People who don’t understand how machine learning and artificial intelligence is used in business find prescriptive analytics to be both scary and complex. Let’s alleviate some of those fears. Your data shows what has been happening over time with your sales, revenue, profitability and many other details about your business’s history.
We crunch those numbers and perform what is called predictive analytics to show us what is most likely going to happen in the future. We take into account not only the raw data from the past but add in the things that influence the future. Cost increases, market trends, competition and many other factors can alter a future.
Next, we all need to know how we can improve in the future. Action items are suggested to the appropriate person(s) and in some cases, actions are automatically initiated by your systems based upon rules you have put in place. Automating processes based on predictive analytics is known as prescriptive analytics.
Decades ago, I recall writing a program to automatically print dunning notices to those who were pushing our credit limits beyond what we considered reasonable. In the past, we mailed those notices and today we have them delivered via email. Today many other decisions can be made by your systems after you define rules and the actions the systems can take. Predictive analytics allows you to take actions on what will likely happen without waiting for problems to develop before you spot them.
You can reduce inventory, increase sales and profitability, improve customer and vendor relationships and much, much more by using prescriptive analytics. And, it can be as easy as issuing a dunning letter.
Want to learn more?