Decision Support Systems: How Managers Analyze Internal and External Data with DSS Video

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  • 0:05 Decision Support Systems
  • 0:48 Sources of Information
  • 2:51 Decision Models
  • 3:39 User Interface
  • 4:34 Not a Black Box
  • 5:36 Lesson Summary
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Lesson Transcript
Instructor: Paul Zandbergen

Paul has a PhD from the University of British Columbia and has taught Geographic Information Systems, statistics and computer programming for 15 years.

A Decision Support System is a specialized information system used when a problem is unstructured or when circumstances are uncertain. Learn about the data and models used in a DSS.

Decision Support Systems

A Decision Support System, or DSS, is a specialized information system specifically designed to facilitate the decision making process in the operations of organizations. Compared to other types of information systems, a DSS is typically used when a problem is unstructured or when circumstances are difficult to predict.

A DSS may include other types of systems. For example, a database management system (DBMS) is often part of a DSS in order to have access to the necessary data. However, a DSS is more than a DBMS since it provides a structure to facilitate the process of making decisions.

Sources of Information

A DSS gathers information from internal sources of an organization over which there is a certain amount of control as well as from external sources over which control is more limited. Internal sources consist of all the various databases within an organization, such as those related to personnel, finances, assets, customers, etc. External sources consist of the various factors that influence how an organization operates, such as market trends, government regulations, competitors, etc. How this information is used is best illustrated using an example.

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 employee working with the customer 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, such as the legal description and the assessed market value. The bank will also look at trends in the real estate market, including interest rates offered by other financial institutions. Finally, the bank needs to consider its own internal finances, such as the funds it has available for loans, how many mortgage loans it has already approved recently, its experience with loans given to similar customers, etc.

There is a lot of information to consider. Some of this can be used again for the next loan application, but some of it is very specific to this particular customer. Some of the information can also change very quickly, such as trends in the housing market. A DSS makes it possible for the bank employee to make an informed decision in a timely manner that considers all the different internal and external data sources.

Decision Models

In addition to lots of data, a DSS uses a model base. This provides access to a number of different models to support decision making. Many of these models consist of statistical analysis of data and can serve as guidelines for certain decisions. Some models are used to determine patterns in existing data, while others are used to try to predict trends in the future.

Models in a DSS provide relatively easy access to sophisticated analytical methods. Typically, such models have already been developed and tested in other contexts, so users can have some confidence in them. In the case of the mortgage loan, a DSS could include a model that predicts the likelihood that someone will default on their loan based on their financial profile.

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