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Prescriptive analytics guide

Prescriptive Analytics A business guide May CContents The Business Value of Prescriptive Analytics What is Prescriptive Analytics Prescriptive Analytics Methods Integration Business Applications Strategy The production of this document has been sponsored by CPrescriptive Analytics a business guide The Business Value of Prescriptive Analytics After ?fty years of using information technology to increase the e ?ciency of business processes we are now ?rmly in the era where technology is also being used to provide us with information Business intelligence allows us to establish what has happened and is happening in our business often called descriptive analytics and predictive analytics uncover patterns which can be useful in the prediction of future events This doesn ? t complete the picture however Descriptive and predictive analytics may tell us what has happened and what may happen but they do not tell us the best way to deploy our resources to meet the demands of the future An example will clarify In a retail environment our descriptive analytics will tell us sales volumes seasonal uctuations and so on Predictive analytics may give us insights into which products tend to be purchased together Armed with this knowledge we then need to know how shelf space should best be allocated and more generally how resources should be utilised to maximise revenue and or pro ?tability This is where prescriptive analytics ?ts in - think of it as a prescription for action The major part of prescriptive analytics is concerned with resource optimisation given a set of business rules constraints and predictions relating to demand customer behaviour the success of marketing campaigns and so on In real business problems optimisation may involve thousands of variables and constraints and ?nding the optimal use of resources given an objective that is to be maximised or minimised can only be achieved using powerful computerised optimisation software Examples abound Airlines use prescriptive analytics to determine the allocation of seats to each particular class Vehicle rental businesses optimise the positioning of vehicles to maximise revenue and pro ?tability Energy companies increasingly use prescriptive analytics and especially with the unpredictable nature of renewable energy sources Of course this all assumes that business managers buy into the resource utilisation schedules created by prescriptive analytics techniques As such the analytics initiative needs high level sponsorship and coordinated e ?ort throughout the enterprise Reporting mechanisms need to be put in place and procedures to deal with the inevitable changes of circumstances all businesses experience To this end some businesses run some of their prescriptive analytics processes in near real-time to accommodate change and such is the power of the optimisation algorithms and computer hardware that this has become possible for complex analytics tasks Prescriptive analytics is clearly not a trivial undertaking It needs close liaison between analytics teams and business management and an integrated analytics environment capable of integrating Copyright butleranalytics com CPrescriptive Analytics a business guide business rules predictive models and prescriptive analytics The integration is important and particularly in large complex businesses Without such