HERBERT SIMON MODEL OF DECISION MAKING

Decision-making is a process in which the decision-maker uses to arrive at a decision. The core
of this process is described by Herbert Simon in a model. He describes the model in three phases
as shown in the figure below:

  I.            Intelligence: raw data collected, processed and examined, Identifies a problem calling for a
decision.
        II.            Design: inventing, developing and analyzing the different decision alternatives and
testing the feasibility of implementation. Assess the value of the decision outcome.
      III.            Choice: select one alternative as a decision, based on the selection criteria.

In the intelligence phase, the MIS collects the data. The data is scanned, examined, checked and edited.
Further, the data is sorted and merged with other data and computations are made, summarized
and presented. In this process, the attention of the manager is drawn to all problem situations by
highlighting the significant differences between the actual and the expected, the budgeted or the
targeted.

In the design phase, the manager develops a model of the problem situation on which he can
generate and test the different decision alternatives, he then further moves into phase of selection
called as choice.

In the phase of choice, the manager evolves selection criteria such as maximum profit, least cost,
minimum wastage, least time taken and highest utility. The criterion is applied to the various
decision alternatives and the one which satisfies the most is selected.
In these phases, if the manager fails to reach a decision, he starts the process all over again and
again. An ideal MIS is supposed to make a decision for the manager.

An example of the Simon model would illustrate further its use in the MIS. For example, a
manager finds on collection and through the analysis of the data that the manufacturing plant is
underutilized and the products which are being sold are not contributing to the profits as desired.
The problem identified, therefore, is to find a product mix for the plant, whereby the plant is
fully utilized within the raw material and the market constraints, and the profit is maximized.
The manager having identified this as the problem of optimization, now examines the use
of linear programming (LP) model. The model is used to evolve various decision alternatives.
However, selection is made first on the basis of feasibility and then on the basis of maximum
profit.

The product mix so given is examined by the management committee. It is observed that the
market constraints were not realistic in some cases and the present plant capacity can be
enhanced to improve the profit. The same model is used again to tool the revised position.
Therefore, additional data is collected and an analysis is made to find out whether the average 20
percent utilization of the capacity can be increased. A market research for some products is made
and it is found that some constraints need to be removed and reduced. Based on the revised
data linear programming model is used and a better optimum solution is obtained.

Executive Support System (ESS)

Executive support systems are intended to be used by the senior managers directly to provide
support to non-programmed decisions in strategic management.

These information are often external, unstructured and even uncertain. Exact scope and context
of such information is often not known beforehand.

This information is intelligence based −

 Market intelligence

 Investment intelligence
  Technology intelligence

Examples of Intelligent Information

Following are some examples of intelligent information, which is often the source of an ESS −

 External databases

 Technology reports like patent records etc.

 Technical reports from consultants

 Market reports

 Confidential information about competitors

 Speculative information like market conditions

 Government policies

 Financial reports and information

Features of Executive Information System

Advantages of ESS

 Easy for upper level executive to use

 Ability to analyze trends

 Augmentation of managers' leadership capabilities

 Enhance personal thinking and decision-making

 Contribution to strategic control flexibility

 Enhance organizational competitiveness in the market place

 Instruments of change

 Increased executive time horizons.

 Better reporting system

 Improved mental model of business executive

 Help improve consensus building and communication

  Improve office automation

 Reduce time for finding information

 Early identification of company performance

 Detail examination of critical success factor

 Better understanding

 Time management

 Increased communication capacity and quality

Disadvantage of ESS

 Functions are limited

 Hard to quantify benefits

 Executive may encounter information overload

 System may become slow

 Difficult to keep current data

 May lead to less reliable and insecure data

 Excessive cost for small company

Enterprise resource planning

Enterprise resource planning (ERP) is the integrated management of main business processes,

often in real-time and mediated by software and technology.

ERP is usually referred to as a category of business management software — typically a suite of

integrated applications—that an organization can use to collect, store, manage, and interpret data
from many business activities.

ERP provides an integrated and continuously updated view of core business processes using
common databases maintained by a database management system. ERP systems track business
resources—cash, raw materials, production capacity—and the status of business commitments:
orders, purchase orders, and payroll. The applications that make up the system share data across
various departments (manufacturing, purchasing, sales, accounting, etc.) that provide the data.
ERP facilitates information flow between all business functions and manages connections to
outside stakeholders.

