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2
Decision
Making and
Business CHAPTER
Processes

LEARNING OUTCOMES
2.1 Explain the difference between transac-
tional data and analytical information, and
between OLTP and OLAP.
Why Do I Need To Know This
This chapter describes various types of business
information systems found across the enterprise ?
used to run basic business processes and used to facilitate
sound and proper decision making. Using information sys-
2.2 Explain how organizations use TPS, DSS, tems to improve decision making and re-engineer business
and EIS to make decisions and how each processes can significantly help organizations become
can be used to help make unstructured, more efficient and effective.
semi-structured, and structured decisions. As a business student, you can gain valuable insight into an
2.3 Describe what AI is and the five types of organization by understanding the types of information sys-
artificial intelligence systems used by tems that exist in and across enterprises. When you under-
organizations today. stand how to use these systems to improve business
processes and decision making, you can vastly improve
2.4 Describe how AI differs from TPS, DSS, organizational performance. After reading this chapter, you
and EIS. should have gained an appreciation of the various kinds of
information systems employed by organizations and how
2.5 Describe the importance of business pro- you can use them to help make informed decisions and
cess improvement, business process re- improve business processes.
engineering, business process modelling,
and business process management to an
organization and how information sys-
tems can help in these areas.

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opening case study

Information Systems Improve Business Processes at Grocery Gateway

Grocery Gateway is Canada’s leader in the online retailing Information Systems Are at the
of home and office delivered groceries. Founded by a H e a r t o f t h e C o m p a n y ’s B u s i n e s s
group of entrepreneurs with the idea that people had bet- Processes
ter things to do in life than grocery shop, Grocery Gateway Grocery Gateway realizes the critical role that information
started out with only a handful of employees and a couple systems play in the health and viability of their electronic
of rental trucks. In 2004, Grocery Gateway was acquired business and the running of their business processes.
by Longo Brothers Fruit Market Inc., a family-owned inde- Technology is used for Grocery Gateway’s business pro-
pendent grocery business that has operated physical gro- cesses such as supporting online merchandising, single
cery stores since 1956.1 Today, Grocery Gateway has item picking, home delivery operations, and customer ser-
successfully secured the business of over 100,000 regis- vice. For example, Grocery Gateway has built in several
tered customers throughout the Greater Toronto Area. key features in its Web site to attract and retain its
Quite a bit of growth for a start-up company founded only customers, such as offering an online shopping demo,
in 1996 by a bunch of classmates and rugby mates in a a getting-started tutorial, and email customer support.
basement of a house.2 Moreover, its Web site offers a full suite of electronic
Like other online grocers, Grocery Gateway’s strategy commerce functionality that allows consumers to browse
is all about the last mile of service. Online grocers sell gro- or find grocery items, see pictures and descriptions of
ceries over the Internet and deliver them directly to your product items (including their price), and to select items in
door. In this sense, groceries are used to initiate the cus- a shopping basket and check out those items for delivery.4
tomer relationship and create a pipeline to the home. The To work effectively, the various functions built into the
online grocer then leverages this pipeline to introduce Web site, such as item searching, grocery ordering, cus-
complimentary products to the consumer.3 tomer profiling, electronic payments, and delivery sched-
What is attractive to consumers is that the online gro- uling, must be tightly integrated and coordinated for the
cery store is open 24 hours, 7 days a week, and that there Web site to function as a cohesive whole.
is greater simplicity in clicking a mouse to get the food you Additionally, one electronic commerce research study
want than trekking down to a physical store and pushing a suggests that online grocery retailers should be looking to
grocery cart. Though prices are competitive with super- improve ordering processes and delivery mechanisms as
markets, price is not the value proposition for the online a means of securing a solid and repeating customer base.5
grocery shopper. Rather, for the consumer, shopping
online for groceries is a time-saver. Consumers—generally Using Information Systems
busy people with not enough time on their hands—are to Manage Logistics Business
looking to find easier and quicker ways to do chores, like Processes
grocery shopping. Also, people who find it physically chal- In addition, Grocery Gateway is well aware that what will
lenging to do grocery shopping (such as the elderly and make or break it is the logistics of quick delivery. Thus, the
the disabled), as well as those who choose not to own a company has turned to the Descartes Systems Group, an
car, find the service that Grocery Gateway provides to be on-demand logistics management solutions provider, to
quite beneficial. optimize Grocery Gateway’s selection of delivery routes.

