What is Prescriptive Analytics

Making Optimized Decisions about the Future

What is Prescriptive Analytics?

Prescriptive analytics optimizes decision making to show companies what actions to take in order to maximize profitable growth, given their business constraints and key objectives.

The Influence of Analytics on Business Performance

Prescriptive analytics is the most advanced form of analytics in the sense that it has the greatest impact on large-scale business objectives like profit, cost of goods, service levels, risk mitigation and decision-making agility.

Descriptive/diagnostic analytics (focused on reporting and pattern recognition) and predictive analytics (focused on future predictions/forecasts) are both limited in scope. Unlike these, prescriptive analytics determines ways in which your business plans should be modified in order to meet all of your business objectives while respecting your business realities. It helps you make your data actionable while also showing the impact of actions on all of your objectives, including financial objectives like cost, revenue, and profit.

Applying prescriptive analytics through optimization enables users to weigh and consider hundreds, or even millions of variables and constraints. This ability allows you to find the best way forward within all of your nuanced business realities. It’s different than applying prescriptive to a simple set of pre-determined business rules.

With major advances in River Logic’s optimization technology, fully implemented projects are able to demonstrate value in less than 4 months…without the help of a single Data Scientist.

 Prescriptive analytics is the application of logic and mathematics to data to specify a preferred course of action. While all types of analytics ultimately support better decision making, prescriptive analytics outputs a decision rather than a report, statistic, probability or estimate of future outcomes.

GARTNER

Forecast Snapshot: Prescriptive
Analytics
, Worldwide, 2017

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The Benefits of Prescriptive Analytics to Your Business

Improve Performance: Typical impact can range from 2-5% of a company’s annual revenue in additional profit.

Increase Efficiency: Typical impact includes 15-20% higher throughput or 10-15% reduction in addressable cost.

Maximize ROI: Typical impact ranges from 25-100% — better NPV than Excel or similar, rules-driven tools.

Drive Agility: Rapidly evaluate dozens of scenarios and develop a faster approach to making trade-off decisions.

Mitigate Risk: Identify and better quantify risk associated with both short- and long-term decision making and develop potential risk mitigation strategies.

Address New Planning Challenges: Prescriptive analytics can address questions that other forms of analytics simply cannot.

 Companies like pepsico are all working on moving from the traditional descriptive and diagnostic analytic capabilities to prescriptive analytics. Adopting prescriptive is critical for supply chains to gain a competitive advantage now and in the future.

Leslie Keating

Former SVP, PepsiCo

Ask Yourself These Questions
to See If You’re Ready

Hint: If you answered yes to any of these questions,
you need prescriptive analytics!

Are you juggling multiple spreadsheets, all linked together by complex equations?

Do you have policies that guide behavior, where decisions are made out of habit?

Do you have complex planning processes that are treated either sequentially or — worse — in isolation?

Does your industry have highly dynamic situations where prices changes constantly, regulations evolve, etc.?

Do you see high differences in average versus marginal decisions?

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