Chapter 2 – Decision Making and Business Processes
When you implement information systems, your goal is to give you more
information about what is going on in your organization, reduce costs, improve
products or services, etc.
What are the reasons for the growth of decision-making information systems?
Organizations can function without information systems, but processing the data
would cost a lot of human labour, and time, and may have errors. (Implementing an
information system saves time, labour costs, and reduces errors).
The organization is like a pyramid (analysts at the bottom, executives at the top.
Analysts, Managers, Executives.
Information systems different in each levels, and detailed information provided is
different at each level.
At each functional areas you will also have different information systems:
For example: Sales and Marketing, Manufacturing and Production, Finance and
Accounting, Human Resources.
We look at information systems, by the level of employees or managers that they
Transaction processing system (TPS) - the basic business system that serves the
operational level (analysts) in an organization
Everything that deals with the frontlines, and front jobs. Such as delivering
and invoicing, systems used by cashiers, payroll uses transaction processing
Online transaction processing (OLTP) – the capturing of transaction and event
information using technology to (1) process the information according to defined
business rules, (2) store the information, (3) update existing information to reflect
the new information
Higher level of systems that are a bit smarter, and support the decision
making of managers more. They do multidimensional analysis, online
analytical processing, etc. which are more advanced than percentages,
It is more analytical than the transaction processing system (TPS)
The manipulation of information to create business intelligence in support of
o BI broad term that refers to information people used to support their
analytical and strategic decision-making. It has an algorithm embedded in it based, that is pre-determined to perform
a task when it receives certain data.
It is multidimensional. (Multidimensional analysis) The questions asked are
more complex. Example: You are in Ottawa and you want to compare the
sales on east and west end during Christmas for a specifc store, compared to
the sales in july. You look at stores, seasons, sales by month, etc. Then you see
where you are doing well, and copy it in the future, to support decision-
making in the organization.
1. Sensitivity analysis
The study of the impact that changes in one (or more) parts of the
model have on other parts of the model
Example: In the restaurant business if you change the size of a cup
size, whether it will affect the profitability or not.
You don’t have a specifc goal you’re looking at, but you see what
happens if you change one variable.
You keep fluctuating a variable up or down, to see how it affects your
Example: In healthcare, people want to see how the dosage of a
medication would affect the outcome or interact with another
2. What-if analysis
Checks the impact of a change in an assumption on the proposed
You change one assumption. “If something happens what would the
Example: If the economic situation improves, what would happen if
the dollar value increases by x amount, how would this affect my
3. Goal-seeking analysis
Finds the inputs necessary to achieve a goal such as a desired level of
What inputs and resources are necessary to achieve your target goal.
If your goal is to increase productivity by a certain percent, what input
and resources would be necessary. What should I do with the shift
work? Hire more people, get more machines?
Have a goal, and try to see what you need to achieve this goal.
A decision-support system that we use every day is excel goal-seeker. There are so
many features that we don’t use and it’s the best example of a decision-support
TPS and DSS should be connected
Transaction Processing Systems (TPS)/Decision Support Systems (DSS)- Two people might look at the same data, but see things completely differently.
Example someone in finance and someone in marketing would see something
different in the data based on experience. It depends on what system, and what tool
you are using to analyze the data.
Executive information system (EIS) – a specialized DSS that supports senior level
executives within the organization.
The major difference between Executive Information system (EIS) and a decision-
support system (DSS):
- Executive Information systems also use external sources of information
(market analysis, financial figures, stocks, in addition to the internal data in
Digital dashboard – integrates information from multiple components and
presents it in a unified display
- They extract the key information and present it to the executives.
- You find it all in one screen.
The type of system that answers the question “how many parts are in inventory”
That would be operational-level system.
No a) strategic-level system
No b) Manage