28 Section 1 Business-Driven Information Systems

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The goal is to maximize efficiency in route selection by so, the software needs to take into account unpredictable
incorporating historical delivery data with real-time infor- delays, such as traffic jams and road accidents, as well as
mation into determining route selection. Real-time data last-minute customer requests or cancellations. GPS-
are achieved through a combination of sophisticated rout- enabled mobile phones allow the logistics software to
ing, tracking, planning, and dispatching functionality. The know the exact position and location of Grocery Gateway
technology allows Grocery Gateway to guarantee its cus- drivers to make the best decisions on routes for drivers to
tomers a specific 90-minute window of delivery of grocer- follow.
ies to their doors, a much narrower window than other Using Descartes’ software has improved the bottom line.
retail delivery operations. Since deploying the On-demand Fleet Management Solu-
Imagine the complexity of coordinating the delivery of tion, Grocery Gateway has improved its on-time delivery
groceries. With thousands of active customers, Grocery performance by 14 percent and is exceeding its yearly stops
Gateway delivery trucks make roughly 500 stops to cus- per paid hour by 12.4 percent. Routes are continually opti-
tomer homes and offices per day. Descartes’s On-demand mized for maximum efficiency. Access to historical data
Fleet Management Solution software ensures that these ensures that business processes are optimized and cus-
orders are delivered within the 90-minute window. To do tomer service needs are responded to more proactively.6

2.1 D E C ISION M A KING AND INFOR M ATION SYSTEM S

DECISION MAKING

B
usiness is accelerating at a breakneck pace. However, the more information a business
acquires, the more difficult it becomes to make decisions, and the amount of informa-
tion people must understand to make good decisions is growing exponentially. In the
past, people could rely on manual processes to make decisions because they had limited
amounts of information to process.
Today, with massive volumes of available information, it is almost impossible for people to
make decisions without the aid of information systems. Highly complex decisions—involving
far more information than the human brain can comprehend—must be made in increasingly
shorter time frames. Figure 2.1 highlights the primary reasons dependence on information
systems to make decisions is growing and will continue to grow.
What is the value of information? The answer to this important question varies but Karsten
Solheim would say the value of information is its ability to lower a company’s handicap.
Solheim, an avid golfer, invented a putter with a “ping,” which led to a successful golf equip-
ment company and the PING golf clubs. PING Inc., a privately held corporation, was the first to
offer customizable golf clubs. The company prides itself on being a just-in-time manufacturer
that depends on flexible information systems to make informed production decisions. PING’s
production systems scan large amounts of information and pull orders that meet certain cri-
teria such as order date (this week), order priority (high), and customer type (Gold). PING

FIGURE 2.1
1. People need to analyse large amounts of information—Improvements in technology itself, innova-
tions in communication, and globalization have resulted in a dramatic increase in the alternatives
Primary Reasons for
and dimensions people need to consider when making a decision or appraising an opportunity. Growth of Decision-Making
Information Systems
2. People must make decisions quickly—Time is of the essence and people simply do not have
time to sift through all the information manually.

3. People must apply sophisticated analysis techniques, such as modelling and forecasting, to
make good decisions—Information systems substantially reduce the time required to perform
these sophisticated analysis techniques.

4. People must protect the corporate asset of organizational information—Information systems

offer the security required to ensure organizational information remains safe.

Chapter 2 Decision Making and Business Processes 29

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then manufactures the appropriate products, allowing it to carry less than 5 percent of inven-
tory in its warehouse. PING depends on its flexible information systems for production deci-
sion support and thanks information systems for the growth of its business.7
A typical organization is similar to a pyramid with three different levels, as seen in Figure 2.2.
The different levels require different types of information and types of decisions to address
challenges and capture opportunities.

