An seE

SUBJECT CODE:CCW331

Strictly as per Revised Syllabus of

ANNAUNIVERSITY
Choice Based Credit System (CBCS)
Vertical - 1 (Data Science) (CSE/IT/CSeBS)
Vertical - 1(Verticals for AIDS I) (AlaDS)
Semester VI(CS&BS)

BUSINESSANALYTICS
Dr. Arati Dandavate
s
Ph.D. (ComputerScience &Engineering),
6'

M.E. (Computer), B.E. (Electronics&Communication)

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HOD (CE Dept.),

DPES, Dhole-PatilCollege of Engineering, Pune.

Dr. M. Kiruthiga Devi

Pn.D. (CSE), M.E. (Mobile ond Pervasive Computing), B.E. (CSE),
Associote Professor,
Departmentof InformationTechnology
Dr. M.G.REducationgland Research Institute
Chennai.

Manisha Mehrotra
M.Tech.(CSE),B.Tech. (CSE),
Assistant Professor,
Dhole PatilCollege of Engineering,
Pune.

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PUBLICATIONS
SINCE 1993
An Up-Thrustfor Knowledge
 SYLLABUS
Business Analytics - (CCW331)

UNIT I INTRODUCTION TOBUSINESS ANALYTICS

Analytics and Data Science - Analytics LifeCycle - Types of Analytics- Business Problem Definis:.
- DataCollection - Data Preparation- HypothesisGeneration - Modeling - Validation and Evaluos:
-Interpretation- Deploymentand Iteration.(Chapter- 1)
UNIT II BUSINESS INTELLIGENCE
Data Warehouses and Data Mart - Knowledge Management - Types of
Decisions - Decision Making
Process - Decision Support Systems Business Intelligence - OLAP - Analytic functions
(Chapter - 2)
UNIT II BUSINESS FORECASTING
Introductionto Business Forecastingand Predictiveanalytics - Logic and Data Driven Models- Data
s
Mining and PredictiveAnalysis Modelling -Machine Learning for Predictiveanalytics.(Chapter- 3)
6'
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UNIT IV HR& SUPPLY CHAIN ANALYTICS

Human Resources - Planning and Recruitment- Training and Development- Supply chain network -
Planning Demand, Inventory and Supply - Logistics - Analytics applicationsin HR & Supply Chain -
Applying HR Analytics to make a prediction of the demand for hourly employees for a year.
(Chapter - 4)
UNIT V MARKETING & SALES ANALYTICS
Marketing Strategy, Marketing Mix, Customer Behaviour - selling Process Sales Planning
Analytics applications in Marketing and Sales - predictive analytics for customer's
behaviour u
marketing and sales. (Chapter- 5)

(iv)
 TABLE OF CONTENTS
UNIT I
Chapter - 1 Introductionto BusinessAnalytics (1- 1)to (1 - 40)
1.1 BusinessAnalytics : Introduction 1-2
1.1.1 Data Science. 1-3
1.1.2 Business Analytics and Data Science - Comparison 1-4

1.2 Analytics Life Cycle 1-5

1.3 Types of Business Analytics. 1-7
1.3.1 Componentsof Business Analytics. .1-8
1.3.2 Applicationsof BusinessAnalytics .1- 10
1.3.3 Terminologies. .1 -11
1.3.4 Three Stages of Business Analytics .1-13
s
1.3.5 Process ...1- 14
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1.3.6 Importance. .1 -16

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1.3.7 Scope of BusinessAnalytics 1 -17

1.3.8 Benefits of Business Analytics. .. 1-19

1.3.9 Challenges of Business Analytics.. ..1 -20

1.3.10 BusinessAnalytics Examples .1-22

1.3.11 BusinessAnalyticsTools. .1 -24
1.3.12 BusinessAnalyticsVs Data Analytics.. 1 -25

1.4 Business Problem Definition 1-26

1.5 Data Collection 1- 28

1.6 Data Preparation 1-29

1.7 HypothesisGeneration 1-30
1.8 Modeling.. 1-32

1.9 Validation and Evaluation ... 1 - 33

1.10 Interpretation 1- 34

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 Deployment and Iteration 1-36
1.11
1.12 Two Marks Questions with
Answers

UNIT II
...1-37
(2 - 1)to (2- 52
Business Intelligence
Chapter - 2
2.1 Data Warehouses and Data
Mart.... .2-2
2.1.1 Data Warehouse -
Introduction .2-3
2.1.2
Data Warehouse Components. 2-5
2.1.3 Data Mart ..2-6
2.1.4 Cost Effective Data Mart ..2-8
2.1.5 Designing Data Marts.. ..2-10
2.1.6 Cost of Data Marts .2-11
2.1.7 Data Mart versus Data warehouse ... 2-13
2.2 Knowledge Management .2-15
2.2.1 Key Elementsof Knowledge Management .2-16
2.2.2 Knowledge Management Process ... 2- 18
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2.2.3 Knowledge ManagementTools. .2-19

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2.2.4 Knowledge Management Use Cases ...2- 20

2.3 Types of Decisions .... 2 - 21
2.4 Decision Making Process ... 2 - 23

2.4.1 Decision-makingMethodologiesand Frameworks. .2 -24

2.4.2 Challenges in the Decision-MakingProcess... .2-25
2.5 Decision Support Systems 2-27
2.5.1 Challengesin Decision Support Systerms. ...2 -28
2.5.2
Advantagesand Disadvantagesof Decision Support Systems... ...2 - 29
2.5.3
Applicationsof Decision Support Systems. ...2 -31
2.6 Business Intelligence 2-32
2.6.1
Importanceof Business Intelligence .2-34
2.6.2
Examples of Business IntelligenceSystem used in 2-35
Practice..
2.6.3
Advantagesof Business Intelligence ..2 -
37

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 2.6.4 Disadvantagesof Business Intelligence. .2-38
2.7 Online AnalyticalProcessing(OLAP) 2- 40
2.7.1 OLAP Guidelines(Dr. E. F. Codd Rule) ... 2 - 41
2.7.2 Characteristics of OLAP 2- 42
2.7.3 Advantagesof OLAP 2-45
2.7.4 Disadvantages of OLAP 2- 46
2.8 Analytic Functions 2- 47
2.8.1 Importanceof AnalyticFunctionsin Business Intelligence. 2- 49
2.9 Two Marks Questions with Answers ..... 2- 50

UNIT III
Chapter-3 Business Forecasting (3 - 1) to (3- 52)
3.1 Introductionto Business Forecastingand PredictiveAnalytics 3-2
3.1.1 The Forecasting Process. 3-4

3.1.2 Predictive Analytics.. 3-7

s
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3.2 Logic and Data Driven Models. 3-11

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3.3 DataMining and PredictiveAnalysis Modelling. 3-17

3.3.1 Discoveryand Prediction 3-18

3.3.2 Confirmation and Discovery.. .3-19

3.3.3 Predictive Modeling. .3-21
3.3.4 Central Intelligence Agency Intelligence Process.... .3- 25
3.3.5 Cross-IndustryStandard Process for Data Mining 3 -26

3.4 Machine Learningfor Predictive Analytics.. 3-28

3.4.1 Machine LearningAlgorithmsfor Predictive Analytics... 3-30

3.4.1.1 Linear Regression.. ..3 - 31

3.4.1.2 Logistic Regression .....3 - 34

3.4.1.3 Decision Trees 3-36

3.4.1.4 Random Forest Regression 3 - 40

3.4.1.5 SupportVector Machines(SVM). ...3 - 41

3.4.1.6 Neural Networks. .3 - 44

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 3.4.1.7 GradientBoosting Machines.
..3 -46
3.4.1.8 Time Series Analysis..
3.4.1.9 Clustering. .3- 46
3.5 Two Marks Questions with Answers ..3-46

UNIT IV
...3-49
Chapter - 4 HR and Supply Chain Analytics
(4- 1) to (4 - 44)
4.1 Human Resources.
4.1.1 Planning and Recruitment.. 4-2
4.1.2
Trainingand Development.. 4-2
4.2 Supply Chain Network. .4-11
4.2.1 Planning Demand 4-26
4.2.2 4-27
Inventoryand Supply
4.2.3 4-29
Logistics
4.3 4-30
AnalyticsApplicationsin HRand Supply Chain
s
4-35
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4.3.1
Applying HRAnalyticsto Make a Predictionof the
Demand
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for Hourly Employeesfor a Year

4.4 4- 40
Two Marks Questionswith
Ansvwers 4- 42
UNIT V
Chapter -5 Marketingand Sales Analytics
5.1 (5- 1)to (5 - 38)
Marketingand Sales Analytics. 5-2
5.1.1
Marketing Strategy... 5-3
5.1.2
5.2
Importanceof Marketing Strategy.
MarketingMix 5-5
5-6
5.2.1 Key Takeaways of
5.2.2 4 Ps of the
Marketing Mix ..5-7

5.2.3
Marketing Mix. 5-9
Purpose of MarketingMix. .5-9
5.3
Customer Behavior.
5-11
5.3.1
Importance of Customer
Behaviour.. ...5 -12
5.3.2 Types of Customer
Behaviour .5-14

(vii)
 .5-15
5.3.3 Parameters that affect Customer Behaviour
5-17
5.4 Selling Process
5-18
5.4.1 Seven Selling Process Steps...
.5-19
5.4.2 Example of Selling Process
5- 20
5.5 Sales Planning.
KeyElements of Sales Planning. 5-20
5.5.1

5.5.2 Factors that Encompass a Winning Sales Strategy. .5-22

5.5.3 Importanceof Sales Planning. ...5 - 23

Analytics applicationsin Marketingand Sales. .5- 24

5.6
5.6.1 Role of Analytics in Marketingand Sales .. 5- 25

5.6.2 Use Cases of Analytics in Marketingand Sales .5-27

5.6.3 Benefits of Analytics in Marketingand Sales .5- 28

5.7 PredictiveAnalyticsfor Customers' Behaviourin Marketingand Sales ..... 5 - 30

.... 5-31
5.7.1 CustomerBehaviorand Analytics
UnderstandingConsumer Behavior .5-33
s

5.7.2
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Types of ConsumerBehavior 5-34

5.7.3
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5.7.4 Analysis of Customer Behavior .5 -35

5.8 Two Marks Questions with Answers ..... 5 - 37

Solved Model Question Paper.... .(M-1) to (M -4)

(ix)
 UNIT I

Introduction to Business
1 Analytics

Syllabus
Analyticsand Data Science-AnalyticsLife Cycle -Types of Analytics-Business ProblemDefinition
Data Collection - Data Preparation - Hypothesis Generation - Modeling - Validation and
Evaluation- Interpretation- Deployment and lteration.

