Data Analytics

Strategic decisions

Involve higher-level issues concerned with the overall direction of the organization. These decisions define the organization's overall goals and aspirations for the future.

Tactical decisions

Concern how the organization should achieve the goals and objectives set by its strategy. They are usually the responsibility of midlevel management.

Operational decisions

Affect how the firm is run from day to day. They are the domain of operations managers, who are the closest to the customer.

Decision making process

1. Identify and define the problem 2. Determine the criteria that will be used to evaluate alternative solutions 3. Determine the set of alternative solutions 4. Evaluate the alternatives 5. Choose an alternative

Common approaches to making decisions

Tradition, Intuition, Rules of thumb, Using the relevant data available

Business analytics

Scientific process of transforming data into insight for making better decisions. Used for data-driven or fact-based decision making, which is often seen as more objective than other alternatives for decision making.

Descriptive analytics

Encompasses the set of techniques that describes what has happened in the past. Examples: data queries, reports, descriptive statistics, data visualization (data dashboards), data-mining techniques, and basic what-if spreadsheet models.

Data query

A request for information with certain characteristics from a database.

Data dashboards

Collections of tables, charts, maps, and summary statistics that are updated as new data become available.

Predictive analytics

Consists of techniques that use models constructed from past data to predict the future or ascertain the impact of one variable on another.

Data mining

Used to find patterns or relationships among elements of the data in a large database; often used in predictive analytics.

Simulation

Involves the use of probability and statistics to construct a computer model to study the impact of uncertainty on a decision.

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 settings.

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. It also employs utility theory.

Utility theory

Assigns values to outcomes based on the decision maker's attitude toward risk, loss, and other factors.

Portfolio models

Use historical investment return data to determine the mix of investments that yield the highest expected return while controlling or limiting exposure to risk.

Supply network design models

Provide the cost-minimizing plant and distribution center locations subject to meeting the customer service requirements.

Price markdown models

Uses historical data to yield revenue-maximizing discount levels and the timing of discount offers when goods have not sold as planned.

Big data

A set of data that cannot be managed, processed, or analyzed with commonly available software in a reasonable amount of time.

Data

The facts and figures collected, analyzed, and summarized for presentation and interpretation.

Variable

A characteristic or a quantity of interest that can take on different values.

Observation

Set of values corresponding to a set of variables.

Variation

The difference in a variable measured over observations.

Random variable / uncertain variable

A quantity whose values are not known with certainty.