Operational
At the operational level, employees develop, control, and maintain core business activities
required to run day-to-day operations. Operational decisions are considered structured
decisions, which arise in situations where established processes offer potential solutions.
Structured decisions are made frequently, are almost repetitive in nature, and they affect
short-term business strategies. Reordering, and creating employee staffing and weekly
production schedules are examples of routine structured decisions.

Managerial
At the managerial level, employees are continuously evaluating company operations to hone
the firm’s ability to identify, adapt to, and leverage change. A company that has a competitive
advantage needs to constantly adjust and revise its strategy to remain ahead of the competition.
Managerial decisions cover short- and medium-range plans, schedules, and budgets, along
with policies, procedures, and business objectives for the firm. They also allocate resources
and monitor the performance of organizational sub-units, including business units, divisions,
process teams, project teams, and other work groups. These types of decisions are considered
semi-structured decisions and they occur in situations in which a few established processes
help to evaluate potential solutions, but not enough to lead to a definite recommended decision.
For example, decisions about producing new products or changing employee benefits range
from unstructured to semi-structured.

FIGURE 2.2
Common Company Structure

STRATEG
IC

MANAG
ERIAL

OPERAT
IONAL

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Strategic At the strategic level, managers develop overall business strategies, goals, and
objectives, as part of the company’s strategic plan. They also monitor the strategic perfor-
mance of the organization and its overall direction in the political, economic, and competi-
tive business environment. Strategic decisions are highly unstructured decisions, occurring
in situations in which no procedures or rules exist to guide decision makers towards the cor-
rect choice. They are infrequent, extremely important, and typically related to long-term busi-
ness strategy. Examples include the decisions to enter a new market or even a new industry
over the next three years. For these types of decisions, managers rely on many sources of
information, along with personal knowledge, to find solutions.
Decision making and problem solving in today’s electronic world encompass large-scale,
opportunity-oriented, strategically-focused solutions. The traditional “cookbook” approach
to decision making will simply not work. This is also reflected when one surveys highly
regarded executive education programs in Canada where decision making and problem solv-
ing consistently appear as important aspects of each program and, in turn, as skills that are
regarded as important to executives’ career development.8

TRANSACTIONAL DATA AND ANALYTICAL

INFORMATION
Besides understanding the types of decisions organizations make there is also a need to better
understand how organizations use data and information to make decisions. It is important
to understand the difference between transactional data and analytical information (see Figure
2.3). Transactional data encompass all the raw facts contained within a single business pro-
cess or unit of work, and their primary purpose is to support performing daily operational tasks.
Examples of events where transactional data are captured include purchasing stocks, making
an airline reservation, or withdrawing cash from an ATM. Examples of transactional data for
these events include a stock purchase price, an airline reservation number, and a bank account
balance. Organizations use transactional data when performing operational tasks and routine
decisions, such as analysing daily sales reports to determine how much inventory to carry.
Analytical information encompasses all summarized or aggregated transactional data, and
its primary purpose is to support performing analysis tasks. Analytical information also includes
external information such as that obtained from outside market and industry sources. Examples
of analytical information include trends, aggregated sales amounts by region, product statistics,
and future growth projections. Examples of analytical information include the largest growing
basket of stocks over the last quarter on the TSX (e.g., energy stocks, technology stocks), the most
popular destination of travel for British Columbia residents, and projections of cash withdrawals
made from chequing accounts for the upcoming holiday weekend. Organizations use analytical
information when making important ad hoc decisions such as whether the organization should
build a new manufacturing plant or hire additional sales personnel.
Two different types of processing occur in an organization with respect to transactional data
and analytical information: online transaction processing and online analytical processing.