Contents
1.1 Business Analytics : Introduction
1.2 Analytics Life Cycle
1.3 Types of Business Analytics
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1.4 Business Problem Definition
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1.5 Data Collection

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1.6 Data Preparation

1.7 Hypothesis Generation
1.8 Modeling
1.9 Validation and Evaluation

1.10 Interpretation
1.11 Deploymentand Iteration
1.12 Two Marks Questions with Answers

(1- 1)
Business Analytics 1-2 introductionto BusinessAnalytics

1.1 BusinessAnalytics : Introduction

Business analyties refers to the practice of using data analysis and statisticalmethods to
gain insights and make informed decisions in a business context. It involves the
collection. processing and interpretationof large volumes of data to uncover patterns.
trends and correlationsthat can be used to drive strategic and operational
within an organization.
improvements
Business analytics leverages various techniques and tools, including data mining.
statistical analysis. predictive modeling and machine learning algorithms. These
methods help businesses identify opportunities, solve complex problems.
processes and make data-drivendecisions.
optimize
The process of business analytics typically involves the following steps :
1. Data collection : Gathering relevant data from various
sources, such as databases,
spreadsheets,customer records,social media and web analytics.
2. Data cleaning and integration : Ensuring data
accuracy and consistency by
removing duplicates,corectingerrors and merging data from multiple sources.
3. Data explorationand visualization : Analyzing and visualizing data to
identify
s
patterns,trends and relationshipsusing tools like charts, graphs and dashboards.
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4. Data modeling and analysis : Applying statistical techniques and

algorithms to
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extract insights and predict future outcomes. This may involve regression analy sis,
clustering.classification,time series analysis, or other methods.
5. Interpretation and insights : Interpreting the results of the analy sis, drawing
conclusionsand extractingmeaningful insights that can drive business decisions and
strategies.
6. Reporting and presentation : Communicating the findings effectively through
reports, presentations,or interactivevisualizationsto stakeholders,enabling them to
understandand act upon the insights gained.
" Business analytics is widely used across industries to support a
variety of business
functions, includingmarketing,sales, operations,finance, supplychain managementand
customer service. It enables organizations to make data-driven decisions, optimize
processes, improve performance, identify new market opportunities,mitigate risks and
gain acompetitiveadvantage in the marketplace.

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Business Analytics 1-3 Introductionto BusinossAnalytics

1.1.1 Data Science

" Datascience is a multidisciplinaryfield that involvesextractingknowledge and insights
from structuredand unstructured datausing variousscientific methods, algorithms and
tools. It combines elements of statistics, mathematics, computer science and domain
expertise to analyze and interpret data in order to solve complex problems and make
data-driven decisions.
Data scientistsemploya combination of skills,such as data collection,data cleaning and
preprocessing,data analysis, machine learning, statistical modeling, data visualization
and communication.They workwith large datasets,often referred to as big dataand use
advanced techniquesto cxtract meaningfulinformationand patterns from the data.
The datascience process typically involves several steps :
1. Problem formulation : Defining the problem or question to be answered and
understandingthe business or research goals.
2. Datacollection : Gathering relevant data from various sources, such as databases,
APIs, websites or sensors. This may involve cleaningand organizingthe data.
3. Data preprocessing : Cleaning and transforming the data to ensure its quality.
consistency and compatibility with analysis techniques. This step may include
s
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handling missing values,outlier detection,feature scaling and normalization.

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4. Exploratory Data Analysis (EDA) : Exploring and visualizing the data to

understand its characteristics,uncover patterns, relationships,and anomalies. EDA
helps in gaining insightsand formulatinghypotheses.
5. Feature engineering : Selecting, creating or transforming fcatures (variables) to
improve the performance of machine learning models. This step involves domain
knowledgeand creativity.
6. Model building : Developing and training machine learning or statistical models
using the prepared data. This can include techniques like regression,classification,
clusteringor deep learning,dependingon the problem at hand.
7. Model evaluation: Assessing the performance of the models using appropriate
metrics and validation techniques. This step helps in understanding how well the
model generalizesto new, unseen data.
8. Model deployment : Integrating the model into a production environment or
creating a solution that addresses the original problem. This could involve building
APIs, creating interactive dashboards or incorporating the model into an existing
software system.

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BusinessAnalytics 1-4 Introductionto BusinessAnalytics
9. Model monitoring and maintenance : Continuously monitoring the mode's
performancein real-world scenariosand making necessary updates or improvements
as new data becomes available.
Data science finds applications in various fields, including finance, healthcare
marketing, e-commerce.socialsciences and many others. It has the potentialto generate
valuable insights, drive decision-making,automate processesand optimize performance
indiverse domains.
1.1.2 Business Analyticsand Data Science - Comparison
Businessanalyticsis more business-focused,using historicaland structureddata to drive
decision-makingand operational efficiency.Data science, on the other hand, has a
broader scope, encompassingadvanced techniques and a wider range of data types to
solve complex problems, make predictionsand drive innovation.
Sr. No. Parameters Businessanalytics Data science
1. Focus: Business analytics primarily Data science aims to extract
revolves around using data insights, patterns and
analysis techniques to gain knowledge from data by using
insights and make informed scientific methods, statistical
s
business decisions. It involves models and machine learning
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understanding and addressing algorithms. It focuses on

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business problems, improving understanding complex

processes and optimizing phenomena, building predictive
strategies. models and solving intricate
problems.
2. Scope : Business analytics often deals Data science encompasses
with structured data from broader range of data types,
internal sources, such as sales including structured,
data customer data, financial unstructured, and semi
data, and operational data. It structured data. It explores
emphasizes using historical diverse data sources, such as
data to identify trends, patterns social media feeds, sensor data,
and correlations that can guide text documents, images and
businessdecision-making. videos.
3. Techniques: Business analytics employs Data science involves various
various statisticaland analytical techniques such as data
methods, such as descriptive preprocessing,data exploration,
analytics (summarizing and statistical modeling, machine
visualizing data), diagnostic learning, deep learning, natural
analytics (understanding the language processing and data
causes of outcomes) and visualization. It emphasizes
predictiveanalytics(forecasting uncovering hidden patterns and
future trends and outcomes). making accurate predictions.

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Business Analytics 1-5 Introductionto Business Analytics

4. Tools Business analytics commonly Data science employs

uses tools like spreadsheets, programming languages like
data visualization software, Python or R, as wellas libraries
Business Intelligence(BI) tools, and frameworks tailored for
and statistical data analysis and machine
software
packages. These tools facilitate learning. It also utilízes tools
data exploration, reporting and for data visualization, data
creatinginteractivedashboards. manipulation and distributed
computing.
5. Application: Business analytics is typically Data science is applied in areas
applied to areas such as market like predictive modeling, fraud
research, customer detection, recommendation
segmentation,sales forecasting. systems, image recognition,
pricing optimization, supply natural language processingand
chain managenent and risk autonomous vehicles. Its focus
analysis. Its focus is on is on generating actionable
improving operational insights, developing advanced
efficiency, identifying growth models and leveragíng data for
opportunities and driving innovation.
business performance.

Review Question

1. Compare businessanalyticsand data science.

s
AU: Marks 7
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1.2 AnalyticsLife Cycle

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The analytics life cycle refers to the iterative process of applying data analytics
techniquesto gain insights and make informed decisions. It encompassesseveral stages
that organizationsfollow to extract value from data. Here is an overviewof the analytics
life cycle:
1. Business understanding : The first stage involves understanding the business
problem or objective that analytics will address. This includes identifying key
questions, defining goals and determining the scope of the analytics project. It is
essential to align analytics initiatives with business priorities and establish clear
objectives.
2. Data acquisition: In this phase, relevantdata is collectedfrom various sources. This
may involve accessinginternaldatabases, external data providers, APls or scraping
data from websites. Data acquisition also includes data Extraction,Transformation,
and Loading(ETL) processesto ensure data quality and compatibilityfor analysis.
3. Data preparation: Once the data is acquired, it needs to be prepared for analysis.
This stage involves data cleaning, removing duplicates, handling missing values,
transformingdata into a suitable format and performingfeature engineeringto create
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Business Analytics 1-6 Introductionto BusinessAnalytics
new variablesor derive meaningful insights. Data preparation is critical to ensure the
accuracy and quality of the data used for analysis.
4. ExploratoryData Analysis (EDA) : In this phase, analysts explore the data to
understand its characteristics,relationshipsand patterns. Descriptive statistics, data
visualization techniques and statistical analysis are applied to identify trends,
outliers. correlations and potential variables that can influence the
analysis. EDA
helps in formulatinghypothesesand guiding subsequentmodeling steps.
5. Modeling and analysis : Once the data is
prepared and explored, various analytical
techniquesare applied to develop models and derive insights. This includes statistical
models, machine learning algorithms, predictive modeling,
or other advanced analytics methods. The goal is to optimizationtechniques
extract actionable insights, make
predictionsor solve specific business problemsbased on the data.
6. Interpretationand communication : After the analysis, the results need to be
interpreted and communicatedeffectively to stakeholders.This involves
the findings into meaningful insights, presentingthem in a translating
clear and understandable
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manner and providing recommendations for

decision-making. Visualization,
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storytellingand data storytellingtechniquesare often used to communicatecomplex

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informationeffectively.
7. Implementationand action : In this stage, the insights and
the analytics are put into action.The organization may
recommendationsfrom
implement changes,
decisions based on the findings or optimize processes using the generated make
The analytics results should drive informed insights.
decision-makingand lead to tangible
businessoutcomes.
8. Monitoring and iteration : Once the actions are
implemented, it is crucial to
monitor their impact andevaluate the effectivenessof the analyticssolution.
monitoring helps track Key Performance Indicators (KPIs), assess the Ongoing
predictionsand identify areas for improvement.Based on the monitoringaccuracy
of
analytics life cycle may iterate by revisiting earlier stages, refining results, the
incorporatingnew data. models or
" The analytics life cycle is an iterative process, as each cycle
helps refine the
understanding,models and insights gained from data analysis. By continuously
and inproving the analytics process, refining
organizations can enhance their data-driven
decision-makingcapabilitiesand drive business success.
Business Analytics 1-7 Introductionto BusinessAnalytics

Review Question

1. Explain in detail analvtics life cycle. AU: Marks 7

1.3 Types of BusinessAnalytics

There are several types of business analytics, cach serving a specific purpose and
providing insights into different aspects of a business. Here are some common types of
business analytics:
1. Descriptiveanalytics : Descriptive analytics focuses on understanding historical
data and providing a summary of what has happened in the past. It involves
techniques such as data aggregation, data visualization and reporting to describe
patterns. trends and Key Performance Indicators (KPIs). Descriptive analytics
provides a foundation for further analysis and decision-making.
2. Diagnosticanalyties: Diagnosticanalyticsaims to determinethe causes and reasons
behind specific business outcomes or events. It involves drilling down into data to
identify relationships, correlations and dependencies between different variables.
Diagnostic analytics helps answer the question "Why did it happen?" by examining
s
historicaldata andidentifyingthe factors that influenceda particular outcome.
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3. Predictive analytics: Predictive analytics uses historical data and statistical

