BUSINESS ANALYTICS II
Introduction
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Text books
• Camm, J. D., Cochran, J. J., Fry, M. J., Ohlmann, J. W., & Anderson, D.
R. (2015). Essentials of business analytics. Cengage Learning.
• Keller, G. (2011). Statistics for Management and Economics,
Abbreviated. Cengage Learning.
Software
• Microsoft Excel , Solver add-in.
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Use of data
• Three developments make the explosive growth in the
use of analytical methods in business applications:
o Technological advances produce incredible amounts of
data for businesses.
o Ongoing research has resulted in numerous
methodological developments.
o Explosion in computing power and storage capability.
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Business Analytics Defined
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Business Analytics Defined
Business analytics:
• Scientific process of transforming data into insight for making
better decisions in business.
• Used for data-driven or fact-based decision making, which is often
seen as more objective than other alternatives for decision making
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Business Analytics Defined
Tools of business analytics can aid decision making by:
• Creating insights from data
• Improving our ability to more accurately forecast for planning
• Helping us quantify risk
• Yielding better alternatives through analysis and optimization
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A Categorization on Analytical
Methods and Models
Descriptive Analytics
Predictive Analytics
Prescriptive Analytics
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A Categorization of Analytical Methods and
Models
• Descriptive analytics: Encompasses the set of techniques
that describes what has happened in the past; examples:
• Data queries (a request for information with certain characteristics
from a database)
• Descriptive statistics
• Data visualization
• Data-mining techniques
• Basic what-if spreadsheet models
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A Categorization of Analytical Methods and
Models
• Predictive analytics: Consists of techniques that use models
constructed from past data to predict the future or identify the
impact of one variable on another.
• Techniques used in Predictive Analytics:
• Linear regression
• Time series analysis
• Data mining
• Simulation
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A Categorization of Analytical Methods and
Models
Prescriptive Analytics: Indicates a best course of action to take
• Optimization models: Models that give the best decision subject to
constraints of the situation
• Simulation optimization: Combines the use of probability and statistics to
model uncertainty with optimization techniques to find good decisions in
highly complex and highly uncertain
• Decision analysis: Used to develop an optimal strategy when a decision
maker is faced with several decision alternatives and an uncertain set of
future events
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Figure 1.3:
The Spectrum of Business Analytics
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Business Analytics in Practice
Financial Analytics Supply-Chain Analytics
Human Resource (HR) Analytics Analytics for Government and Nonprofits
Marketing Analytics Sports Analytics
Health Care Analytics Web Analytics
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Business Analytics in Practice
• Financial analytics
• Use of predictive models to:
o Forecast future financial performance
o Assess the risk of investment portfolios and projects
o Construct financial instruments such as derivatives
o Construct optimal portfolios of investments
o Allocate assets
o Create optimal capital budgeting plans
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Business Analytics in Practice
Marketing analytics
• Marketing is one of the fastest growing areas for the application of analytics
• A better understanding of consumer behavior through the use of scanner
data and data generated from social media has led to an increased interest in
marketing analytics
© 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 14
Business Analytics in Practice
• Health care analytics
• Descriptive, predictive, and prescriptive analytics are used to improve:
• Patient, staff, and facility scheduling
• Patient flow
• Purchasing
• Inventory control
• Use of prescriptive analytics for diagnosis and treatment
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Business Analytics in Practice
Web analytics
• The analysis of online activity, which includes, but is not limited to, visits to
web sites and social media sites such as Facebook and LinkedIn
• Leading companies apply descriptive and advanced analytics to data collected
online experiments to determine the best way to:
• Configure web sites
• Position ads
• Utilize social networks for the promotion of products and services
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Business Analytics in Practice
• Supply chain analytics
• The core service of companies such as FedEx is the efficient delivery of goods,
and analytics has long been used to achieve efficiency
• The optimal sorting of goods, vehicle and staff scheduling, and vehicle routing
are all key to profitability for logistics companies
• Companies can benefit from better inventory and processing control and
more efficient supply chains
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Business Analytics in Practice
Human resource (HR) analytics
• New area of application for analytics
• The HR function is charged with ensuring that the organization:
• Has the mix of skill sets necessary to meet its needs
• Is hiring the highest-quality talent and providing an environment that retains it
• Achieves its organizational diversity goals
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Business Analytics in Practice
• Analytics for government to:
• Drive out inefficiencies
• Increase the effectiveness and accountability of programs
• Analytics for nonprofit agencies to ensure their effectiveness and
accountability to their donors and clients
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