FIGURE 2.3
Characteristics of Data,
Online
Analytical Analytical Information, and Processing
Information Coarse Processing in Organizations

Executives
(Strategic)

Processes Granularity Managers Processing

(Managerial)

Analysts
(Operational)

Transactional Fine Organizational Levels Online

Data and Responsible Transaction
Roles Processing

Chapter 2 Decision Making and Business Processes 31

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Revisiting Figures 2.2 and 2.3 we find that at the operational level, people perform online
transaction processing. Online transaction processing (OLTP) is the capturing of transac-
tion and event data using information systems to (1) process the data according to defined
business rules, (2) store the data, and (3) update existing data to reflect the new data entered.
During OLTP, the organization must capture every detail of transactions and events.
At the managerial and strategic level, people conduct online analytical processing that
deals less with raw transactional details and more with meaningful aggregations of data. This
summarization or aggregation of raw data from transactional processing systems is when
data is given a context, becomes meaningful, and is turned into information. Working with
less “fine” (detailed) and more “coarse” (summarized) information allows employees to make
broader decisions for the organization. Whether information is fine or coarse refers to the
granularity of that information. Those higher up the organizational pyramid tend to work with
information that has coarser granularity. Online analytical processing (OLAP) is the analy-
sis of summarized or aggregated information sourced from transaction processing systems
data, and sometimes external information from outside industry sources, to create business
intelligence in support of analytical and strategic (non-operational) decision making. Busi-
ness intelligence is a broad, general term describing information that people use to support
their analytical and strategic decision-making efforts.
Consolidation, drill-down, and slice-and-dice are a few of the capabilities associated with
OLAP.
■ Consolidation involves the aggregation of information and features simple roll-ups to
complex groupings of interrelated information. Many organizations track financial infor-
mation at a regional level and then consolidate the information at a single global level.
■ Drill-down enables users to view details, and details of details, of information. Viewing
monthly, weekly, daily, or even hourly information represents drill-down capability.
■ Slice-and-dice is the ability to look at information from different perspectives. One slice
of information could display all product sales during a given promotion. Another slice
could display a single product’s sales for all promotions.
Walmart consolidates point-of-sale details from its thousands of stores and uses OLAP to
transform this information into business intelligence. Data-mining systems (covered in detail
in Chapter 7) sift instantly through summarized data (information) to uncover patterns and
relationships that would elude an army of human researchers. The results enable Walmart to
predict sales of every product at each store with uncanny accuracy, translating into huge sav-
ings in inventories and maximum payoff from promotional spending. Data-mining tools
apply algorithms to information sets to uncover inherent trends and patterns in data and
information. Business analysts use data mining to develop new business strategies to build
models that, when exposed to new information sets, perform a variety of data analysis func-
tions. The analysts provide business solutions by combining the analytical techniques and the
business problem at hand, which often reveals important new correlations, patterns, and
trends in information. A few of the more common forms of data-mining analysis capabilities
include cluster analysis, association detection, and statistical analysis.

MEASURING DECISION SUCCESS

Key performance indicators (KPIs) are the measures that are tied to business drivers. Metrics
are the detailed measures that feed those KPIs. Performance metrics fall into a nebulous area that
is neither systems- nor business-centred, but this area requires input from both IS and business
professionals to find success. Cisco Systems implemented a cross-departmental council to cre-
ate metrics for improving business process operations. The council developed metrics to evalu-
ate the efficiency of Cisco’s online order processing and discovered that due to errors, more than
70 percent of online orders required manual input and were unable to be automatically routed to
manufacturing. By changing the process and adding new information systems, within six months
the company doubled the percentage of orders that went directly to manufacturing.9

Efficiency and Effectiveness Metrics

Organizations spend enormous sums of money on IS to compete in today’s fast-paced business
environment. Some organizations spend up to 50 percent of their total capital expenditures on
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IS. To justify these expenditures, an organization must measure the payoff of these investments,
their impact on business performance, and the overall business value gained.
Efficiency and effectiveness metrics are two primary types of metrics. With information sys-
tems, efficiency IS metrics measure the performance of the information system itself such as
throughput, speed, and availability. Effectiveness IS metrics measure the impact IS has on busi-
ness processes and activities including customer satisfaction, conversion rates, and sell-through
increases. Peter Drucker offers a helpful distinction between efficiency and effectiveness.
Drucker states that managers “Do things right” and/or “Do the right things.” Doing things right
addresses efficiency—getting the most from each resource. Doing the right things addresses
effectiveness—setting the right goals and objectives and ensuring they are accomplished.10
Efficiency focuses on the extent to which an organization is using its resources in an opti-
mal way, whereas effectiveness focuses on how well an organization is achieving its goals and
objectives. Although the two—efficiency and effectiveness—are definitely interrelated, suc-
cess in one area does not necessarily imply success in the other.