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techniquesto make predictionsabout future outcomes or events. It involves applying

predictivemodels andalgorithmsto identify patternsand trends in historicaldata and
use them to forecast future behavior. Predictive analytics enables businesses to
anticipate customer behavior, demand trends, market changes and potential risks.
empoweringthem to make proactivedecisions.
4. Prescriptiveanalytics : Prescriptiveanalytics goes beyond predictive analytics by
not only predictingfuture outcomes but also providingrecommendationson the best
course of action. It combines historical data, predictive models, optimization
techniques and business rules to suggest the most optimal decisions to achieve
desired outcomes. Prescriptiveanalytics helps businessesanswer the question "What
should wedo?" by providingactionableinsightsand decision support.
5. Diagnostieanalytics: Diagnosticanalytics focuses onexploringdata to understand
the reasons behind specificevents or outcomes. It involves analyzingdata to identify
patterns, correlationsand causal relationships.Diagnostic analytics helps businesses
uncover the factors that contributedto aparticularoutcome or event, enabling them
to make informed decisionsand take appropriateactions.
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Business Analytics 1-8 Introductionto Business Analytrca
6. Text analytics: Text analytics involves extractinginsights from unstructuredtext1l
data, such as customer feedback.socialmedia posts. emails, surveys and documents
It uses Natural Language Processing(NLP) techniquesto analyze and interpret text.
enabling businesses to understand customer sentiment, extract key topics, identif,
emerging trends and perform sentimentanalysis.
These different types of business analytics complementeach other and can be used in
combination to provide a comprehensive understanding of a business and support
decision-makingat various levels, from operationalto strategic.
1.3.1 Componentsof BusinessAnalytics

Data
visualization Optimízation
Prescriptive
analytics
Components
Stages
Forecasting)
Predictive
analytics
s
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Data
Data
mining
Descriptive aggregation
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Text mining
analytics

Fig 1.3.1 Stages and components of business analytics

Business analytics consists of several key components that work together to extract
insights and drive data-driven decision-making. Here are the main components of
businessanalytics:
1. Data collection : The process of gatheringrelevant data from various sources, both
internal and external to the organization. This includes structured data from
databases, spreadsheets, transactional systems, as well as unstructured data from
sources like social media, web logs or text documents.
2. Data integration: Integratingand combiningdata from multiple sources to create a
unified view. This involvescleaning,transforming,and organizingthe data to ensure
consistencyand compatibility.Data integrationenables a comprehensiveanalysisby
bringingtogetherdiverse data sets.
3. Data storage and management: Storing and managing the collectedand integrated
data in astructured manner. This can be done through data warehouses,data lakes or
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Business Analytics 1-9 Introductionto Business Analytics

other data management systems. Data storage includes processes like data indexing.
partitioningand ensuringdata security and privacy.
4. Data cleaningand preprocessing: Theprocess of cleansingand preparing the data
for analysis. It involves handling missing values,removing duplicates,resolving
inconsistenciesand normalizingor transformingthe data as necessary. Data cleaning
and preprocessingensure data quality and reliability.
5. Descriptive analytics : Descriptive analytics focuses on summarizing and
visualizing historical data to gain insights into what has happened. This includes
using techniques like data visualization, dashboards and reports to understand
patterns, trendsand key metrics.
6. Predictiveanalytics: Predictiveanalyticsinvolvesanalyzing historicaldata to make
predictionsand forecasts about future outcomes. It uses statisticalmodeling, machine
leaning algorithms and predictive modeling techniques to identify patterns and
relationshipsthat can be used to anticipatefuture trends and behavior.
7. Prescriptive analytics : Prescriptive analytics takes predictive analytics a step
further by providing recommendationsand actionable insights. It uses optimization
algorithms, simulation modeling and decision support systems to suggest the best
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course of action based on the predictedoutcomesand businessconstraints.

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8. Datavisualizationandreporting: Presentingdata and insights in a visual format to

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facilitate understanding and decision-making. Data visualization techniques like

charts, graphs and interactive dashboards make it easier to comprehend complex
informationand communicatefindings to stakeholders.
9. Business Intelligence (BI) Business intelligence involves the technologies.
processes and tools used to collect, analyze and present data to support business
decision-making.Bl encompasses data integration, reporting, ad-hoc analysis and
interactive visualization.

10. Data governanceand ethies : Ensuring data integrity,security and compliancewith

relevant regulations. Data governance involves establishingpolicies, procedures and
standards for datamanagement,data privacy and data security. It ensures that data is
usedethically and in accordancewith legal and regulatory requirements.
" These components work in conjunction to enable organizations to leverage data
effectively and gain valuable insights that drive strategic and operational decision
making.

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Business Analytics 1- 10 Introductionto BusinessAnalvtis
|1.3.2 Applicationsof BusinessAnalytics
Business analytics has a wide range of applications across various industries and
business functions. Here are some common applicationsof business analytics :
1. Marketing analytics : Businesses use
marketing analytics to gain insightsinto
customer behavior, preferences and trends. It helps in
understanding customer
segments, targeting the right audience, optimizing marketing campaigns,
the effectiveness of marketing efforts and measuring
improving customer acquisition and
retention strategies.
2. Sales analytics : Sales analytics
focuses on analyzing sales data to identify patterns,
trends and opportunities.It helps businesses
sales volumes,track sales pipeline, identify optimize sales performance, forecast
and improve sales strategiesand cross-sellingand upsellingopportunities
3. Financialanalytics : processes.
Financial analytics involves analyzing financial data to
insights into the financial performanceand health of a gain
planning and forecasting, profitability business. includes financial
It
fraud detection and compliance analysis,cost optimization,risk assessment,
4. monitoring.
Operationsanalytics : Operationsanalytics aims to
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improve operationalefficiency.
productivityand quality. It involves analyzing data related
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supply chain management, inventory to production processes,

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management, logistics and resource allocation.

Operations analytics helps in optimizing
resource utilization,and enhancingoverall processes, reducing costs, improving
operational
5. Human
Resources (HR) analytics : HR analytics performance.
gain insights into workforce involves analyzing HR data to
performance, employee
and retention,
compensation and benefits, training andengagement, talent acquisition
planning. It helps businessesmake
informed decisions
development and workforce
employee satisfaction,successionplanning and related to talent management,
6. Risk analytic :
Risk analytics focuses on workforce optimization.
involves analyzing data to assess and identifyingand managing business risks. It
develop risk mitigation strategies.Risk quantify risks, predict potential risks and
assessment,fraud detection,insurance analytics is used in areas such as credit
risk
7. Customer underwriting, and
analytics : Customer analytics aims to regulatorycompliance.
preferences and needs. It involves understand customer behavior.
patterns, segment customers, analyzing customer data to identify buying
personal1ze marketing strategies, optimize
experienceand improve customer satisfactionand loyalty. customer
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Business Analytics 1 - 11 Introductionto Business Analytics

8. Supply chainanalyties : Supply chain analytics focuses on optimizingsupply chain

operations, reducing costs and improving efficiency. It involves analyzing data
related to inventory levels,demand forecasting, supplier performance, logistics and
distribution. Supply chain analytics helps in improving procurementstrategies,
demand planning. inventory managementand supplier relationshipmanagement.
These are just a fewv examples of how business analytics is appliedin different areas.
The applicationsof business analyticsare constantlyevolving as organizationsfind new
ways to leverage data to gain a competitive advantage, improve decision-makingand
drive business growth.
1.3.3 Terminologies
Business analytics is afield that involves the use of statistical analysis, data mining.
predictive modeling and other analytical techniques to gain insights and make data
driven decisions in a business context. Here are some key terminologiescommonly used
in the field of business analytics :
1. Data analytics : The process of examining data to uncover patterns, draw
conclusions and make informed business decisions.
s
2. Deseriptiveanalytics : The analysis of historical data to understand what happened
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in the past and gain insights into patternsand trends.

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3. Predictiveanalytics : The use of statisticalmodels and techniquesto predict future

outcomes based on historical data. It involves forecasting and estimating
probabilities.
4. Preseriptiveanalytics : The application of optimization techniques and decision
algorithms to recommend actions that willoptimize business outcomes. It provides
recommendations on what actions to take based on predictions and business
constraints.
5. Data mining : The process of discoveringpatterns and relationshipsin large datasets
to extract valuable information. It involves using techniques like clustering,
classification,regression,and associationrule mining.
6. Machine learning : Asubset of Artificial Intelligence (Al) that involves the
developmentof algorithmsand statisticalmodels that enable computersto learn trom
dataand make predictionsor decisions without being explicitly programmed.
7. Big data : Large and complex datasets that cannot be easily managed or analyzed
using traditional data processing techniques. Big data typically involves high
volumes, variety and velocity of data.

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BusinessAnalytics 1- 12 Introductionto Business Analytics
8. Key Performance Indicators (KPIs) : Quantifiable metrics that measure he
performance of a business or specific aspects of it. KPis are used to evaluate the
success or effectivenessof a particularactivity or objective.
9. Data visualization :The graphical representationof data and informationto make it
easier to understand and interpret. It involves using charts, graphs and other visual
elements to present data in a meaningfuland visually appealingway.
10. Data warehouse: A centralized repository of integratedand
structured data from
various sources within an organization. It provides a unified view of data
and
supports reporting, analysis and decision-makingprocesses.
11. Business Intelligence(BI) : The technologies,tools
and processes used to collect.
analyze and present data in away tht helps businessesmake informed
decisions.B
involves data integration, reporting,dashboards andad-hoc analysis.
12. Dashboard : A visual display of key
metrics, performance indicators and other
relevant information in a consolidated and easily
digestible format. Dashboards
provide a real-time snapshotof business performance.
13. Data cleansing : The process of
identifying and correcting or
s

inconsistencies,and inaccuracies in datasets. It aims to improve removing errors.

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data quality and

reliabilityfor analysis.
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14. Regression analysis : A statistical

technique used to model and analyze the
relationshipbetween dependent variable and one or more
a
helps understand how changes in the independentvariables. It
variable.
independent variables affect the dependent
15. A/B testing:A method of
comparing two versions (A and B) of a webpage.
advertisement other elements to determine which performs better in
or
engagement or conversion rates. It is comnmonly used in terms of user
optimization. marketing and website
These are just a few of the many
terminologiesused in the field of business analytics.
The field is constantly evolving and
new
technologyadvancesand businessesseek totermms and techniques continue to
leverage data for
emerge as
competitiveadvantage.

