How would you improve your business if you could see into the future? Would you launch new product lines? Build bigger warehouses? Invest in sophisticated technology?
While there is no magic crystal ball that lets you see where your company will be six months from now, developments in data analytics are gradually moving us toward a world in which we can more accurately predict the direction our businesses will take.
What Is Data Analytics?
Data analytics is the process of taking raw data and mining it for all the information it holds. The more raw data you feed into the system, the more patterns and hidden associations it reveals.
Data analytics can help businesses determine customer demand, unveil inaccuracies in shipping and manufacturing processes, and suggest beneficial solutions—all in real time.
Data Analytics Models
Typically, there are three models of analytics used by supply chain managers:
- Descriptive analytics shows you what’s currently happening in your company, and what’s happened in the past. This model uses your existing data, along with business intelligence, to give you an accurate picture of each.
- Predictive analytics takes things a bit further. Instead of simply showing you a picture of the present, it “predicts” what could happen in the future, using statistical data and forecasts. For instance, predictive analytics can give you a warning that the next quarter may be busier, or that your current pricing strategy might be a bit too high.
- Prescriptive analytics is much more precise. It doesn’t just tell you what could happen, it tells you what should happen, based on the embedded decision rules that you’ve set. Where predictive analytics may point you in a general direction, prescriptive analytics provide you with a detailed roadmap.
These models aren’t meant to stand alone. Each builds upon the other, providing a more accurate picture of where you are now, where you could be in the future, and the route you should take to get to where you want to go.
Of course, it’s impossible to gain insight into supply chain operations without normalized, clean data. That’s why it’s so important to use a logistics performance platform. This sophisticated software refines your data, and provides the analytics tools to help you pinpoint areas of opportunity and make faster, more informed decisions.
Benefits of Predictive Analysis
Now that we’ve defined each of the three models, let’s delve deeper into the benefits of the most popular: predictive analysis.
While supply chain predictive analysis isn’t quite the crystal ball we mentioned earlier, it provides plenty of insight into the future of your company, the directions you should take, and the habits of your customers. Applied correctly, predictive analytics can also:
- Mitigate risks by predicting which customers are likely to default on their accounts.
- Predict supply and demand more accurately, leading to less waste during lean times and more on-time deliveries during peak demand.
- Provide insight into the performance of marketing campaigns.
- Increase your advantage over competitors who may not yet have adopted the model.
The Case for Prescriptive Analytics
Predictive analytics show you what could happen.
Although prescriptive analytics certainly has its benefits, Gartner’s Hype Cycle estimates that only five to 10 percent of organizations currently use this model, and those who do take a “prescriptive approach” (leveraging the known parameters to make the best decision) and may only use it in a subsection of their company, rather than across all of their supply chain channels.
Why is this?
Many supply chain companies don’t yet understand the benefits of a prescriptive approach. Others are on board, but may fear the cost of upgrading their systems and the integration issues with their current software. Still more think it will be too difficult to implement, or too time-consuming to use. However, experts expect prescriptive analytics will be increasingly common in the not-too-distant future, and those who adopt the model now will get (and stay) ahead of the game.
Supply Chain Analysis Works Alongside Logistics Management
Prescriptive analytics is the future of logistics management.
Whether you’re managing a warehouse, a shipping hub, or an entire company, you should already be implementing a strong logistics management strategy to keep the wheels of productivity greased and spinning. However, supply chain predictive analytics can transform the way you do business by ensuring that you and your partners work together more cohesively —not just managing the day-to-day, but constantly operating with the big picture in focus.
When it comes to your company, it’s not enough to know what’s happening now—in order to be the best in the business, you need analytics to show you the future!