Benchmarking—Baseline Metrics
Regardless of what is measured, how it is measured, and whether it is for the sake of efficiency
or effectiveness, there must be benchmarks, or baseline values the system seeks to attain.
Benchmarking is a process of continuously measuring system results, comparing those
results to optimal system performance (benchmark values), and identifying steps and proce-
dures to improve system performance.
Consider online government services (e-government) as an illustration of benchmarking
efficiency IS metrics and effectiveness IS metrics (see survey results in Figure 2.4). From an
effectiveness point of view, Canada ranks number two in its citizens’ e-government satisfac-
tion. The survey, sponsored by Accenture and last done in 2007, also included such attributes
as customer-service vision, initiatives for identifying services for individual citizen segments,
and approaches to offering e-government services through multiple-service delivery chan-
nels. These are all benchmarks at which Canada’s government excels.11
In contrast, the 2011 Waseda University World e-Government Ranking ranks Canada seventh
in efficiency IS metrics. This particular ranking, based purely on efficiency IS metrics, includes
benchmarks such as the number of computers per 100 citizens, the number of Internet hosts per
10,000 citizens, and the percentage of the citizen population online. Therefore, while Canada lags
behind in IS efficiency, it is one of the premier e-government providers in terms of effectiveness.12
Governments hoping to increase their e-government presence would benchmark them-
selves against these sorts of efficiency and effectiveness metrics. There is a high degree of
correlation between e-government efficiency and effectiveness, although it is not absolute.

The Interrelationship between Efficiency and

Effectiveness IS Metrics
Efficiency IS metrics focus on the information system itself. Figure 2.5 highlights the most
common types of efficiency IS metrics.
While these efficiency metrics are important to monitor, they do not always guarantee
effectiveness. Effectiveness IS metrics are determined according to an organization’s goals,

FIGURE 2.4
Efficiency (2010) Effectiveness (2007) E-Government Ranking for
Efficiency and Effectiveness
1. Singapore 1. Singapore

2. United States 2. Canada

Sources: “2007 Leadership in Customer
Service: Delivering on the Promise,”
3. Sweden 3. United States
www.accenture.com/us-en/Pages/
insight-public-leadership-customer-
4. Korea 4. Denmark service-delivering-promise.aspx,
accessed July 3, 2011; “Institute of
5. Finland 5. Sweden e-Government Released the 2011
World e-Government Ranking,”
6. Japan www.waseda.jp/eng/news10/
110114_egov.html, accessed July 3,
7. Canada 2011.

Chapter 2 Decision Making and Business Processes 33

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FIGURE 2.5
Common Types of Efficiency Throughput The amount of information that can travel through a system at any point
IS Metrics in time.

Transaction speed The amount of time a system takes to perform a transaction.

System availability The number of hours a system is available for users.

Web traffic Includes a host of benchmarks such as the number of page views, the
number of unique visitors, and the average time spent viewing a Web page.

Response time The time it takes to respond to user interactions such as a mouse click.

FIGURE 2.6
Common Types of Usability The ease with which people perform transactions and/or find
Effectiveness IS Metrics information. A popular usability metric on the Internet is degrees
of freedom, which measures the number of clicks required to find
desired information.

Customer satisfaction Measured by such benchmarks as satisfaction surveys, percentage

of existing customers retained, and increases in revenue dollars per
customer.

Conversion rates The number of customers an organization “touches” for the first
time and persuades to purchase its products or services. This is a
popular metric for evaluating the effectiveness of banner, pop-up,
and pop-under ads on the Internet.