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knowledge
Business Analytics 1- 13 Introductionto Business Analytics

1.3.4 Three Stages of BusinessAnalytics

Business
computer cloud
data storage
Predict
opportunities in Allocate resources
Find possible
business-related which the firm to take advantage
opportunities can take of the predicted
opportunities
advantage

Outcome of the entire

Business Descriptive Predictive Prescriptive BA analysis
database analytic analytic analytic measurable increase in
or data set analysis analysis analysis business value
and performance

What's happening
What happened ? why is it How shall it be
happening and handled ?
what will happen ?
Business
reports
s
Fig. 1.3.2Stages of business analytics
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Businessanalytics can be divided into three main stages or phases, each serving a
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specific purpose in the analytical process. These stages are commonly known as
descriptiveanalytics, predictiveanalytics and prescriptiveanalytics. Let'sexplore each
stage :
1. Deseriptiveanalytics : Descriptiveanalytics isthe first stage of business analytics.
It involves examining historical data to gain insights into past performance and
understand what has happened in the business. Descriptive analytics focuses on
summarizing and visualizing data to identify patterns, trends and relationships. It
aims to answer questions like "what happened?"and "why did it happen?"
Techniques commonly used in descriptive analytics include data aggregation, data
visualization, dashboards and reports. By analyzing deseriptive analytics,
organizationscan understand their current state, evaluate historicalpertomanceand
identifyareas that require attention or improvement.
2. Predictive analytics : Predictive analytics builds on descriptive analytics and
involves analyzing historical data to make predictions about future events or
outcomes. It uses statistical modeling,machine learning algorithms and data mining
techniques to uncover patterns and relationships in the data and create predictive
models.
Business Analytikcs Introductionto Business Analytie.
The goalof predictive analytics is to answer questionssuch as "What is likely
happen" and "What are the potential outcomes" By leveraging historical dats
organizations can develop models that forecast future trends, anticipate customer
behavior, predict sales volumes or estimate risks. Predictive analytics provide
insights that help organizations make more informed decisionsand take proactiye
actions.
3. Prescriptiveanalytics : Prescriptiveanalytics is the most advanced stage of busines
analytics. It focuses on recommending actions or decisions to optimize businese
outcomes based on the insights derived fromdescriptive and predictive analytics
Prescriptive analytics leverages optimization algorithms, simulation models anc
decision support systems to suggest the best course of action given specific
constraintsand objectives.
" Prescriptiveanalytics aims to answer questions like "What should we do?" and "How
can we achieve the best outcome?" It goes beyond predicting
future scenarios by
providingrecommendationson the actions to be taken. By simulatingdifferent scenario
and analyzing trade-offs, organizations can make
data-driven decisions to improve
efficiency,optimize resource allocation,minimize risks or maximize desired outcomes.
s

" It's important to note that these stages are not strictly linear and
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can be iterative. Insight

gained from each stage can inform and refine subsequentstages, leading to an
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iterativ
process of continuousimprovementand refinementin business analytics.
1.3.5 Process
The businessanalytics process involves several steps to extract
insights fromn data and
support decision-makingin abusiness context. While different organizationsmay have
variations in their specificprocesses, here is a general outline of the steps involved in
business analytics :
1. Define the business problem : Clearly articulate the
business problem or objective
you want to address. Understand the specific goals,
challenges and requirementsot
the organization.Collaborate with stakeholdersto gather their
input and define the
problem statement.
2. Identify key metrics and data requirements :
Determine the Key Performance
Indicators (KPls)andmetrics that align with the business problem,ldentify the data
required to measure andanalyze these metrics. This involves
of data needed, such as customer data, sales data,
understandingthe typès
financial data or operationaldata.

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Business Analytics 1- 15 Introductionto Business Analytics

3. Data collection :Gather the necessary data from internal and external sources. This
may involve extracting data from databases, CRM systems. ERP systems. weh
analytics tools, surveys or other sources. Ensure the data is accurate. reliable and
relevant to the problem at hand. Consider ataquality issues, data privacy regulations
and any necessarydata transformations.
4. Data cleaning and validation : Cleanse the data to ensure its quality and integrity.
This includes handling missing values, resolving inconsistencies, removing
duplicates andstandardizingformats. Validatethe data to ensure it meets the defined
quality standards. Perform data profiling and exploratory analysis to gain insights
into the data's structure and characteristics.

5. Data transformation and integration : Prepare the data for analysis by

transformingitinto asuitable format. This may involve aggregating.disaggregating.
filtering or normalizing the data. Integrate data from multiple sources to create a
unified view if necessary. Consider using techniques like data wrangling, feature
engineeringor data enrichmentto enhancethe dataset.
6. Exploratory Data Analysis (EDA) : Conduct exploratory analysis to uncover
patterns, relationships and trends in the data. Use deseriptive statistics, data
s
visualization techniques and statistical analysis to gaininsights. ldentify outliers.
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correlationsand potential variables of interest. EDA helps to understand the data

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better and identifypotentialareas for further analysis.

7. Statistical analysis and modeling : Apply appropriate statistical techniques or
advanced modeling approachesto analyze the data and generate insights. This may
involve regression analysis, time series analysis, clustering, classification or
predictive modeling techniques like machine learning algorithms. Select and fine
tune models,validatetheir performanceand interpretthe results.
8. Data visualizationand reporting : Present the findings and insights in a visually
appealing and comprehensible manner. Create informative and interactive data
visualizationsusing charts, graphs,dashboardsor reports. Tailor the visualizationsto
the target audience and their specific needs. Use storytellingtechniquesto ettectively
communicatethe results and key takeaways.
9. Decision-makingand recommendations : Based on the analysis and insights
generated, make informeddecisions and recommendationsto address the business
problem. Collaborate with stakeholders to ensure buy-in and alignment. Provide
actionablerecommendationssupportedby the data analysis. Considerthe limitations,
risks and uncertainties associated witlh the findings and communicate them
appropriately.
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Business Analytics 1- 16 Introductionto BusinessAnalytics

10. Implementationand monitoring: Implement the recommendedstrategies,changes

or initiatives. Track the implementationprogress andmonitor the outcomes againe
the defined KPls.Continuouslynmeasure and evaluatethe impact of the implemented
solutions. Use monitoringtools, feedback mechanismsor performancedashboardsto
assess the effectivenessof the decisionsand adjust strategiesif necessary.
11. Continuous improvement and iteration : Business analytics is an iterative process,
Learn from the outcomes, feedback and evolving business needs to improve the
analysis and decision-makingapproach. Refine data collection methods, modeling
techniquesor analytical methodologies.Continuouslyupdate and adapt the analytics
process to leverage new technologies,data sources or emerging businesstrends.
Remember, the business analytics process is not always linear and iterations may occur
at various stages. It requires collaboration between analysts, data scientists, domain
experts and stakeholders to ensure that the analysis aligns with the organization's
objectivesand supportseffectivedecision-making.
1.3.6 Importance
s
Business analytics plays a crucial role in modern organizationsand its importancestems
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from severalkey factors :

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1. Data-driven decision making : Business analytics enables organizationsto make

informed decisions based on data and evidence rather than relying solely on intuition
or gut feelings. By analyzing and interpreting data, organizations can identify
patterns, trends and insights that guide strategic and operational decision-making
This leads to more accurate, objectiveand effectivedecision-makingprocesses.
2. Improved performance and efficiency: Business analytics helps optimize business
operations and processes by identifying inefficiencies, bottlenecks and areas for
improvement. It allows organizations to measure and monitor Key Performance
Indicators (KPIs), track progress towards goals and identify opportunities for cost
reduction, resource optimization, or performance enhancement. This leads to
improved operational efficiency,productivityand profitability.
3. Customer insightsand personalization: Business analytics enables organizations
to gain a deeper understandingof their customers'behavior, preferencesand needs.
By analyzing customer data and patterns, organizations can personalize their
marketing strategies, improve customer segmentation, tailor product offerings and
deliver better customerexperiences.This enhances customer satisfaction,loyalty and
ultimatelydrives business growth.
 1- 17 Introductionto Business Analytics
Business Analytics
landscape.
Competitive advantage : In today's highly competitive business
4. analytics gain acompetitive edge.
organizationsthat effectively leverage data and
analytics helps organizations identify market trends, monitor competitors.
Business
data-driven decisions that outperform
analyze market dynamics and make
curve, seize opportunities
competitors. It enablesorganizationsto stay ahead of the
and adapt tochangingmarket conditions.
managenment and fraud detection : Business analytics plays a criticalrole in
5. Risk analyzing historical
By
identifying and mitigating risks, both internal and external.
risks, predict future risks and
data and patterns, organizationscan identify potential
also aids in fraud detection
develop strategies to mitigate them. Business analytics
activities in financial
andpreventionby identifyinganomalous patterns or suspicious
transactionsor operationalprocesses.
can uncover
6. Innovation and new business opportunities : Business analytics
opportunities or
insights and trends that lead to the identification of new business
trends,
innovative ideas. By analyzing market data, customer behavior and emerging
organizations can identify gaps in the market, new customer segments or untapped
business
markets. This enables organizations to develop new products, servicesor
s
models that cater to evolving customer needs and drive business growth.
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of
7. Continuousimprovementand adaptability : Business analyticsfosters a culture
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continuous improvement and adaptability within organizations. By measuring,

monitoring and analyzing data, organizationscan assess the effectiveness of their
strategies, initiatives, and processes. Data-driven insights help identify areas for
improvement,validate hypothesesand support evidence-baseddecision-making.This
allows organizationsto adapt and respond to changing market conditions, customer
demands and businesschallenges.
Business analytics empowers organizationsto leverage data effectively,make better
decisions, improve performance and gain a competitive advantage in today's data
driven business environment.It is a crucial tool for organizationsto extract insights,
drive innovationand achieve sustainablegrowth.

1.3.7 Scope of BusinessAnalytics

The scope of business analytics is vast and encompassesa wide range of applications
and industries.Here are some key areas where business analytics finds significant
Scope :
1. Marketing and customer analyties : Business Analytics helps organizations
understandcustomer behavior, preferencesand buying patterns. It enables effective
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Business Analytics 1- 18 Introductionto BusinessAnalytics
customer segmentation, targeted marketing campaigns,
recommendations and customer lifetime value analysis.Marketing analytics als
personalized
includes measuring campaign effectiveness, analyzing social media data and
optimizingmarketingspend.
2. Sales and revenue optimization : Business analytics supports sales forecasting,
sales performance analysisand territory optimization.It helpsorganizationsidentify
sales trends, analyze customer buying patterns and optimize pricing strategies. Sales
analytics also includes sales force effectiveness, pipeline analysis and customer
churn prediction.
3. Supply chain and operationsanalytics : Business analytics plays a critical role in
optimizingsupply chain operations, inventory managementand demand forecasting.
It helps organizations optimize procurement, improve production efficiency and
enhance logistics and distribution processes. Analytics in operations also includes
quality control, productionplanningand supply chain risk management.
4. Financialanalytics : Business analytics aids in financial
planning, budgeting and
forecasting.It enables organizationsto analyze financial data, assess profitabilityand
s

identify cost-savingopportunities.Financial analytics also includes fraud detection,

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risk management,and credit scoring.

