(a) The owner of a chain of auto-accessory shops in five different towns inputs sales figures into a computer model that displays the selling trends of each store. She uses her own observation form visits to the shops and information gained from the model to make ordering decisions for each store.
Are the ordering decisions she makes structured, semi-structured or unstructured? Briefly explain the reasons for your choice and outline what product related variables are involved in the ordering decisions.
(b) Certain financial problems such as simplified bread-even analysis models for predicting profits can be computerized.
P = (Sp – Vc) U – F c
P = Profits
Sp = Selling price per unit
Vc = Variable cost per unit
U = Number of units of sales
Fc = Fixed cost
Using the above model, describe any three decisions that management can make form the break-even analysis model.
Why do organizations automate reasoning or decision-making tasks which human beings are naturally better able to perform than computers?
Structured decisions –these are repetitive and defined decisions. A standardized pre- planned approach is used to make the decision and a specific methodology is applied routinely.
Semi structured decision –the information requirement and the methodology to be applied are often known, but some aspects of the decision still rely on the manager. As such the manager can exercise some discretion in the making of decisions.
Unstructured decisions –tends to be unique. The information needed for decision–making is unpredictable and no fixed methodology exists. Here the manager exercises a lot of discretion.
From the above definitions its clear that the decision made the owner of this classic stone is semi-structured. She incorporates the information from the computer which is automated and uses judgment to make decision. The product related variables in making ordering decisions are :-
(i) The quality of the products.
(ii) The quantity to be ordered.
(iii) The availability of the products needed.
(iv) The availability of supplies and reliability.
(v) Availability of cash to purchase.
8 (b) Decisions that management may make from the break even analysis model:
• Decision on the selling price of the products in order to obtain certain profit.
• Marketing decision in order to make the required sales.
• Determining the variable costs of the products in order to make required profits. This could be buying cheaper raw materials.
• Decide the number of unit to be produced.
(ii) An expert system is a system that acts as an expert consultant to users. Reason for its use include: –
• For consistency in the decision being made
• Speed- the expert system is faster than a human being expert.
• Permanence – the experts can die or leave but an expert system can be used for a long time, use will only stop if it is changed.
• Remote areas – expert system can be used in areas where human being fear going eg. Arid areas, bad climate area etc
• Objectivity – decisions made expert systems are not guided passions or feelings as such decisions are always for the best interest of the organisation.
• Experts are costly to maintain, expert systems on the other hand involve only one off costs, the acquisition.