Enterprise system software is a multibillion-dollar industry that produces components supporting

a variety of business functions. IT investments have become the largest category of capital
expenditure in United States-based businesses over the pastdecade. Though early ERP systems
focused on large enterprises, smaller enterprises increasingly use ERP systems.

The ERP system integrates varied organizational systems and facilitates error-free transactions
and production, thereby enhancing the organization's efficiency. However, developing an ERP
system differs from traditional system development. ERP systems run on a variety of computer
hardware and network configurations, typically using a database as an information repository.

Characteristics

ERP systems typically include the following characteristics:

 An integrated system
 Operates in (or near) real time
 A common database that supports all the applications
 A consistent look and feel across modules
 Installation of the system with elaborate application/data integration by the Information
Technology (IT) department, provided the implementation is not done in small steps
 Deployment options include: on-premises, cloud hosted, or SaaS
The successful implementation of an ERP system will have many advantages, as indicated
below:

 Business Integration and Improved Data Accuracy: ERP system is composed of

various modules/ submodules where a module represents a particular business
component. If data is entered in one module such as receiving, it automatically updates
other related modules such as accounts payable and inventory. This updating occurs at
real time i.e. at the time a transaction occurs. Since, data needs to be entered only once at
the origin of the transaction, the need for multiple entries of the same data is eliminated.
 Likelihood of duplicate/ erroneous data is, therefore, minimized. The centralized
structure of the database also enables better administration and security provisions, which
minimizes loss of sensitive data.
 Planning and MIS: The various decision support tools like planning engines and
simulations functions, form an integral part of an ERP system that helps in proper
utilization of resources like materials, human resources, and tools. Constrained based
planning help in drawing appropriate production schedules, thereby improving the
operation of plant and equipment. As a part of MIS, an ERP system, contains many
inbuilt standard reports and also a report writer that produce ad hoc reports, as and when
needed.
 Improved Efficiency and Productivity: In addition to provision of improved planning,
ERP system provides a tremendous boost to the efficiency of day to day and routine
transactions such as order fulfillment, on time shipment, vendor performance, quality
management, invoice reconciliation, sales realization, and cash management. Cycle time
is reduced for sales to cash and procurement to pay sequences.
 Establishment of Standardized Procedures: ERP system is based on processes of
international best practices, which are adopted by the organizations during
implementation. Department silos are purged, and maverick practices are done away
with. Because of top-down view available to management, chances of theft, fraud and
obsolescence are minimized.
 Flexibility and technology: Due to the globalized environment, where production units,
distribution centers, and corporate offices reside in different countries, organizations need
multi-currency, multi-language and multi-accounting modes, in an integrated manner.
These provisions are available in most of the ERP systems, particularly in products
offered by tier 1 and tier 2 vendors. ERP vendors are also quick to adopt latest
technologies, from mainframe to client server to the internet. Unlike a bespoke system,
Upgrading to latest technology for a running ERP system is uncomplicated, involving
mostly adoption of service packs and patches.

Advantages
The most fundamental advantage of ERP is that the integration of a myriad of business processes
saves time and expense. Management can make decisions faster and with fewer errors. Data
becomes visible across the organization. Tasks that benefit from this integration include:

 Sales forecasting, which allows inventory optimization.

 Chronological history of every transaction through relevant data compilation in every

area of operation.

 Order tracking, from acceptance through fulfillment

 Revenue tracking, from invoice through cash receipt

 Matching purchase orders (what was ordered), inventory receipts (what arrived),

and costing (what the vendor invoiced)

 ERP systems centralize business data, which:

 Eliminates the need to synchronize changes between multiple systems—consolidation of

finance, marketing, sales, human resource, and manufacturing applications

 Brings legitimacy and transparency to each bit of statistical data

 Facilitates standard product naming/coding

 Provides a comprehensive enterprise view (no "islands of information"), making real–

time information available to management anywhere, anytime to make proper decisions

 Protects sensitive data by consolidating multiple security systems into a single structure

Benefits

ERP creates a more agile company that adapts better to change. It also makes a company more
flexible and less rigidly structured so organization components operate more cohesively,
enhancing the business—internally and externally.

ERP can improve data security in a closed environment. A common control system, such as the
kind offered by ERP systems, allows organizations the ability to more easily ensure key
company data is not compromised. This changes, however, with a more open environment,
requiring further scrutiny of ERP security features and internal company policies regarding
security.