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5. Human resources analytics : Business analytics supports talent acquisition,

workforce planning, performance management and employee engagement. It helps
organizations analyze HR data, identify skill gaps and optimize workforce
deployment. HR analytics also includes employee retention analysis, diversity and
inclusion metrics and workforce forecasting.
6. Risk analytics : Business Analytics plays a crucial role in identifyingand
managing
risks across various domains. It includes fraud detection, credit risk
assessment,
insurance claim analysis and operational risk management. Analytics also helps
organizationsin compliancemnonitoring, regulatory reporting andcybersecurityrisk
analysis.
7. Strategic planning and business performance management:
Business analytics
provides insights that drive strategic decision-making,performancetracking and g0dl
alignment. It helps organizationsassess market trends, conduct competitiveanalysis
and evaluate business opportunities.Analytics in strategic planning also
include
scenarioanalysis, business modeling and market forecasting.

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 IntroductiontoBusinessAnalytics
1- 19
to
Business Analytics
analytics plays asignificantrole in healthcare
Healthcare analytics: Business allocation and enhance operational
8. optimize resource
improve patient outcomes, healthcarequality and safety analysis,
data analysis,
efticiency.It includes patient
costoptimization.
diseasepredictionand healthcare of business analytics.
Virtually every
are just a few examples of the scope data analytics to gain
These benefit from leveraging
can
industry and business function achieve business objectives.
With the
decision-making and
insights,drive infomed in analyticstechnologies,the scope of
and advancements
increasingavailabilityof data new possibilitiesfor organizationsto
expand, offering
business analyticscontinues to
leveragedata for competitiveadvantage.
1.3.8Benefits of BusinessAnalytics
numerous benefits to organizationsacross various industries.
Business analytics offers
leveraging businessanalytics:
Here are somekey benefitsof organizations to make
: Business analyticsenables
1. Data-drivendecision making rather than relying on intuition or
based on data and insights
informed decisions
evidence-baseddecision-making,leading to
guesswork.It provides a foundation for
s
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outcomes.
more accurate and reliable
analyzingdata and identifyinginefficiencies
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efficiency
operational : By
2. Improved businessprocesses,reduce costs and
optimize
or bottlenecks,businessanalyticshelps
efficiency. It allows organizations to streamline operations,
improve operational
resourceallocation.
identifyareas for automationand enhance
Businessanalyticsenables organizationsto gain
3. Enhanced businessperformance:
into customer behavior, market trends and competitive dynamics. By
insights optimize
opportunities,
leveragingthese insights, organizationscan identify growth
satisfactionand enhance overall business
pricing strategies, improve customer
performance.
in identifyingand managing
4. Improved risk management : Business analytics aids
anomalies. It helps organizations
risks by analyzing historical data, patterns and
proactively
detect fraud, mitigate risks and enhance compliance efforts. By
measures to minimize
identifying potentialrisks, organizationscan take preventive
their impact.
to
5. Personalized customer experiences : Business analytics enables organizations
understand customer preferences, segment customers and deliver personalized
experiences.By analyzing customer data, organizationscan tailor products, services

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Business Analytics 1-20 Introductionto Business Analytics

and marketing efforts to meet individual customer needs, enhancing customer

satisfactionand loyalty.
6. Competitiveadvantage : Organizationsthat effectively leverage business analytics
gain a competitive edge by making data-driven decisions and anticipating market
trends. Analyticsenables organizationsto identify new market opportunities,monitor
competitoractivitiesand respond swiftly to changes in the business environment.
7. Improved marketing and sales effectiveness: Business analytics helps
organizationsoptimize marketing campaigns, target the right audience and improve
sales effectiveness.By analyzing customer data, organizationscan identify the most
effective marketing channels, optimize marketing spend and drive better customer
engagement.
8. Innovation and new product development Business analytics enables
organizationsto identify market gaps, analyze customer needs and gain insights for
new product development.By leveragingdata,
organizationscan generate innovative
ideas, improveproduct offeringsand stay ahead of the
9. Continuous
competition.
improvement Business analytics fosters a culture of continuous
improvement by providing organizations with data-driven insights and feedback
s

loops. It allows organizations to

measure performance, track progress and
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continuouslyrefine strategiesand operationsfor better outcomes.

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10. Efficient resource

allocation By analyzing data, organizations can
:
resource allocation, whether it is workforce optimize
budget allocation. Business Analytics deployment, inventory management or
helps organizations allocate
efficiently,reducingwaste and improving overallresource resources
These benefits demonstratethe value and utilization.
impact business analytics on
of
decision-making, operational efficiency, customer experiences and organizational
performance. By leveraging data and insights, business
innovation and sustainable competitive organizations can drive growth,
landscape. advantage
in today's data-driven business
1.3.9Challengesof Business
Analytics
While business analytics offers
challenges in implementing andsignificant benefits, organizations may face several
common challengesassociatedwith leveraging analytics effectively. Here are sonk
1. Data quality and business analytics :
availability: Poor data
availability can hinder thequality, incomplete
and limited data
or inconsistent data
effectiveness business analytic
of
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Business Analytics 1-21 Introductionto Business Analytics

Organizationsneed to ensure that data is accurate, reliable and relevant for analysis.
Datacleansingand integrationprocessesare necessaryto address data quality issues.
2. Data governanceand privacy : Organizationsmust navigate data governance and
privacy regulations to ensure compliance and protect sensitive information. Data
govemance frameworks, policies and procedures should be in place to address data
privacy concernsand manage access to dataappropriately.
3. Data integration and complexity : Integrating data from disparate sources can be
challenging dueto variations in data formats, structures andsystems. The complexity
of data integration can hinder the ability to derive holistic insights. Establishing
robust data integrationprocessesand technologiesis crucial.
4. Analytical skills and talent gap : Business analytics requires skilled professionals
who possess a combination of domain knowledge, statistical expertise and
proficiencyin analyticaltools and techniques.The shortage of qualified data analysts
and data scientistscan pose a challenge for organizationsseeking to build analytical
capabilities.
5. Technology infrastructure: Implementing and maintaining the necessary
technology infrastructureto support business analytics can be complex and resource
s

intensive. Organizationsneed scalable and reliable systems, including data storage.

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processingpower and analytical tools, to handle large volumes of data and perform
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advanced analytics.
6. Change management and organizationalculture : Embracing a data-driven
culture and driving organizationalchange can be challenging. Organizations may
face resistance to adopting data-driven decision-making,requiring effective change
managementstrategiesand leadershipsupport.
7. Interpretationand actionabilityof insights : Extracting actionable insights from
data analysis can be a challenge. Organizations need to ensure that the generated
insights are understandatble,relevant and actionable for decision-makers.The ability
to translate analyticalfindings into tangible actions is essential for realizing the value
of business analytics.
8. Cost and Return on Investment (ROI) : Implementing and maintaining business
analytics capabilities can involve significant investments in technology, talent and
infrastructure.Organizationsmust carefully assess the costs and potential returns to
justify the investmentand ensure that the benefits outweigh the expenses.
Addressing these challenges requires a comprehensive approach that includes data
governance, talent development, technology investments, change management and a
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 Business Analytics 1- 22 Introductionto Business
commitmentto building adata-drivenculture within the organization.Overcomingthe
Analytic
challenges can unlock the full potential of business analytics and drive impacts
decision-makingand business outcomes.
1.3.10 Business Analytics Examples
" Here are some examples of howv business analytics is applied in various industriesand
business functions :
1. Retail industry :
" Customer segmentation : Retailers use business analytics to
segment their customer
base based on demographics, buying behavior and preferences. This helps tailo
marketing campaigns, promotionsand product offeringsto specificcustomersegments.
Demand forecasting : By analyzing historical sales data and external factors like
seasonality and promotions, retailers can forecast demand for products. This allows
them to optimize inventory levels, reduce stockouts and improve overall supply chain
efficiency.
" Price optimization : Retailers utilize pricing analytics to determine optimal
pricing
strategies for products. By analyzing customer willingness to pay, competitor pricing
s
and market trends, retailers can optimize prices to maximize
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profitability while
remainingcompetitive.
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2. Health care industry:

Predictiveanalytics for patient health : Healthcare providers use predictive analytics
to identify patientsat risk of specific diseases or adverse events. By
analyzing patient
health records and relevant medicaldata, they can proactivelyintervene,
improve patient
outcomes and reduce healthcare costs.
" Fraud detection Healthcare organizations employ analytics to identify fraudulent
activities,such as billing fraud or insurance fraud. By analyzing patterns,
anomaliesand
historical data, they can detect and prevent fraudulent behavior, ensuring
accurat
reimbursementand reducing financiallosses. a

" Resource optimization : Hospitals utilize business analytics to optimize resoure sp

allocation,such as hospital bed utilization,staff schedulingand equipment
maintenance av
Analyticshelps balance patient demand, resource availabilityand operationalefficienc

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 1- 23 Introductionto Business Analytics
Business Analytics

3. Marketing andadvertising:
the
Customer Lifetime Value (CLV) : Businesses leverage CLV analysis to estimate
long-term value ofa customer. By considering factors like purchase history, average
order value and customer retention rates, organizations can identify high-value
customers,personalizemarketingefforts and allocate resourceseffectively.
Campaign performanceanalysis : By analyzing marketing campaign data, businesses
can assess the effectivenessof different marketing channels, messages and strategies.
Analytieshelps optimize marketingcampaigns,allocate budgets eficientlyand improve
Return On Investment (ROI).
Social media analytics : Organizations analyze social media data to understand
customer sentiment, preferences and engagement. By monitoring social media
conversations and sentiment analysis, businesses can adjust marketing strategies,
address customerconcernsand improve brand perception.
4. Financialservices :
" Credit scoring : Financial institutions use analytics to assess creditworthinessand
s
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predict the likelihoodof default. By analyzingcredit history, income and other relevant
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factors,they can make infornmed lending decisionsand manage credit risk effectively.
Fraud detection: Financial organizations employ analytics to detect fraudulent
activities, such as identity theft, payment fraud or money laundering. By analyzing
patterns, anomalies and transactional data, they can identify suspicious behavior and
prevent financial losses.
" Portfolio management : Investment firms utilize analytics to optimize investment
portfolios.By analyzing market trends, historical data and risk factors, they can make
data-driven investment decisions, balance risk and return and enhance portfolio
performance.
These are just a few examples of how business analytics is applied across industries.The
applications of business analytics are extensive, spanning areas such as supply chain
management, operations optimization, risk management, human resources and more. The
specific use cases and analytics techniques employed vary based on the organization'sgoals,
availabledata and industry context.
Business Analytics 1- 24 Introductionto BusinessAnalytioe

