MODELLING & ANALYSIS

Dekar DSS 1
Modeling for DSS
 Modeling is
 a key element in most DSS
 a necesssity in a model-based DSS
 Simulation is a common modeling
approach

Dekar DSS 2
 Sample at the P&G’s DSS for its North
America supply chain redesign

 A generating model (based on an algorithm) to make

transportation cost estimates
 A demand forecasting model (statistically based)
 A distribution center location model
 A transportation model
 A financial and risk simulation model
 A geographic information system for a user interface

Dekar DSS 3
 Sample at the P&G’s DSS for its North
America supply chain redesign

 The P&G Case DSS demonstrates that a DSS can be

composed of several models, some standard and
some custom built, used collectively to support
strategic decisions in the company.
 As is evident, modeling is not a simple task.
 The model builder must balance the model’s
simplication and representation requirements. So, it
is useful for the decision maker.

Dekar DSS 4
 Categories of Models
Category Process and Objective
Optimization of problems with few Find the best solution from a small
alternative number of alternatives
Optimization via algorithm Find the best solution from a large or
an infinite number of alternatives
using a step-by-step improvement
process
Optimization via an analytic formula Find the best solution in one step
using a formula
Simulation Finding a good enough solution
Heuristics Find a good enough solution using
rules
Other models Solve a what-if case using formula
Predictive model (Website) Predict the future for a given scenario
Dekar DSS
Representative Techniques
Decision table, decision trees
Linier and other mathematical
programming models, network models
Some inventory models
Several types of simulation
Heuristics programming, expert
systems
Financial modeling, waiting lines
Forecasting model, Markov analysis
5
Static and dynamic models
 Static models
 Take a single snapshot situation.
 For example: a decision on whether to
make or buy a product
 During a static analysis, stability of the
relevant data is assumed

Dekar DSS 6
Static and dynamic models
 Dynamic models
 Represent scenarios that change over time.
 For example: a 5-year profit and loss
projection in which the input data, such as
costs, prices, and quantities, change from
year to year.
 Dynamic models are time-dependent

Dekar DSS 7
Model Base
 Generating model
 Financial
 Forecasting
 Simulation/Risk analysis
 Multi Criteria Decision Making (MCDM)
 Goal Seeking/Optimisation/Linier
Programming
 Sensitivity Analysis

Dekar DSS 8
Financial Models
 “adjusting for the time value of money
based on interest, depreciation, inflation
rates”
 Net Present Value (NPV)
 Interest Rate Return (IRR)
 Discounted Cash Flow (DCF)
 Amortisation

Dekar DSS 9
Forecasting
 “predicting future value based on past
pattern of time series”
 Regression
 Exponential smoothing
 Decomposition

Dekar DSS 10
Simulation/Risk Analysis
 “either the modeling of a process or a
form of sensitivity analysis where many
-what ifs- are performed”
 Systems Dynamics
 Dynamic
 Based on store/flow/control
 Difference equations

Dekar DSS 11
Simulation/Risk Analysis
 Monte Carlo
 Variation of given variables according to an
assumed statistical pattern
 static

Dekar DSS 12
Simulation/Risk Analysis
 Discrete
 Snapshot of model is triggered by an event
 Continuous
 Snapshot of model is triggered at regular time
intervals
 Visual
 Interface
 Iconic
 Abstract …real

Dekar DSS 13
Regression
 Statistical model
 Dependent, independent variables
 May be time based

Dekar DSS 14
MCDM
 “exploration of the pain and gain
associated with different alternatives”
 Alternatives
 Criteria
 Rating of alternatives
 Weighting of criteria
 exploration
Dekar DSS 15
MCDM
1. List Options (Candidates, Choices,
alternatives, etc.)
2. List Criteria
3. Rate the Options (say on a scale of 0 -100)
for Each Criteria
4. Weight the criteria
5. Find the total Score each option (Weight x
Score and summed over each criteria)

Dekar DSS 16
Goal Seeking/ Optimisation/
Linier Programming

 “either the search for pattern of

variables that will lead to a goal or the
pattern of variables that will optimise a
goal under given constraints”

Dekar DSS 17
Sensitivity Analysis
 “the performing of –what if- analysis in
a given model through varying
underlying variables”
 Fixed values
 Interval/increments
 According to a statistical pattern

Dekar DSS 18