structured
Information Requirements of Key Decision-Making Groups in a Firm
The Decision-Making Process

Phases of Decision Making Process

 Intelligence
 Design
 Choice
 Implementation
Stages in Decision Making
Phases of Decision Making Process
 Intelligence gathering
– Definition of problem
– Data gathered on scope
– Constraints identified
 Design phase
– Alternatives identified and assessed
 Choice
– Selection of an alternative
 Implementation
– Testing the selected alternative.
Typical Inputs and Outputs
 Inputs: Information from the TPS
 Outputs: hard and softcopy reports
– Scheduled reports
– On-demand reports
– Key-indicator (business fundamentals)
– Exception reports
MIS Support to
Decision Making
Process
Functional Perspectives of MIS

 Financial MIS
– Will integrate information from
multiple sources
– Functions
• Costing
• P&L reporting
• Auditing
• Funds management
Functional Perspectives of MIS

 Manufacturing
– Design and Engineering
– Master Production Scheduling
– Inventory Control
– Materials Planning
– Manufacturing and Process Control
– Quality Control
Functional Perspectives of MIS

 Marketing
– Market research
• Web-based market research
– Pricing
Functional Perspectives of MIS

 Transportation and Logistics

– Route and schedule optimization
 Human Resources
 Accounting
Systems for Supporting Decisions

• Management information systems (MIS)

• Decision-support systems (DSS)
• Executive support systems (ESS)
• Group-decision support systems (GDSS)
• Intelligent techniques
Management Information Systems (MIS)

• Help managers monitor and control a

business
• Produce regular reports on
performance, such as monthly or annual
sales
• Sometimes highlight exceptional
conditions
• Reports often available online
 Techniques and Models for Decision making

a) Allocation Models - Allocation models are used to allocate

resources to activities in such a way that some measure of
effectiveness (objective function) is optimized. If the measure
of effectiveness such as profit, cost, etc. is represented as a
linear function of several variables and if limitations on
resources (constraints) can be expressed as a system of
linear equalities or inequalities, the allocation problem is
classified as a linear programming problem. But if the
objective function of any or all of the constraints cannot be
expressed as a system of linear equalities or inequalities the
allocation problem is classified as a non-linear programming
problem.
(b) Inventory Models- Inventory models deal with the
problem of determination of how much to order at a
point in time and when to place an order. The main
objective is to minimize the sum of three conflicting
inventory costs: the cost of holding or carrying extra
inventory, the cost of shortage or delay in the
delivery of items when it is needed, a cost of
ordering or set-up. These are also useful in dealing
with quantity discounts and selective inventory
control.
(c) Waiting Line (or Queuing) Models

These models have been developed to establish

a trade-off between costs of providing service and
the waiting time of a customer in the queuing
system. Constructing a model entails describing
the components of the system: arrival process,
queue structure and service process and solving
for the measure of performance-average length of
waiting time, average time spent by the customer
in the line, traffic intensity, etc. – of the waiting
system.
(d) Competitive (Game Theory) Models

These models are used to characterize the behavior

of two or more opponents (called players) who
compete for the achievement of conflicting goals.
These models are classified according to several
factors such as number of competitors, sum of loss
and gain, and the type of strategy which would yield
the best or the worst outcomes.
(e) Network Models

These models are applied to the management

(planning, controlling and scheduling) of large scale
projects. PERT/CPM technique help in identifying
potential trouble spots in a project through the
identification of the critical path. These techniques
improve project coordination and enable the
efficient use of resources. Network methods are
also used to determine time-cost trade-off resource
allocation and updating of activity time.
(f) Sequencing Models - The sequencing problem arises
whenever there is a problem in determining the sequence
(order) in which a number of tasks can be performed by a
number of service facilities such as hospital, plant etc. in such
a way that some measure of performance, for example, total
time to process all the jobs on all the machines, is optimized.

(g) Dynamic Programming Models - Dynamic programming

may be considered as an outgrowth of mathematical
programming involving the optimization of multistage
(sequence of inter-related decisions) decision processes. The
method starts by dividing a given problem into stages or sub-
problems and then solves those sub-problems sequentially
(h) Markov-Chain Models - These models are used for
analyzing a system which changes over a period of time
among various possible outcomes or states. The model while
dealing with such systems describes transitions in terms of
transitions probabilities of various states. These models have
been used to test brand-loyalty and brand switching
tendencies of consumers, where each system state is
considered to be a particular brand purchase.

(i) Simulation Models - These models are used to develop a

method to evaluate the merit of alternative courses of action
by experimenting with a mathematical model of the problems
where various variables are at random. Repetition of the
process by using the simulation model provides an indication
of the merit or alternative course of action with respect to the
decision variables.
(j) Decision Analysis Models

These models deal with the selection of an

optimal course of action given the possible
payoffs and their associated probabilities of
occurrence. These models are broadly
applied to problems involving decision-making
under risk and uncertainty.
Individual Decision-Making Models
(a) Rational Model: Model of human behavior based
on the belief that people, organizations, and nations
engage in basically consistent, value maximizing
calculations.
(b) Systematic decision-makers: Cognitive style that
describes people who approach a problem by
structuring it in terms of some formal method.
(c) Intuitive decision-makers: Cognitive style that
describes people who approach a problem with
multiple methods in an unstructured manner, using
trial and error to find a solution.
Decisions by "computers" Decisions by "people"

Start with a provisory solution to be validated and

Start with the data: Almost free from prejudices.
modified

Rational formulation Adaptive behavior

Large volumes of information Limited access to information

Inductive in-depth analysis Intuitive-deductive search for "patterns"

Specialized: Sectorial analysis Global: Multi-sectorial synthesis

Large volumes of calculations, slow conclusions Rapid expression of personal perceptions

Satisfying strategy based on "acceptable"

Optimization strategy from all possible solutions
possibilities
 Computer based Information Systems and Decision
making
(a) Fast computation: A decision-maker can perform large
number of computations very quickly and that too at a cost
with the help of computer support systems. Today, in
majority of the decisions, time is major factor.
(b) Enhanced Productivity: Computer based systems can
enhance the productivity of support staff and also enable the
group members to discuss the problems among themselves.
(c) Data Transmission: Sometimes the data, which may be
stored at different locations, may be required to be
transmitted quickly from distant locations. Computer support
systems can search, store, and transmit the required data
quickly and economically.
(d) Better Decisions: Computer support systems can help a
decision-maker in arriving at a better decision. For example,
more alternatives can be evaluated, risk analysis be
performed quickly, and views of experts from different places
and at a lower cost.

(e) Competitive edge: Decision support systems enable the

users to get a competitive edge over their competitors as
these systems enable organizations to change their
operations frequently, re-engineer processes and structures,
empower employees and innovate. Decision support
technologies can create useful empowerment by allowing
people to make good decisions, even if they lack some
knowledge.
Thankyou