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Module 7 Prescriptive Analytics

Prescriptive analytics is a data-driven approach that provides recommendations for optimal decision-making by analyzing various factors and potential outcomes. It is applied across industries such as finance, hospitality, retail, transportation, marketing, and healthcare to enhance efficiency and customer satisfaction. Challenges include defining fitness functions and addressing human biases, while benefits include improved decision-making and risk management.

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Angelica Dela Cruz Lopez
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9 views

Module 7 Prescriptive Analytics

Prescriptive analytics is a data-driven approach that provides recommendations for optimal decision-making by analyzing various factors and potential outcomes. It is applied across industries such as finance, hospitality, retail, transportation, marketing, and healthcare to enhance efficiency and customer satisfaction. Challenges include defining fitness functions and addressing human biases, while benefits include improved decision-making and risk management.

Uploaded by

Angelica Dela Cruz Lopez
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Prescriptive Analytics

Prescriptive Analytics
• is the process of using data to determine an optimal course of action. By considering all
relevant factors, this type of analysis yields recommendations for next steps.
• gathers data from a variety of both descriptive and predictive sources for its models and
applies them to the process of decision-making.
• includes combining existing conditions and considering the consequences of each decision to
determine how the future would be impacted.
• measure the repercussions of a decision based on different possible future scenarios.
• suited to those in leadership positions than it is for those running daily operations.

Benefits
• Make data-driven, not instinct-driven decisions
• Simplify complex decisions
• Focus on execution rather than making decisions.

Challenges
• Difficult to define a fitness function
• Human bias in models
• Complex constraints
Applications
Financial Services
Banks and other financial institutions use prescriptive analytics and prescriptive economic
analysis to reduce risk. By looking at factors like credit history and economic trends, for
example, banks can predict loan defaults, allowing them to adjust lending policies proactively
and maintain a healthier portfolio.

Hospitality
In the world of hospitality, it's essential to understand guests' wants and needs. Hotels segment
their customer base using prescriptive analytics, which allows them to promote more tailored
packages and experiences. The result is improved customer satisfaction, leading to repeat
bookings, positive reviews and potential brand advocates.

Retail
Whether people shop in stores or online, retail is an industry driven by consumer behavior.
Retailers can use prescriptive analytics to forecast product demand based on historical sales and
seasonal trends, meaning they can maintain optimal stock levels, ensure popular items are
always available and reduce overstock costs.
Applications
Transportation
One major priority for transportation companies is efficient route planning. Airlines and freight
companies use prescriptive analytics, factoring in variables like weather and fuel costs, to
determine the quickest and most fuel-efficient routes. The result is timely deliveries and reduced
operational costs.

Marketing
Prescriptive analytics helps marketers analyze emerging trends and data-driven insights,
allowing them to fine-tune ad placements or content types. For instance, if younger audiences
engage more with interactive polls on social media, marketers can adjust their strategies to
feature more of that content, leading to greater reach and engagement.

Healthcare
Hospitals can use prescriptive analytics to improve patient care and operational efficiency. It
allows them to forecast patient readmission rates or optimize bed allocations, meaning patients
receive timely care while hospitals can maximize resource utilization.
What-if Analysis
• is a data-intensive simulation whose goal is to inspect the behavior of a complex system.
• measures how changes in a set of independent variables impact a set of dependent variables
with reference to a given simulation model such a model is a simplified representation of the
business, tuned according to the historical corporate data.

Benefits
• Competitive advantage: Companies that build contingency plans recover from impacts
faster than those that don’t.
• Better risk management: Understanding the financial impacts of change reduces key areas
of operational risk.
• Stronger decision-making: When you understand what’s possible, you can decide on
what’s preferable. Scenario planning allows you to look at all available courses of action.
Business Optimizations
Business optimization is the process of identifying and implementing new methods that make
the business more efficient and cost effective.

Examples of business optimization:


• Introducing new methods, practices and systems that reduce turnaround time
• Reducing costs while improving performance
• Automation of repetitive tasks
• Machine-learning techniques that improve equipment operation
• Increasing sales through enhancing customer satisfaction
• Reducing all kinds of waste such as wasted time, scrap production and repeat work.

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