MODELLING &

ANALYSIS

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DSS

Modeling for DSS

Modeling is

a key element in most DSS

a necesssity in a model-based DSS
Simulation is a common modeling
approach

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DSS

Sample at the P&Gs 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

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DSS

Sample at the P&Gs 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 models
simplication and representation requirements.
So, it is useful for the decision maker.
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DSS

Categories of Models
Category

Process and Objective

Representative
Techniques

Optimization of problems with few

alternative

Find the best solution from a small

number of alternatives

Decision table, decision trees

Optimization via algorithm

Find the best solution from a large

or an infinite number of
alternatives using a step-by-step
improvement process

Linier and other mathematical

programming models, network
models

Optimization via an analytic

formula

Find the best solution in one step

using a formula

Some inventory models

Simulation

Finding a good enough solution

Several types of simulation

Heuristics

Find a good enough solution using

rules

Heuristics programming, expert

systems

Other models

Solve a what-if case using formula

Financial modeling, waiting lines

Predictive model (Website)

Predict the future for a given

scenario

Forecasting model, Markov

analysis

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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

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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
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Model Base

Generating model
Financial
Forecasting
Simulation/Risk analysis
Multi Criteria Decision Making (MCDM)
Goal Seeking/Optimisation/Linier
Programming
Sensitivity Analysis
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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
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Forecasting

predicting future value based on

past pattern of time series
Regression
Exponential smoothing
Decomposition

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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
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Simulation/Risk Analysis

Monte Carlo

Variation of given variables according

to an assumed statistical pattern
static

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Simulation/Risk Analysis

Discrete

Continuous

Snapshot of model is triggered by an event

Snapshot of model is triggered at regular
time intervals

Visual

Interface
Iconic

Abstract real
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Regression

Statistical model
Dependent, independent variables
May be time based

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MCDM

exploration of the pain and gain

associated with different alternatives
Alternatives
Criteria
Rating of alternatives
Weighting of criteria
exploration
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MCDM
1.

2.
3.

4.
5.

List Options (Candidates, Choices,

alternatives, etc.)
List Criteria
Rate the Options (say on a scale of 0
-100) for Each Criteria
Weight the criteria
Find the total Score each option (Weight
x Score and summed over each criteria)
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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

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Sensitivity Analysis

the performing of what ifanalysis in a given model through

varying underlying variables
Fixed values
Interval/increments
According to a statistical pattern

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