Financial Such as return on investment (the earning power of an organization’s

assets), cost-benefit analysis (the comparison of projected revenues
and costs including development, maintenance, fixed, and variable),
and break-even analysis (the point at which constant revenues equal
ongoing costs).

strategies, and objectives. Here, it becomes important to consider the strategy an organiza-
tion is using, such as a broad cost leadership strategy (e.g., Walmart), as well as specific goals
and objectives such as increasing the number of new customers by 10 percent or reducing
new-product development cycle times to six months. Figure 2.6 displays the broad general
effectiveness IS metrics.
One must be careful when looking at efficiency and effectiveness IS metrics; take security
for example. When an organization offers its customers the ability to purchase products over
the Internet, it must implement the appropriate security. It is actually inefficient for an organi-
zation to implement security measures for Internet-based transactions compared with pro-
cessing non-secure transactions. However, an organization will probably have a difficult time
FIGURE 2.7 attracting new customers and
increasing Web-based revenue if
The Interrelationships High it does not implement the neces-
Between Efficiency and sary security measures. Purely
Effectiveness from an efficiency IS metric point
Optimal area of view, security generates some
Efficiency

in which to
inefficiency. However, from an
operate
organization’s business strategy
point of view, security should lead
to increases in effectiveness met-
rics. Information security issues
Low are further discussed in Chapter 9.
Low Effectiveness High Figure 2.7 depicts the interrela-
tionships between efficiency and
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effectiveness. Ideally, an organization should operate in the upper right-hand corner of the
graph, realizing both significant increases in efficiency and effectiveness. However, operating in
the upper left-hand corner (minimal effectiveness with increased efficiency) or the lower right-
hand corner (significant effectiveness with minimal efficiency) may be in line with an organiza-
tion’s particular strategies. In general, operating in the lower left-hand corner (minimal
efficiency and minimal effectiveness) is not ideal for the operation of any organization.

TPS, DSS, AND EIS

Where does the information to make decisions and measure performance come from? Tradi-
tionally, it is from three major classes of information systems that are found in organizations:
transaction processing systems (TPS), decision support systems (DSS), and executive infor-
mation systems (EIS).
A transaction processing system (TPS) is the basic business system that serves the opera-
tional level (clerks and analysts) in an organization. A TPS performs OLTP and handles trans-
actional data. The most common example of a TPS is an operational accounting system such
as a payroll system or an order-entry system. In terms of decision making, a TPS supports
operational types of decisions such as how much did a specific customer order on July 1st?,
what unit price was paid?, and to what address was the product delivered?
A decision support system (DSS), on the other hand, models data and information to sup-
port managers, analysts, and other business professionals during the decision-making pro-
cess for more analytical purposes. A DSS can be used on transactional data or analytical
information, depending on the level and depth of analysis desired. A more robust DSS per-
forms OLAP and works with analytical information. For example, at the limousine and trans-
portation company BostonCoach, managers must dispatch fleets of hundreds of vehicles as
efficiently as possible. BostonCoach requires a real-time dispatching system that considers
inventory, customer needs, and soft dimensions such as weather and traffic. Researchers at
IBM built BostonCoach a mathematical algorithm for a custom dispatch DSS that combines
information about weather, traffic conditions, driver locations, and customer pickup requests
and determines which cars to assign to which customers. The system is so efficient that, after
launching it, BostonCoach experienced a 20 percent increase in revenues.13
Three quantitative models often used by DSS include:
1. Sensitivity analysis—the study of the impact that changes in one (or more) part(s) of the
model have on other parts of the model. Users change the value of one variable repeatedly
and observe the resulting changes in other variables.
2. What-if analysis—checking the impact of a change in an assumption on the proposed
solution. For example, “What will happen to the supply chain if a blizzard in Alberta
reduces holding inventory from 30 percent to 10 percent?” Users repeat this analysis until
they understand all the effects of various situations. Figure 2.8 displays an example of
what-if analysis using Microsoft Excel. The tool calculates the net effect of a pre-defined set