1.3.11 BusinessAnalyticsTools
There are various business analytics tools available in the market, each offering unjaue
features and capabilities.Here are some popular tools commonly used in business
analytics:
1. Tableau: Tableau is a powerfuldata visualizationand business intelligencetool. It
allows users to connect to multiple data sources, create interactive dashboards and
generate insightful visualizations. Tableau offers a user-friendly interface and
supportsdrag-and-dropfunctionality.
2. Microsoft power BI : Power BI is a cloud-based business analytics platform
provided by Microsoft. It enables users to connect, analyze and visualize data from
multiple sources. Power Bl offers a range of data exploration, data modeling and
reportingcapabilities.
3. QlikView : QlikView is a self-service data discovery and visualization tool. It
provides users with the ability to explore data, create interactivevisualizationsand
generate dashboards. QlikView uses an associative data model to enable data
s
explorationfrom differentangles.
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4. IBM cognos analyties: Cognos analytics is an enterprise-levelbusiness intelligence

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and reporting tool. It offers features such as ad-hoc querying, interactivedashboards

and advanced analytics capabilities. Cognos analytics integrates with various data
sources and providesa unified view of data.
5. SAS : SAS (StatisticalAnalysis System) is a comprehensivesuite of analytics tools.
It offers a wide range of capabilities for data management, statistical analysis,
predictive modeling and machine learning. SAS is widely used in industries such as
healthcare, finance and retail.
6. R: R is a programming language and environment for statistical computing and
graphics. It provides a wide range of packages and libraries for data manipulation,
exploratory data analysis, statistical mnodeling and machine learning. R is popular
among statisticians and data scientists.
7. Python : Python is a versatile
programming language with numerous libraries for
dataanalysis and machine learning. Libraries such as
Pandas, NumPy and Scikit
Jearn provide powerful tools for data manipulation,analysis and
widely used in the data science community. modeling. Python
8. Apache spark: Apache spark is an open-sOurce,
distributed computingframewor
for big data processing and analytics. It provides high-speed data processing
capabilities and supports various data sources and analytical operations. Sparkis
Business Analytics 1 - 25 Introductionto Business Analytics

knownfor its scalabilityand ability to handle large-scaledata processingtasks.

9. RapidMiner : RapidMiner is an integrated platform for data preparation,predictive
modeling and machine learning. It offers a visual interface for building analytical
workflows and supports a wide range of data mining and machine learning
algorithms.
10. Google analytics : Google analytics is aweb analytics tool that provides insights
into websitetraffic, user behaviorand marketingeffectiveness.It offers features such
as data visualization, conversion tracking and audience segmentation to help
businessesoptimize their online presence.
" These are just a few examples of the many business analytics tools available in the
market. The choice of tool depends on factors such as the specific requirementsof the
organization,the complexityof analyticstasks, the size of the data and the expertiseof
the analyticsteam.

1.3.12 Business AnalyticsVs Data Analytics

Business analytics and data analytics are related fields that involve the analysis of data
to extract insights and drive decision-making.While there is overlap between the two
s
terms, they havesome distinctdifferences:
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Sr. No. Parameter Businessanalytics Data analytics

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Scope and focus Business analytics has a broader Data analytics primarily focuses
scope and focuses on using data on analyzing data to uncover
analysis to drive business patterns, trends and insights. It
decision-making and improve involves techniquessuch as data
business performance. It cleaning, exploratory data
includes not only data analysis analysis and statistical analysis
techniques but also business tounderstandand interpretdata.
strategy, domain knowledge,
and communication of insights
to stakeholders.
2 Objectives Business analytics goes beyond The main objective of Data
data analysis and aims to use analytics is to gain a deeper
data insights to solve specific understanding of data and
business problems and drive extract meaningful insights. It
strategic decision-making. It aims to answer questionsrelated
focuses on providing actionable to what happened, why it
recommendations and insights happened and what patterns or
that can lead to tangible trends can be observed in the
business outcomes. data.

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Business Analytics 1- 26
Introductionto Business Analyties
3. Context Data analytics can be applied in Business analytics is specifically
various contexts, including applied within the business
scientific research, academic context, where the analysis of
studies and exploratory data data is used to improve business
analysis. It can be used in any performance, optimize
field that involves analyzing processes, enhance customer
data to gain insights. experiences and achieve
business goals.
4 Stakeholderfocus Data analytics often focuses on Business analytics takes
data scientists, statisticians and broader perspective and
analysts who perform data involves collaboration with
analysis tasks and generate various stakeholders, including
insights. business managers, executives,
and decision-makers. The
insights and recommendations
generated from business
analytics are aimed at
supporting decision-making at
the strategic, tactical, and
s
operational levels of the
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organization.
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Data analytics primarily focuses on data analysis and extracting insights, while business
analytics encompasses a broader set of activities that includes data analysis, busines
strategy and decision-making. Business analytics leverages data insights to drive
business outcomes and inmproveorganizationalperformance.
Review Questions

1. What are types of business analytics. AU: Marks 6

2. Explain in detailcomponents of business analytics. AU: Marks 7
3. List down applications of business analytics. AU : Marks 6
4. Explain three stages of business analytics. AU : Marks 7
5. Discussscope of businessanalytics. AU: Marks 6
6. List downbenefits of business analytics. AU: Marks 7
7. Discuss challenges of business analytics. AU: Marks 6
8. Compare business analyticsvs data analytics. AU: Marks 7

1.4 Business Problem Definition

. Business problem definition is acritical step in business analytics that
involves cle
understanding and articulating the specificchallenges or opportunities that analy
initiatives aim to address. It involves identifying and defining the problem statement

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BusinessAnalytics 1- 27
Introductionto Business Analytics
which serves as the foundation for the entire analytics project. Here are
some key
aspects of business problem definition in business analytics :
1. Identify the key question : Start by identifying the key question or
problem that
needs to be solved. This question should be aligned with the
business goals and
objectives. For example, it could be related to optimizing operational efficiency,
improving customer satisfaction,increasing sales, reducing costs or identifying new
market opportunities.
2. Gather stakeholderinputs : Engage with
stakeholders,including business leaders,
managers, subject matter experts and end-users, to gather their perspectiveson the
problem. Understand their pain points challenges and desired outcomes. Their
insights will help shape the problem definition and ensure that the analytics solution
addresses their needs.
3. Define the scope: Clearly define the scope and boundaries of the
problem.
Determinethe specific aspects, processesor areas within the organizationthat willbe
the focus of the analytics project. Setting the scope helps manage expectations and
ensures that the analyticsefforts are feasible andactionable.
s

4. Formulate measurable objectives: Develop measurable objectives that clearly

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state what the analytics project aims to achieve. Objectives should be specific.
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measurable, attainable, relevant and time-bound (SMART). For example, an

objective could be to increase customer retention by 10 % within six months or
reduce inventory holding costs by 15 % within a year.
5. Analyze root causes : Dig deeper to understand the root causes of the problem.
ldentify the underlying factors or drivers contributing to the issue. This analysis
helps in developingtargeted analytics models and strategiesto address the problem
effectively.
6. Consider data availability: Assess the availabilityand quality of data that can be
leveraged to solve the problem. Identify the relevant data sources and determine if
any data gaps exist. Understanding the data landscape will help determine the
feasibilityof the analyticsprojectand the need for data acquisitionor preparation.
7. Evaluate business impact : Consider the potential impact of solving the business
problem. Assess the financial,operationalor strategic implicationsof addressingthe
problem successfully.Quantify the potential benefits and value that can be derived
from the analyticssolutionto demonstrateits Return On Investment(ROI).

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BusinessAnalytics 1-28 Introductionto Business
8. Document the problem definition : Summarize the problem definition,
Analytics
objectives
scope and key findings in a clear and concise manner. This documentationserves a
a reference point throughout the analytics project and ensures that
all stakeholder
have a shared understandingof the problem.
" By clearly defining the business problem in
business analytics organizationscan focus
their efforts,allocate resources effectivelyand develop
address the specific needs of the business. It lays the
targeted analytics solutionsthat
foundation for successful analytics
projectsand enables data-drivendecision-making.
1.5 Data Collection
Data collection plays a pivotal role in
business
gather and analyze relevant informationto make analytics, enabling organizationsto
insights. In the realm of business analytics, datainformed decisions and gain valuable
gathering of various types of data, including customercollection involves the systematic
records, market trends and more. This data, sales figures, financial
process can be achieved through
channels, such as surveys, interviews,website numerous
and transactional databases. tracking tools, social media monitoring
" Businesses collect
data from both internal and
s

external sources to obtain a

comprehensiveview of their operations and the broader
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data may be sourced from market landscape. Internally.

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enterprise systems,
Management (CRM) platforms, Enterprise Resourcesuch as Customer
Planning
Relationship
and inventory databases.
External data, on the other hand, may be(ERP) systems or sales
research firms, governmentdatabases, industry obtained from market
The reports or publicly availabledatasets.
collected data is typically
unstructured semi-structured and it needs to be
or
processed and organized for analysis.
specific goals and requirementsof the Data collection methods vary depending on the
implementingsurveys or questionnairesanalyticsproject. This may involve designingand
to gather customer feedback or
depth interviewsto capture conducting in
data scraping techniques to qualitative insights. In some cases, businessesmay employ
extract relevant informationfrom
integration consolidateinformationfrom multiple
to websites or employ data
" To ensure the sources.
accuracy reliability of the collected data,
and
datagovernance organizations often establish
frameworks and quality assurance
the data, cleaning it to remove processes.This involyes validating
inconsistencies or errors and
privacy regulationsto protect sensitive information. ensuring compliance with

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knowledge
Business Analytics 1- 29 Introductionto BusinessAnalytics

Once the data collection process is complete, the collected data is ready for analysis.
Through various statisticaland analytical techniques, businesses can uncover patterns,
trends, corelationsand other meaningful insights from the data. These insights serve as
afoundation for evidence-baseddecision-making,identifying areas for improvement,
optimizingbusiness processesand gaining a competitiveedge in the market.
Data collection is a fundamental component of business analytics, enabling
organizationsto gather, process and analyze relevant data to extract valuable insights.
By harnessing the power of data, businesses can make informed decisions, enhance
operationalefficiencyand drive innovation in today's data-drivenlandscape.

1.6 Data Preparation

Data preparation is a crucial step in the field of business analytics, as it involves
transforming raw data into a clean, structured and organized format that can be
effectively analyzed. It encompasses a series of processes aimed at ensuring data
quality,consistencyandrelevanceforanalysis purposes.
The first step in data preparation is data cleaning, which involves identifying and
rectifyingany errors, inconsistenciesor missing values in the dataset. This may include
s
6'

removing duplicate records, handling missing data through imputation techniques and
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addressing outliers or anomalies that could distort the analysis. Data cleaning helps to
improve the accuracy and reliabilityof the dataset, ensuring that subsequentanalysis is
based on reliable information.
The next step is data integration,which involves combining data from multiple sources
into a unified dataset. Organizations often collect data from various systems,
departments or external sources and data integration brings them together to create a
comprehensive view. This process may involve matching and merging records,
resolving discrepanciesindata formats and establishingrelationshipsbetween different
datasets. By integrating data, businesses can gain a holistic understanding of their
operationsand make more informed decisions.
Data transformationis another essential aspect of data preparation. Thisstep involves
convertingthe data into a format suitable for analysis. It may include standardizingunits
of measurement,aggregatingdata at different levels(e.g., daily to monthly)or creating
new variables or features derived from the existing data. Transformationhelps to align
the data with the specific requirements of the analysis and ensures consistency and
comparabilityacross differentvariables.