ERP provides increased opportunities for collaboration. Data takes many forms in the modern
enterprise, including documents, files, forms, audio and video, and emails. Often, each data
medium has its own mechanism for allowing collaboration. ERP provides a collaborative
platform that lets employees spend more time collaborating on content rather than mastering the
learning curve of communicating in various formats across distributed systems.

ERP offers many benefits such as standardization of common processes, one integrated system,
standardized reporting, improved key performance indicators (KPI), and access to common data.
One of the key benefits of ERP; the concept of integrated system, is often misinterpreted by the
business. ERP is a centralized system that provides tight integration with all major enterprise
functions be it HR, planning, procurement, sales, customer relations, finance or analytics, as well
to other connected application functions. In that sense ERP could be described as "Centralized
Integrated Enterprise System (CIES)"

Disadvantages

 Customization can be problematic. Compared to the best-of-breed approach, ERP can be

seen as meeting an organization’s lowest common denominator needs, forcing the
organization to find workarounds to meet unique demands.

 Re-engineering business processes to fit the ERP system may damage competitiveness or
divert focus from other critical activities.

 ERP can cost more than less integrated or less comprehensive solutions.

 High ERP switching costs can increase the ERP vendor's negotiating power, which can
increase support, maintenance, and upgrade expenses.

 Overcoming resistance to sharing sensitive information between departments can divert

management attention.

 Integration of truly independent businesses can create unnecessary dependencies.

  Extensive training requirements take resources from daily operations.

 Harmonization of ERP systems can be a mammoth task (especially for big companies)
and requires a lot of time, planning, and money.

 Critical challenges include disbanding the project team very quickly after
implementation, interface issues, lack of proper testing, time zone limitations, stress,
offshoring, people's resistance to change, a short hyper-care period, and data cleansing.

MIS AND DECISION-MAKING

It is necessary to understand the concept of decision-making as they are relevant to the design of
the MIS. The Simon model provides a conceptual design of the MIS and decision-making
wherein the designer has to design the system in such a way that the problem is identified in
precise terms. That means the data gathered for data analysis should be such that it provides
diagnostics and also provide a path to bring the problem to surface.

In the design phase of the model, the designer is to ensure that the system provides models for
decision-making. These models should provide for the generation of decision alternatives, test
them and pave way for the selection of one of them. In a choice phase, the designer must help to
select the criteria to select one alternative amongst the many.

The concept of programmed decision-making is the finest tool available to the MIS designer,
whereby he can transfer decision-making from a decision-maker to the MIS and still retain the
responsibility and accountability with the decision maker or the manager. In case of non-
programmed decisions, the MIS should provide the decision support systems provide a
generalized model of decision-making.

The concept of decision-making system, such as the closed and the open system, such as the
closed and the open systems, helps the designer in providing design feasibility. The closed
systems are deterministic and rule based, therefore, the design needs to have limited flexibility,
while in an open system, the design should be flexible to cope up with the changes required from
time to time.

The methods of decision-making can be used directly in the MIS provided the method to be
applied has been decided. A number of decision-making problem calls for optimization, and
operational models are available which can be made a part of the system, the optimization
models are static and dynamic, and both can be used in the MIS. Some of the problems call for a
competitive analysis, such as payoff analysis. In these problems, the MIS can provide the
analysis based on the gains, the regrets and the utility.

The concept of the organizational and behavioral aspects of decision-making provides an insight
to the designer to handle the organizational culture and the constraints in the MIS. The concepts
of the rationality of a business decision, the risk awareness of the managers and the tendency to
avoid an uncertainty, makes the designer conscious about the human limitations and prompts him
to provide a support in the MIS to handle these limitations. The reliance on organizational
learning makes the designer aware of the MIS and makes him provide the channels in the MIS to
make the learning process more efficient.

The relevance of the decision-making concepts is significant in the MIS design. The significance
arises out of the complexity of decision-making, the human factors is the decision-making, the
organizational and behavior aspects, and the uncertain environments. The MIS design addressing
these significant factors turns out to be the best design.

What are intelligent systems?

