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Over the recent years, decision support systems (DSS) have appeared as a new tool for supporting and improving administrative decision making. A DSS is an interactive computer-based system that offers the user easy access to choice models and assignments in order to sustain semi-structured and uncontrolled decision-making tasks. The progressively growing interest in DSS has been advanced by supervisors who are better conversant about the accessibility and potentials of the new technology and by the beginning of software products known as Decision Support System generators (creators). A DSS creator is a “package” of associated hard and soft that can be used to expand a definite DSS. It naturally holds capabilities such as information and data administration, graphic demonstration, economic and statistical study routines, and optimization analysis-all capabilities that have been obtainable independently for some time, but only lately as an incorporated easy-to-use set of tools. While large company have reclined more upon DSS for successful decision taking, small businesses have practically disregarded this new technology.
The case study offers the investigation of DSS use in some small business company, engaged in the production of plastic toys.
Short review of the company
The toy manufacturing is a highly competitive commerce. The sales volumes of the corporation consisted $3 million in 1982, and were planned to be increased up to $3.6 million in 1983.
Over 80 percent of annual financial turnover was raised during the August-November time. The company’s manufacturing plan had been seasonal.
In 1982, the company’s production manager became extremely bothered by the issues that arose not only from manufacture planning but also from ultimately falling incomes. Seasonal extension and reduction of the staff resulted in employment troubles as well as high training and quality control expenditure. Equipment, inactive for several months, was unexpectedly subjected to intense use. Speeded up manufacturing plans resulted in regular system modifications on technical equipment and perplexity in planning runs, which reasoned inefficiencies in assemblage and wrapping.
For these grounds, the production manager had recommended the president to assume a strategy of level monthly manufacturing in 1983, indicating that estimations of trade volumes had been steadfast in the earlier periods, and that acquisition terms would not be influenced by the rescheduling of purchases.
The president became aware that an obvious development of manufacture efficiency could result from production levels, but he was hesitant on the issue what the impact on other stages of the industry might be. Predominantly, he was anxious about the effect that productivity level might have on the firm’s prerequisites for finances in 1983. To concentrate on this issue, the production manager offered that ABC needs to develop a computer based DSS to study the financial suggestions of the level production plan.
To correspond acknowledged needs it was determined to elaborate a computer-based DSS that could be implemented into the assistance in yearly planning, to estimate the financial insinuations of the proposed manufacturing level plan, and to assist in cash financial planning.
Using the system to evaluate the proposed level production plan
As it was estimated, net profit ($174,000) gained under the manufacturing level plan is considerably higher than that acquired implementing of the seasonal production plan ($108,000). The monthly documented balance, consequential from the existing manufacturing plan shows that the only noticeable regular financing obligation throughout the year will be a swelling in receivables for the duration of the collection wrap after the peak sales months. The largest expected bank borrowing of $657,000 happens in November, well within the $850,000 credit limit.
The firm’s economic position in July becomes even more dangerous since its existing benefits are contained predominately of inventories, while by September, the increase of accounts receivable is extensive. The risk that takes into account incomes will be uncollectible is much less than the risk that supplies may not be salable, mainly in the toy industry where costs and trends vary sharply in the off-season. The DSS system allows administration to weigh the augmented profit available under a manufacturing level plan against the risk of augmented inventory investment and the complexity of attaining sufficient financing. The assessment of this kind of trade-off in creation of a production plan resolution is significant when one believes the fact that for a small-scale industry, liquidity and survival are synonymous. Because of predictable complexity in finding sufficient financing, the president ultimately settled on against the level production plan. Nevertheless, the two manufacturing plans appraised above characterization only two extremes of a range of probable substitute manufacturing plans. The administration of ABC Co. realized that the system can be used to decide the most attractive manufacturing plan under the restriction of predictable economic circumstances.
Using the system to assist in annual planning and budgeting
Monthly sales estimates and manufacturing plans are the two main contributions to the process of raising a chain of standard statements. In their annual development procedure, ABC’s administration can use the DSS to test the economic impact of different manufacturing strategies grounded upon an agreed sales estimate. These systems may be created by different groupings of level and seasonal manufacture. For each manufacturing policy, the model is run by using the “what-if’ characteristic to create a set of monthly pro forma reports. Administration can inspect and analyze the economic influence of these strategies, mainly with value of the necessity for exterior financing. This procedure is duplicated until management is pleased with the projected values on the reports.
Factors for success
Aspects that seem to have donated to the achievement of this scheme are:
- the necessity for a system to sustain top managing decision-making was well recognized;
- top management must support the system from its foundation;
- the production manager needs to serve as the catalyst;
- most important consumers (the vice president of economics and the production manager) vigorously contributed in the actual achievement of the system;
- use of a DSS creator such as IFPS to develop the system.
It should be underlined that a DSS needs to be developed over time in order to better correspond to the requirements of the decision makers and the enterprise. As such, the system has to be updated or modified as the requirements of the users become better recognized or the executive surroundings changes significantly.
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