FIGURE 2.8
Example of What-If Analysis
in Microsoft Excel

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of input variables or scenarios (e.g., best, most likely, worst) such as tax rate, interest rate,
and sales growth on a company’s bottom line.
3. Goal-seeking analysis—finding the inputs necessary to achieve a goal such as a desired
level of output. Instead of observing how changes in a variable affect other variables, as
in a what-if analysis, goal-seeking analysis sets a target value (a goal) for a variable and
then repeatedly changes other variables until the target value is achieved. For example,
“How many customers are required to purchase a new product to increase gross profits
to $5 million?” Figure 2.9 displays a goal-seeking scenario using Microsoft Excel. The
model determines how many bikes Hauger will need to sell to break even, or have a
profit of zero. Hauger needs to sell 46 bikes at $3,500 each to break even.
One national insurance company uses a DSS to analyse the amount of risk the company is
undertaking when it insures drivers who have a history of driving under the influence of alcohol.
The DSS discovered that only three percent of married male homeowners in their forties received
more than one Driving Under the Influence (DUI) offence. The company decided to lower rates
for customers falling into this category, which increased its revenue while mitigating its risk.14
Figure 2.10 displays how a TPS is used in conjunction with a DSS. Each TPS in the figure
supplies transaction-based data to the DSS. The DSS summarizes and aggregates the data
sourced from many different TPS systems into information, which assists managers and

FIGURE 2.9
Example of Goal-Seeking
Analysis in Microsoft Excel

FIGURE 2.10
Interaction Between TPSs
Transaction Processing Systems Decision Support Systems
and DSSs

Order Entry Order Processing

Sales
Data System
Information

Inventory Inventory Tracking Manufacturing Managerial

System DSS
Data Information Reports

Shipping Distribution Transportation

Data System Information

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analysts in making informed decisions. Canadian Pacific Railway uses a DSS to analyse the
movement of all its railcars and to track shipments against delivery commitments. Without this
tool, the job of integrating and analysing transaction-based data would be a difficult task.15
An executive information system (EIS) is a specialized DSS that supports senior-level
executives within the organization. An EIS differs from a DSS because an EIS typically con-
tains information from external sources as well as information from internal data sources,
supports executive end-users exclusively, contains primarily very coarse (highly-summarized)
information, and is used more often for strategic purposes (see Figure 2.11).
A common feature of an EIS is a digital dashboard. Digital dashboards integrate informa-
tion from multiple components and tailor the information to individual preferences. Digital
dashboards commonly use indicators to help executives quickly identify the status of key
information or critical success factors. Following is a list of features included in a dashboard
designed for a senior executive of an oil refinery:
■ A hot list of KPIs, refreshed every 15 minutes.
■ A running line graph of planned versus actual production for the past 24 hours.
■ A table showing actual versus forecasted product prices and inventories.
■ A list of outstanding alerts and their resolution status.
■ A graph of crude-oil stock market prices.
■ A scroll of headline news from Petroleum Company news, an industry news service.
Digital dashboards, whether basic or comprehensive, deliver results quickly. As digital
dashboards become easier to use, more executives can perform their own analysis without
inundating IS personnel with questions and requests for reports. According to an indepen-
dent study by Nucleus Research, there is a direct correlation between the use of digital dash-
boards and companies’ return on investment (ROI). Figures 2.12 and 2.13 display two different
digital dashboards.
EIS systems, such as digital dashboards, allow executives to move beyond reporting to
using information to directly impact business performance. Digital dashboards help execu-
tives react to information as it becomes available and make decisions, solve problems, and
change strategies daily instead of monthly.

FIGURE 2.11
Interaction Between TPSs
Transaction Processing Systems Executive Information Systems
and EISs

Order Entry Order Processing Sales

Data System Information

Inventory Inventory Tracking Manufacturing

Data System Information

Shipping Distribution
Transportation
Data System
Information

Executive
EIS
Reports

External Sources of Information

Industry Industry
Information Information

Stock Market Market

Information Information

Chapter 2 Decision Making and Business Processes 37

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FIGURE 2.12
Corporate Financial
Dashboard

FIGURE 2.13
Sales Executive Dashboard

Source: www.dundas.com.