An intelligent system is a machine with an embedded, Internet-connected computer that has the
capacity to gather and analyze data and communicate with other systems. In IT,
a system is defined as a collection of connected elements or components that are organized for a
common purpose.
Intelligent systems are technologically advanced machines that perceive and respond to the
world around them. Intelligent systems can take many forms, from automated vacuums such as
the Roomba to facial recognition programs to Amazon’s personalized shopping suggestions.
Artificial Intelligence Characteristics
 Deep Learning. Deep learning is a machine learning technique that teaches computers to
do what comes naturally to humans, to learn by example.
 Facial Recognition.
 Automate Simple and Repetitive Tasks.
 Data Ingestion.
 Chatbots.
 Quantum Computing.
 Cloud Computing.
How do you make an intelligent app?

Building an Intelligent App Ecosystem
1. Study the user context and predict user intent.
2. Make informed decisions for the users.
3. Provide information to the user based on their previous searches.
4. Auto-reply to emails and messages.
5. Automate tasks using preprogrammed commands.
6. Predict users’ communication choices and tone.

Applications of intelligent systems

Intelligent systems are poised to fill a growing number of roles in today's society, including:

 Factory automation
 Field and service robotics
 Assistive robotics
 Military applications
 Medical care
 Education
  Entertainment
 Visual inspection
 Character recognition
 Human identification using various biometric modalities (e.g. face, fingerprint, iris, hand)
 Visual surveillance
 Intelligent transportation

Challenges in intelligent systems

Research in intelligent systems faces numerous challenges, many of which relate to representing
a dynamic physical world computationally.

1. Uncertainty: Physical sensors/effectors provide limited, noisy and inaccurate

information/action. Therefore, any actions the system takes may be incorrect both due to
noise in the sensors and due to the limitations in executing those actions.
2. Dynamic world: The physical world changes continuously, requiring that decisions be
made at fast time scales to accommodate for the changes in the environment.
3. Time-consuming computation: Searching for the optimal path to a goal requires
extensive search through a very large state space, which is computationally expensive.
The drawback of spending too much time on computation is that the world may change in
the meantime, thus rendering the computed plan obsolete.
4. Mapping: A lot of information is lost in the transformation from the 3D world to the 2D
world. Computer vision must deal with challenges including changes in perspective,
lighting and scale; background clutter or motion; and grouping items with intra/inter-
class variation.

Studying intelligent systems

Students who want to study intelligent systems will need to be able to understand and integrate
knowledge from various subject areas including:

 Programming
 Data structures
  Algorithms
 Pattern recognition
 Machine learning
 Artificial intelligence
 Physics
 Numerical methods
 Psychology
Intelligent Systems in Your Everyday Life
• Post Office: automatic address recognition and sorting of mail
• Banks: automatic check readers, signature verification systems o automated loan
application classification
• Telephone: Companies o automatic voice recognition for directory inquiries
• Credit Card: Companies o automated fraud detection
• Computer Companies: automated diagnosis for help-desk applications
• Netflix: movie recommendation
• Google: Search Technology
Best Artificial Intelligence Software

 Deep Vision.
 Braina.
 Google Cloud Machine Learning Engine.
 Engati.
 Azure Machine Learning Studio.
 Tensor Flow.
 Cortana.
 IBM Watson.

Examples: Intelligent systems exist all around us in point-of-sale (POS) terminals, digital
televisions, traffic lights, smart meters, automobiles, digital signage and airplane controls, among
a great number of other possibilities.

Types
 Artificial intelligence
It is the science and engineering of making intelligent machines, especially intelligent
computer programs. It is related to the similar task of using computers to understand
human intelligence, but AI does not have to confine itself to methods that are biologically
observable.
Intelligence is the computational part of the ability to achieve goals in the world. Varying
kinds and degrees of intelligence occur in people, many animals and some machines.
Ability to interact with the real world o to perceive, understand, and act o e.g.,
speech recognition and understanding and synthesis o e.g., image understanding o e.g.,
ability to take actions, have an effect
• Reasoning and Planning o modeling the external world, given input o solving new
problems, planning, and making decisions o ability to deal with unexpected problems,
uncertainties
• Learning and Adaptation o we are continuously learning and adapting o our internal
models are always being “updated” • e.g., a baby learning to categorize and recognize
animals
Deep Blue defeated the reigning world chess champion Garry Kasparov in 1997

AI Applications:
Identification Technologies ID cards e.g., ATM cards
can be a nuisance and security risk: cards can be lost, stolen, passwords forgotten, etc
Biometric Identification o walk up to a locked door • camera • fingerprint device •
microphone • iris scan
computer uses your biometric signature for identification • face, eyes, fingerprints, voice
pattern, iris pattern