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Business Analytics 1-30 Introductionto Business
Data reduction or dimensionalityreduction techniques may be applied to large datasete
Analytics
with numerous variables. This process involves selecting a subset of relevant variables
or creating derived variables that capture the most important informationwhile reducino
the overallcomplexityof the dataset.Techniquessuch as Principal Component Analysis
(PCA) or feature selection algorithms can be utilized to achieve data reduction, which
improves computationalefficiencyand simplifiessubsequentanalysis.
Data formatting is another crucial step in data preparation. It involves
structuring the
dataset in a standardized and consistent manner, adhering to apredefined
schema
format. This includes defining variable names, establishing appropriate data types
(e.g., numerical, categorical or textual) and organizing the dataset into rows and
columns. Well-formatteddata facilitates easier analysis and ensures compatibilitywith
various analyticaltools and algorithms.
Finally, data validation and verification are performed to ensure the accuracy and
integrity of the prepared dataset. This involves checking the data against predefined
business rules, conducting plausibility checks and validating the data against external
sources or known benchmarks. Through validation and verification, potential errors or
discrepancies in the prepared dataset are identified and addressed, ensuring the
s
reliabilityof subsequentanalyses and insights.
6'

Data preparation is avital step in business analyties that involves cleaning, integrating.
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transformingand formatting raw data to make it suitable for analysis. Byensuring data
quality, consistencyand relevance, organizationscan generate accurate and meaningful
insights,leading to informed decision-makingand inmproved businessoutcomes.

1.7 HypothesisGeneration
Hypothesis generation in business analytics is the process of formulating educated
assumptions or hypotheses based on existing data, domain knowledge and problem
context. It involves proposing possible explanationsor relationshipsbetween variables
that can be tested and validated using data analysistechniques.
" The goalof hypothesisgenerationis toguide the analysis process by providingspecifik
statements or propositions that can be investigated to gain insights into business
problems or phenomena. These hypotheses help to focus the analysis, determinë
relevant data sources and select appropriate statistical tests or models for further
analysis.

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Business Analytics 1- 31 Introductionto Business Analytics

The process of hypothesisgenerationtypically involves the following steps :

1. Problem understanding: Begin by gaining a deep understandingof the business
problem or research question at hand. This involves gathering relevant information,
consulting subject matter experts and reviewing existing literature or industry
reports. By comprehendingthe problem context, you can identify key variables or
factors that may influencethe outcome.
2. Exploratorydata analysis : Perform exploratorydata analysis on the availabledata
to identify patterns,trends and potential relationships. Visualizations, summary
statistics and data profiling techniques can be used to gain initial insights and
generate hypotheses.This step helps inidentifyingpotential variables that may have
a significantimpact on the outcome of interest.
3. Domain knowledge and expertise : Leverage your domain knowledge and subject
matter expertise to generate hypotheses. This involves drawing on your
understanding of the industry, market dynamics, customer behavior and other
relevant factors. Domainexperts and stakeholderscan also provide valuable insights
s
and hypothesesbased on their experienceand knowledge.
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4. Existing research and literature : Review existing research studies, academic

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papers, case studies or reports relevant to the problem domain.This can provide
insights into previous findings, theories or models that can be extended or tested in
the current context. Existing research can inspire hypotheses or provide a starting
point for formulatingnew ones.
5. Data-driven hypothesis formulation : Based on the insights gained from the
previous steps, formulate hypotheses that are testable and specific. Hypotheses
typically take the form of a statementthat proposes a relationship or difference
between variables. For examnple, "Increased marketing expenditure leads to higher
sales" or "Customer satisfaction levels are higher for premium-tier products
compared to basic-tier products." Ensure that the hypotheses are aligned with the
objectivesof the analysis and can be empiricallytested using the availabledata.
6. Refining and prioritizinghypotheses : Once the initial hypotheses are generated,
refine and prioritize them based on their potential impact, feasibility of testing and
resource constraints. Focus on hypotheses that have the highest relevance and
potential for actionableinsights.
 Introductionto Business Analyti
Business Analytics 1-32

business analytics are not definiti.

" It is importantto note that hypotheses generated in
should
conclusions but rather starting points for further analysis. The hypotheses
tested rigorously using appropriate statistical methods, machine learning algorithms o
other analyticaltechniquesto validate or refute them based onthe evidence in the data
By following a systematic process of hypothesis generation, business analysts can
narrow down their focus,optimizedata analysis efforts and uncover meaningful insights
that drive evidence-baseddecision-making.
1.8 Modeling
Modeling in business analytics refers to the process of creating mathematical or
statistical models that represent real-world business processes, relationships or
phenomena. It involves the applicationof various techniquesand algorithms to analyze
data, make predictionsand derive actionable insights. Modeling plays a
crucial role in
understandingcomplex business problems, uncoveringpatterns and supporting decision
making.
The modeling process typically involves the
following steps :
1. Problem formulation : Clearly
define the business problem or objective that the
modelaims to address. This involves
understandingthe
s

variables of interest and determining the scope and context, identifyingthe key
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project. constraints of the modeling

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2. Data preparation : Prepare the data by cleaning, integrating,

formatting it in a suitable format for modeling. This transforming and
values, outliers and ensuring data quality includes handling missing
and consistency.The
divided into training, validationand testing prepared data is then
3. Model selection : sets to assess the model's performance.
Choose the
the problem, available data appropriatemodeling technique based on the nature of
and objectives.There are
business analytics, including regression various types of models used 0
models, clustering algorithms and models,classificationmodels, time series
networks, decision trees or support machine learning algorithms such as neurd
vector machines. The
depends on the specific selection of the model
requirements and
4. Model
development: Buildthe chosencharacteristics
model
of the problem at
using the selected
hand.
involves parameter estimation, Thi
training data. The model is optimization and calibration of the technique.
designedto capture the
variablesand the target variable(s)
model usingthe
of interest. relationships between the inpu
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Business Analytics 1-33 Introductionto BusinessAnalytics

5. Model evaluation: Assess the performance of the model using evaluation metrics
and validation techniques.This involves measuringthe accuracy, precision,recall, FI
score or other relevant metrics to determine how well the model performs on unseen
data. Cross-validation,hold-out validation or other validation methods can be
employed to assess the generalizationcapabilitiesof the model.
6. Model refinementand iteration : Based onthe evaluationresults, refine the model
by adjusting parameters, incorporatingadditional variables or exploring different
algorithms. Iterativelyrefine and improve the modelto enhance its predictivepower
and performance.
7. Model deployment : Once the model is deemed satisfactory,it can be deployed for
practicaluse within the business environment. This may involve integrating the
model into operationalsystems, creating a user interface for stakeholders or
incorporating it into decision support tools or dashboards. The deployment phase
ensures that the model is utilized effectivelyto drive decision-makingand achieve
the desired outcomes.
8. Model monitoringand maintenance: Continuouslymonitorthe performanceof the
deployed model and update it as needed. This includes tracking model accuracy,
retrainingthe model periodicallywith newdata and adapting it to changing business
s

conditions.
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Modeling in business analytics enables organizations to make data-driven decisions.

F1

predictfuture outcomes, optimize processes and gain a competitive advantage. It

provides valuable insights intocomplex business problems and helps in identifying
opportunities,mitigatingrisks and improvingoperationalefficiency.Effective modeling
requires a combination of domain knowledge, statistical expertise and data analysis
skills to develop accurate and robust models that drive business success.

1.9 Validationand Evaluation

Validationand evaluationare crucialsteps in the field of businessanalyticsto assess the
performance andreliabilityof analyticalmodels or solutions.These steps involve testing
the effectiveness,accuracy and generalizabilityof the developed models or analytics
approaches.
" Validation typically focuses on assessing whether the model or solution has been built
correctly,while evaluationdetermineshow well it performs in practice.
During the validation phase, the developed model or solution is examinedto ensure that
it meets the requirementsand objectives defined in the initialstages of the analytics
project. This includeschecking if the model adheres to the defined problem formulation,
data preparationand modeling techniques. Validationaims to verify that the model has
been implementedaccuratelyand is aligned with the desired objectives.
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Business Analytics 1-34 Introductionto Business Anali

Evaluation,on the other hand,focuses on measuringthe performanceand effectivenes

of the model or solution using appropriate evaluation metrics and techniques, I
evaluation process typically involves testing the model's predictive power, accuracy
precision,recall, FI score or other relevant metrics. This is done by comparing the
model's predictions or outputs with actual or ground truth data. Evaluationprovide
insights into how wellthe model performs on unseen or new data, allowing analyststo
assess its generalizationcapabilitiesand reliability.
Various validation and evaluation techniques can be employed in
business analytics
depending on the specific problem and the nature of the model or solution being
developed. These techniques may include hold-out validation,
bootstrappingor A/B testing. Hold-out validation involves splitting thecroSs-validation,
into training and testing sets, where the available data
training set is used to build the model and the
testing set is used to evaluate its performance on
unseen data. Cross-validation,on the
other hand, involves dividing the data into
testing the model on different multiple subsets and iterativelytraining and
performance.
combinations of these subsets to assess itsaverag
The validation and evaluation steps
s
are iterative
adjustments to the model or solution based on theandevaluation
may require refinements and
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process allows analysts to fine-tune the model, results. This iterative

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enhance its predictivepower or make necessary improvements and

performance.
Validating and evaluating the model or solution in
ensure its effectivenessand reliabilityin business analytics is essential t0
helps organizationsmake informed addressingthe business problem or objective.I
derived from the analytics process.decisions based on accurate and
By validating and trustworthy insights
businesses can gain confidence in the
outcomes and
evaluating analytical models
drive success and competitive make data-driven decisions tha
advantage.
1.10 Interpretation
Interpretationin business
meaningful analyticsrefers to the process of
insights from analytical models, data understanding and deriving
other output
generated
through visualizations,
data analysis. It
statisticalresults or a
information,identifying patterns, trends, involves extracting valuabk
and translating them into
actionable correlations and
knowledge that can drive relationships
within the dats
inform businessstrategies.
decision-making
3"

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Business Analytics 1-35 Introductionto BusinessAnalytics

Interpretationin businessanalyticscan encompassseveral aspects:

1. Data patternsand trends : Aalyzingthe data and identifyingpatterns and trends is
a key aspect of interpretation. This involves recognizing recurring themes,
seasonality or cyclical patterns in sales, customer behavior or market trends.
Understarnding these patterns helps businesses make informed predictions and
formulate strategies to capitalize on emerging opportunities or mitigate potential
risks.

