We continually make decisions in life that we anticipate will reduce problems and increase our opportunities for ourselves and the society we live in. Arguably, making credible and reliable decisions sometimes is a very hard task, the problems faced by the current business environment are complex, and these problems can only be addressed by analyzing various decision perspectives and options. Adopting the best course of action represents the fundamental nature of decision analysis. This paper will basically present the research findings on the topic “data and decision analysis in system modeling using spreadsheets” the paper will incorporate the meaning of the technical words under spreadsheet modeling, its importance to businesses and other sectors, and finally its relevance to decision making and the study of analyzing data.
One of the most effective ways of evaluating and analyzing decision alternatives involves adopting electronic spreadsheet to construct computer models of the problems faced by the business organization. A computer model is a set of logical assumptions and mathematical relationships incorporated in a computer to signify the real world problem solution. In today’s world, electronic spreadsheets are used to provide useful and convenient way for managers and decision makers in an organization to analyze and implement computer models. Arguably, most bossiness consider the electronic spreadsheet as the most useful and important tool in business decision making. Using an electronic spreadsheet model, organizations are in good positions to analyze various decision alternatives before choosing to adopt a certain course of action or implementation plan.
Many institutions adopted spreadsheet programs because it helps the managerial team establish a better way to compute and create business models to solve problems much easier. In the near future, if one innovates a technology that is radically better than the spreadsheet model, the usage of the model will drastically decline.
A model is an illustration of a system that can be employed to forecast the performance of some business aspects. A model converts inputs to outputs. The process of creating an electronic model is referred to as modeling. Modeling is exclusively creative, personal, and subjective. From the research findings, it has been concluded that modeling is an iterative process, it is viewed as a fine art that is hard to teach and study (Ragsdale, 2012, p. 3)
A spreadsheet program allows one to edit, create, and maintain a worksheet full of data. Using spreadsheets, one can make invoices, budgets, and related documents. Spreadsheet is profoundly used in financial sectors of many businesses. Most technologically inclined businesses do most of its preparations using the spreadsheet model.
Decision analysis consists of the processes, theories, and analytical methods in decision-making that covers the uncertain, multicriteria and the dynamic aspects of decision-making. The commonly known methods of decision analysis include influence diagrams, analytical hierarchy process, and multi–attribute utility models. All these methods allows the decision seekers to analyze decision alternative decisions in a quest to adopt the most credible decision through, by weighing risks and uncertainties attached to every decision they analyzed.
Characteristics and benefits of system modeling using spreadsheets
Despite a model being a simple representation of reality, the model will always be useful as long as it is valid. A valid model is a model that perfectly represents the relevant qualities of the decision problem under study. The following are some benefits attached to system modeling using spreadsheets:
- It is often cheap to analyze decision problems using the spreadsheet model, besides being a cheaper means of analyzing a problem, the analyses of a model help shun costly mistakes that come along with poor decisions.
- The model normally conveys the appropriate and the needed information in a timely manner. Arguably, it is relatively easy to adopt the electronic spreadsheet model in decision making as compared to their real world equivalents. Timeliness is an issue when important data is not available, in such cases, a spreadsheet model can be adopted to help predict the missing data hence assisting in decision-making in an organization.
- The model is very useful in investigating things in life that are almost impossible in life.
- The electronic spreadsheet model allows us to understand and gain insight about the decision problem under investigation. The key purpose of using decision model is to improve the credibility and reliability of the decision made. While constructing a model, one is in a position to unveil important light and a critical understanding on the problem. In some exceptional cases, decisions might be reached while constructing the model when a previously misunderstood element of a problem is eliminated or discovered. In other cases, analyzing a complete model might be necessary in gaining the insights that are fundamental in making a decision.
- Arguably, ease of using electronic spreadsheet lies not just in its unique computational qualities, but it is easy to use and programme. Unlike writing a computer programme, constructing an electronic spreadsheet during decision-making is instinctive and can be done by people with minimal training. A non-technical individual watching a spreadsheet being constructed only sees some arithmetics being performed, a better-trained person on the other hand will only see the modeler working with some simple mathematical manipulations.
Uses of spreadsheets
Electronic spreadsheet, though not the best is convenient for business finance and operation analyses (Reding, & Wermers, 2010, p. 21). A decent business will always have computers with installed spreadsheet application. Advancement in technology has brought about the inclusion of powerful features such as relative cell referencing, goal seek, and array formulation, furthermore most businesses are now adopting spreadsheets in order to optimize and simulate complex business challenges.
Operations management, management science, and financial modeling in colleges and universities are currently being taught by the use of electronic spreadsheets. Other than the use of electronic spreadsheets in teaching, some small companies have adopted the use of spreadsheets as their “Enterprise Resource Planning ERP” system (Wade, Schneberger, & Dwivedi, 2012, p. 20). The electronic spreadsheets in such companies are used to administer production plan, work force administration, and materiel follow-up and ordering, as well as financial reporting and accounting.
