Ch. 9
Building Model-Driven Decision Support Systems

Many DSS applications deal with financial analysis and some tools help develop such applications. While spreadsheet software can be used, specialized tools are often more efficient or effective. Since the 1960s, planning models have advanced from an obscure concept for large corporations to an appropriate tool for planning in almost any size company.

Some modeling packages require developers to enter equations. Spreadsheets, on the other hand, create their models with a computation or calculation orientation. The definition of a planning model varies somewhat with the scope of its application. For instance, financial planning models may have a very short planning horizon and a collection of accounting formulas for producing pro forma statements.

On the other hand, corporate planning models often include complex quantitative and logical interrelationships among a corporation's financial, marketing, and production activities. Most financial models are dynamic, multiyear models. Accounting formulas are true by definition, such as profit = revenue - expenses. Empirical relationships have been derived from past data, e.g. sales support expenses = $48.50 * no. of salespeople. Managers hope empirical relationships remain valid long enough to use them for prediction.

In addition to generic DSS-based planning models, there are several industry-specific ones for hospitals, banks, and universities. For example, many universities use Educom’s Financial Planning Model (EFPM). Comshare is a major vendor of planning and budgeting software.

There are many planning and modeling languages on the market. Typical applications of planning models include: financial forecasting; manpower planning; pro forma financial statements; profit planning; capital budgeting; sales forecasting; marketing decision making; investment analysis; merger and acquisition analysis; tax planning; lease versus purchase decisions; and new venture evaluation.