Prescriptive Analytics

Prescriptive Analytics: What should we do based on expectations?

  • What-if analysis

  • Cash flow analysis

  • Scenario analysis

  • Optimization

  • etc.

Optimization

  • Support and improve managerial decision-making

  • Maximize or minimize some objective function within a certain set of constraints

  • Can be linear or nonlinear, deterministic or stochastic, etc

  • Problem Formulation: Translating the verbal statement of a problem into a mathematical statement or model

Example

T = # of Tables

C = # of Chairs

Max Revenue = 16T + 10C

Constraints

2T + 1C <= 12

2T + 2C <= 18

T >= 0

C >= 0