In data and decision analysis, electronic spreadsheets are used to store results and data that are computed outside the spreadsheet. More advanced modelers consider spreadsheets as advanced calculators. Notably, most executives’ modelers are confident and comfortable using spreadsheets. Furthermore, from the research findings, modelers and user over confidence, lack of spreadsheet comprehending and poor understanding of spreadsheets as computer-programmed models is the major cause of spreadsheets in corporate use being polluted by lethal errors.
Accuracy in spreadsheet modeling
The inaccuracy in spreadsheet modeling arises due to complexity with the model, its inputs, and the spreadsheet implementation (Vose, 2008, p. 451). Models necessarily ease complexity and selectively ignore certain aspects of the predicament. Creating electronic spreadsheets is sometimes a hard task, notably, models are intrinsically prejudiced, and two people of the same domain can therefore construct a different model. The correct outputs of the spreadsheet cannot be determined and this complicates spreadsheet errors.
Additionally, complications that are likely to cause errors arise when data input to the spreadsheet model is less than the ideal. Arguably, inputs can have errors, since some data are inherently tentative, and must be treated as point estimates.
It has been established that inaccuracy in system outputs are inescapable, organizations have therefore presumably learnt to live with the situation. Since analysis with inadequate accuracy is better off than other alternatives of no analysis at all, errors may not be a serious concern to many circumstances. This therefore suggests that inaccuracies in spreadsheet modeling can be tolerable in practice.
Inaccuracies in spreadsheet modeling are a big problem in situations where the spreadsheet implementation errors is the main source of inaccuracy, and where the inaccuracy is of sufficient weight to cause pain. Such cases exist but they are not common. Efficiencies in managing accuracy and errors in spreadsheet modeling can have valuable effects to the final decision. For instance, if the new practice reduces the resources needed to build a spreadsheet, saved resources could be used to improve the value of the model inputs or undertake extra examination.
Importance of spreadsheet modeling in Data and Decision Analysis
Decision analysis is a phrase that illustrates the extensive application of simulation and modeling techniques used to improve decision-making (Belton, & Stewart, 2002). Through the use of spreadsheet modeling, it is possible to find the most reliable decision by applying electronic spreadsheet techniques in an organization to solve problems ranging from simple projects to company’s strategic plans. The following are the importance of spreadsheet modeling decision analysis.
- Electronic spreadsheet modeling provides a comprehensive business solution that helps improve reliability, quality, and speed of managerial decisions. It helps colleagues collaborate on significant plans, analyze alternatives using simulation techniques, computerize routine decisions using professional system expertise. Additionally, it improves the general managerial effect by adding structure to a disorganized process.
- The use of spreadsheet modeling frees organizations from too much reliance to one planner with knowledge on critical operations and decision-making. The staff in an organization will be in a position to use the model-based approach to perform particular tasks and make decisions effectively. The model incorporates collective intelligence hence automating routine operations and testing business plan.
- The powerful spreadsheet modeling and simulation technology allows the organization to examine business alternatives in cases where mistakes are inexpensive. Instead of helping, the executives understand what happened, the spreadsheet model would help the organization understand why and how to solve the problem. It forecasts and therefore it allows you to act rather than react.
- The electronic spreadsheet model combines major quantitative methods to produce an improved solution and decisions to technical problems in an organization.
- Spreadsheet modeling improves the speed, quality, and reliability of routine decisions by combining professional system technology and modeling capabilities. It makes business automated through an easy-to-use web interface without necessarily the need of an expensive IT professional.
- It improves the productivity of a firm since less cost will be incurred in decision-making; it encourages the use of prior solution process and simplifies the modeling process.
Characteristics of spreadsheet modeling
- Forecasting: the spreadsheet electronic model analyses the historical performance hence aid in planning
- Sensitivity analysis: the model helps the organization establish which conjecture drives your decision the most.
- Optimization: the spreadsheet model helps the organization find the most reliable solution to complex business constraints.
- The model communicates the solutions and ideas clearly by tackling complex problems logically.
- The spreadsheet electronic model incorporates historical valuable experimental data to find out the most suitable solution.
- The model helps businesses choose the most credible course of action when future results are uncertain.
- It manages business threats and simulates complex systems.
Arguably, the spreadsheet model is very useful in decision-making, this model is often cheap when used to analyze decisions, provides the information and solutions to a problem in a timely manner, helps the modeler gain an insight of the solution under investigation, and its ease of computation qualities. Despite its effectiveness in providing a reliable solution, the model may experience inaccuracies in its computation; such solutions normally arise due to complexity with the model inputs, and the implementation of the solution. Inaccuracies in spreadsheet modeling are inevitable and therefore the organizations using the model have learnt to live with it.
The major characteristics of spreadsheet modeling include its ability to forecast mange threats and simulate complex systems. Among the many attached benefits, the spreadsheet model is important to businesses and organizations that make use of it; the model frees organizations from the reliance on irrelevant solution methods, increases reliability, quality, and speed of managerial solutions.
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