Verizon Communications CIO Shaygan Kheradpir tracks 100-plus major information sys-
tems on a single screen called “The Wall of Shaygan.” Using real-time processing, a new set of
charts communicating Verizon’s performance is produced every 15 seconds, flashing onto a
giant LCD screen in Kheradpir’s office. The 44 screenshots cycle continuously, all day long,
every day. The dashboard includes more than 300 measures of business performance that fall
into one of three categories:
1. Market pulse—examples include daily sales numbers, market share, and subscriber turn-
over.
2. Customer service—examples include problems resolved on the first call, call centre wait
times, and on-time repair calls.
3. Cost driver—examples include number of repair trucks in the field, repair jobs completed
per day, and call centre productivity.
Kheradpir has memorized the screens and can tell at a glance when the lines on the charts
are not trending as expected. The system informs him of events such as the percentage of
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customer calls resolved by voice systems, number of repair trucks in the field, and amount of
time to resolve an information system issue. The dashboard works the same way for 400 man-
agers at every level of Verizon.16 Executives must be mindful of their dashboards as not all
dashboards process data in real-time; they may process data in a batched manner on a
nightly, weekly, or even monthly basis.
Note that the classification of information systems as TPS, DSS, or EIS is just one classifica-
tion of information systems found in organizations. Later on in the textbook, different classi-
fications of information systems used in organizations will be introduced (e.g., Section 2
classifies various types of enterprise information systems according to their business func-
tionality, such as customer relationship management, supply chain management, and enter-
prise resource planning). However, the classification of systems as TPS, DSS, and EIS is useful
in demonstrating which class of systems work with transactional data and which with ana-
lytical information. This classification of systems is also useful in showcasing the typical users
of these systems and for what decision-making purposes these systems are typically used (see
Figure 2.14).
Figure 2.14 showcases how decision making occurs at all levels of an organization and that
various types of information systems can facilitate different types of decision making. For
instance, a TPS is useful for making decisions at the operational level while the other types of
information systems are more appropriate for making decisions at the managerial and strate-
gic levels.
Though each system supports different types of decisions and different types of users, it is
important to understand that these various decision-making information systems need to be
tightly integrated for proper and sound decision making to occur and that the underlying data
found in a TPS must be accurate and reliable for higher-level decision-making systems to be
effective. The reason for this is that data stored in a TPS are often used to source the data and
information contained in decision support and executive information systems. Thus, it is
imperative that transactional data found in TPS are accurate and reliable, and that the data in
these systems is consistent across the enterprise. Otherwise, TPS data used to source any DSS
or EIS will be in error, potentially leading to misguided decisions by management and
analysts. This could steer the organization off-course in reaching its strategic goals and
objectives—not a position any firm wants to be in.

ARTIFICIAL INTELLIGENCE
Many companies are starting to take advantage of artificial intelligence to help employees
make better operational, analytic, and strategic decisions. RivalWatch offers a strategic business
information service using artificial intelligence that enables organizations to track the product
offerings, pricing policies, and promotions of online competitors. Clients can determine the
competitors they want to watch and the specific information they wish to gather, ranging from
products added, removed, or out of stock, to price changes, coupons offered, and special
shipping terms. Clients can check each competitor, category, and product either daily, weekly,
monthly, or quarterly.
“Competing in the Internet arena is a whole different ballgame than doing business in the
traditional brick-and-mortar world because you’re competing with the whole world rather

FIGURE 2.14
Transaction Decision Executive TPS, DSS and EIS Differences
Processing Support System Information
System (TPS) (DSS) System (EIS)

Type of data or Transactional Transactional data Analytical

information typically data or analytical information
found in the system information

Who typically makes Clerk or analyst Analyst or Executive

the decision using manager
the system?

Type of decision Operational Analytical or Strategic

typically handled managerial

Chapter 2 Decision Making and Business Processes 39

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