Prescriptive analytics is a decision making model that can help supply chains meet the increasing demands that have resulted from the revolution of technology.
Now more than ever, the supply chain and logistics industry is under pressure to meet the unprecedented growing demands of consumers. In addition, they also must meet demands with efficiency and immediacy, while offering competitive rates and network opportunities. The impact of emerging technologies on transportation supply chains is a point of interest to a variety of industry leaders. It requires actionable initiatives that specifically analyze innovative ways for supply chains to improve their bottom line and transform to effective digital supply networks (DSNs).
Prescriptive Analytics is a critical approach toward helping supply chains achieve this transformation. Gartner Inc.defines this technology as:
A form of advanced analytics which examines data or content to answer the question “What should be done?” or “What can we do to make _______ happen?
This form of algorithmic decision making, enables companies to visualize actions that improve operations and capitalize profits. This blog post dives deeper into understanding the function and benefits of prescriptive analytics in supply chain management.
Prescriptive Versus Predictive Analytics
Advanced analytics can be described as being either descriptive, predictive or prescriptive. Their meaning can be broken down into fundamental questions that help businesses achieve an objective.Descriptive ————— “What has happened?”Predictive ————— “What could happen?”Prescriptive ————— “What should we do?”
In April, Morai Logistics discussed the imperative need for supply chains to improve transparency. We describe predictive analytics as a recommended technology that provides organizations with the technology to forecast and achieve real-time visibility. Joined by Artificial Intelligence and Machine Learning, this suite of tools help many industries such as retail, healthcare and transportation. What’s does prescriptive analytics bring to the table?
According to Digital Journal, the global prescriptive analytics market serves numerous markets including healthcare, information technology & communications, manufacturing, government and defences, and of course transportation and logistics. They share the following insight into the growth of this market:
Prescriptive analytics market accounted for USD 1.20 billion growing at a CAGR of 30.95% during the forecast period of 2017 to 2024.
In comparison to forecasting with predictive analytics, prescriptive analytics identifies how ‘business processes should evolve or be modified’. It’s an algorithmic decision making model that analyses data in order to take action. Applying this level of analysis can help any business understand how to effectively use their ‘resources, costs and capabilities’.
Benefits for Supply Chains
Transportation and logistics is a market segment that should utilize prescriptive analytics. However, their integration is comparatively slower to other industries despite feeling the pressure of consumer demand the most. Although there is a growing need for new and improved processes, many industry leaders fear the unknown of integrating a new technology tool. Supply Chain Management Review states that implementing prescriptive analytics is ‘a crucial analytics approach’. They further reinforce the following outcomes below as beneficial to improving supply chain management.
- Create ‘visibility between the supply chain and finance’.
- Provides managers with advanced platforms that help base decisions on fact-based scenarios.
- Integration of predictive benefits such as cost reductions, forecasting and end-to-end visibility.
- Create a prepared, informed and confident workforce.
Advanced analytics is a critical tool that should be integrated into any organization looking to achieve profit growth. Supply chains must continue to embrace technologies in order to meet customer demands, while creating a competitive advantage in changing markets. Predictive analytics is important because it helps supply chains understand future risks, challenges and outcomes. However, prescriptive analytics leverages data to devise action that will improve efficiency, immediacy and their bottom line.