2. Statisticalsignificance: Interpretingthe statisticalresults of data analysis is critical

to understandingthe reliabilityand significanceof findings. This includes assessing
p-values,confidenceintervals,effect sizes and other statisticalmeasures to determine
the strength and robustness of relationships or differences observed in the data.
Statistical significance helps validate the insights derived from the analysis and
supportsevidence-baseddecision-making.
3. Correlationsand relationships: Interpretingcorrelationsand relationshipsbetween
variables is vital in business analytics. Identifyingwhich variables are positivelyor
negatively correlated and understanding the strength of those relationships can
provide insights into cause-and-effectrelationshipsor factors that influence business
s

outcomes. This understanding helps organizations prioritize resources, allocate

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budgets and focus on key drivers of success.

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4. Predictive insights : Interpretation in business analytics involves leveraging

predictive models to forecast future outcomes. Understanding the factors and
variablesthat contributemost significantlyto predictionshelps organizationsdevelop
strategies and action plans to optimize performance, anticipate customer needs,
manage inventoryor mitigate risks.
5. Contextual understanding: Interpretationalso involves considering the broader
business context and domain knowledge. Combining data-driven insights with
industry expertise helps organizations interpret the analysis results effectively.
Contextual understandinghelps to identify the implicationsof findings, recognize
potential limitationsor biases in the analysis and apply the insights in a meaningtul
way to support businessobjectives.
" Effective interpretation in business analytics requires clear communication and
visualizationof results. Presenting the findings in a clear and understandablemanner
using data visualizations,charts, graphs or dashboards helps stakeholdersand decision
makers comprehend the insights easily and facilitates discussions around potential
actions or strategies.

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 lutoduotionto Bu6ln966 AalyAa
BusinesN Analyties
data inte
" limately, intorpretation in busineNs MMalytis is about transforming raw
and
actionable knowledye. It involves extracting insiplhts, drawing conclusions
commumicnting the implications of data alysis to drive strategie decision-making.
optimizeprocessesand pain a competitiveedye inthe marketplace.
1.11 Doploymentand Iteratlon
Deployment and iterationare key tapes in the lifecycle of business analytics that
involve putting analytical models, Nolutions or insightsinto practiccand continuously
retining them for ongoing improvement.
" Deployment in business analyticsrelers to the process of implementing the developed
analytical models, solutions or isights into the operational systems or busines
processes.It involves integrating the analyties outputs into the cxisting infrastructure,
tools or workflows tocnable their practical use and impact. Deploymentensures that the
valuableinsights and recommendationsderived from analyticsare cffectivelyutilized to
drivedecision-makingand in1prove businessoutcomes.
" During thedeployment phase, the following steps are typically involved :
1. Integration: Integrate the analytics outputs into the operational systems, software
applicationsor decision supporttools used within the organization.This may require
s
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developing APls (Application Programming Interfaces) or connecting to existing

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databasesor platforms to enable seamless integration.

2. User interface: Design a user-friendlyinterfacethat allows stakeholders,decision
makers or end-users to access and interact with the analyticsoutputs casily. This can
involvedevelopingdashboards,visualizations,or reports that present the insights in a
clear and actionable manner.
3. Trainingand adoption : Providetraining and support to users who willbe utilizing
the analyticsoutputs. This ensures that they understand how to interpretand leverage
the insights effectively. Encouraging user adoption and buy-in is erucial for
successful deployment and maximizing the impact of analytics within the
organization.
4. Monitoringand performanceevaluation :Continuouslymonitor the performanc
and impact of the deployed analytics solutions. This involves tracking ke
performanceindicators,evaluatingthe effectivenessof the insights in driving desire
outcomesand making adjustmentsor refinementsas needed.
lteration. on theother hand,involvesthe ongoing improvementandrefinement of
deployed analytics models or solutions. It recognizes that business conditions, da

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Business Analytics 1-37 Introductionto Business Analytics

availability or requirements may change over timeand the analytics outputs need to
adapt accordingly. Iteration involves a continuous cycle of feedback, learning and
enhancement to ensure that the analytics solutions remain relevant, accurate and
impactful.
" Key aspects of the iteration process include :
1. Feedback collection : Gather feedback from users, stakeholdersor customers who
interact with the deployed analytics solutions. This feedback can provide insights
into the strengths,weaknessesor areas for improvementin the analyticsoutputs.
2. Data updates : Update the data used in the analytics models or solutionsas new data
becomes available.Incorporate new data points or time periods to ensure that the
models remain up-to-dateand representativeof the current business environment.
3. Model refinement: Continuouslyrefine andimprove the analyticsmodels basedon
the feedback and insights gained. This may involve adjusting parameters,
incorporatingadditional variables, exploring alternativealgorithms or incorporating
new analyticaltechniquesto enhance accuracy, predictivepower or performance.
4. Continuouslearning : Embrace a culture of continuous learning and improvement
within the organization.Encourage experimentation,explorationof new techniques
s

and staying updated with the latest advancementsin the field of analytics. This
6'

allows for the identification of emerging opportunities or challenges and the

F1

proactiveenhancementof the analyticssolutions.

" By activelydeployingand iteratingon analyticsmodels and solutions,organizationscan
leverage the power of data to drive continuousimprovement,optimize processes,make
informeddecisionsand stay ahead in a competitivebusiness landscape.

1.12 Two Marks Questions with Answers

Q.1 What is data science ?

Ans. : Data science is a multidisciplinaryfield that involves extractingknowledge and insights

from structuredand unstructureddata using various scientificmethods, algorithmsand tools. lt
combines elements of statistics, mathematics, computer science and domain expertise to
analyze and interpretdata in order to solve complex problems and make data-drivendecisions.
Q.2 In brief explain analytics life cycle.

Ans. : The analytics life cycle refers to the iterative process of applying data analytics
techniques to gain insights and make informed decisions. It encompasses several stages that
organizationsfollow to extract value from data.

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BusinessAnalytics 1-38 Introductionto Business nalvtis
Q.3 Define data analytics.
Ans. : Data Analytics : The process of examining data to uncover
and make informed business
patterns, draw conclusions
decisions.
Q.4 Define descriptiveanalytics?
Ans. : The analysis of historicaldata to
understand what happened in the past and gain insights
into patternsand trends.
Q.5 Define
predictiveanalytics?
Ans. : The use of statistical models and
historicaldata. It involves forecastingand techniques predict future outcomes based on
to
Q.6 Define
estimatingprobabilities.
prescriptiveanalytics?
Ans. : The application of
optimization techniques and
actions that willoptimize business decision algorithms to recommend
take based on predictionsand outcomes. It provides
recommendationson what actions to
business constraints.
Q.7 Define data mining ?

Ans. : The process of

discoveringpatterns and relationshipsin large datasetsto
information. It involves using techniques like extract valuable
s

associationrule mining. clustering, classification, regression and

6'

Q.8 Define machine learning.

F1

Ans. : A subset of Artificial

statistical models that enableIntelligence(AI) that involves the
computers to learn from data anddevelopment of algorithms and
withoutbeing explicitlyprogrammed. make predictionsor decisions
Q.9 Define big data ?
Ans. : Large and complex
datasets that cannot be easily
data processing managed or analyzed using traditional
techniques. Big data typically involves high
data.
volumes, variety and velocity of
Q.10 What is Key
PerformanceIndicators(KPls) ?
Ans. : Quantifiable metrics that
KPls are used to evaluate the measure the performance
of a
success or business or specific aspects of it.
Q.11 Define data visualization. effectiveness
of a
particular activity or objective.
Ans. : The graphicalrepresentationof data
and
interpret. It involves using
meaningful and Visually appealing way.
information
charts, graphs and oher to make it easier to understandand
visual elements to present data in

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Business Analytics 1 - 39 Introductionto Business Analytics

Q.12 VWhat is data warehouse ?

Ans. : Acentralizedrepositoryof integrated andstructureddata from various sources within an
organization.It provides a unified view of data and supports reporting, analysis and decision
making processes.
Q.13 In short explain Business Intelligence(BI) ?
Ans. : The technologies,tools and processes used to collect, analyze and present data in a way
that helps businesses make informed decisions. BI involves data integration, reporting,
dashboardsand ad-hoc analysis.

s
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 UNIT II

2 Business Intelligence

Syllabus
DataWarehouses and DataMart - Knowledge Management-Types of Decisions- Decision Making
Process -DecisionSupportSystems- BusinessIntelligence-OLAP Analyticfunctions

Contents
2.1 Data Warehouses and Data Mart
2.2 Knowledge Management
s

2.3 Types of Decisions

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2.4 Decision Making Process

2.5 Decision Support Systems
2.6 Business Intelligence
2.7 Online AnalyticalProcessing(OLAP)
2.8 AnalyticFunctions
2.9 Two Marks Questions with Answers

(2- 1)
Business Analytics 2-2 Business Intelligence
2.1 Data Warehousesand Data Mart
Data warehouses anddata marts are two types of data storage and
management systems
commonly used in business analytics. While they serve similar purposes of storing and
organizing data for analysis. there are differences in terms of their scope, designand
Usage.
Adata warehouse is a centralizedrepositorythat
integrates data from various sources
within an organization. It is designed to support enterprise-wide
analysis. Data warehouses are typically large-scale, comprehensivedecision-makingand
and capable of
storing vast amounts of structured and semi-structured data. They
employ an ETL
(Extract, Transform, Load) process to extract data from disparate
into a consistentformat, and load it into the sources, transformit
warehouse.
" The main features of a data warehouse
include :
1. Data Integration: Data
warehouses consolidatedata from multiple sources, such as
operational databases, CRM Systems, financial systems and external
data sources.
They provide a unified view of the data, eliminating
2. Historical Data Storage : Data
redundancyand inconsistencies.
warehouses store large volumes of historical data,
capturing a long-term view of business operations. This enables
s

organizationsto
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perform trend analysis, identify patterns and make informed decisions based on
historical insights.
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3. Structured Schema: Data warehousesuse a

structuredschema called a star schema
or a snowflake schema to organize data into
dimensions and fact tables. This schema
allows for efficient querying and analysis across different
dimensions, such as time,
geography,product or customer.
4. Complex Queries and Analytics : Data
warehouses support complex queries and
analytics operations,including aggregations,drill-downs,slicing and dicing and data
mining techniques. They are optimized for analytical processingto
deliver fast and
efficientresponsesto complex analyticalqueries.
On the other hand, a data mart is a smaller,
more focused subset of a data warehouse tha
is tailored to the specific needs of a
particular department, business unit or functional
areawithin an organization.Data marts contain a subset of
data from the data warehous
andare designed to serve a specific user group or
more specialized and targeted view of the data, analytical purpose. They provide i
data sets for specific business functions or
offering simplified and pre-aggregat
teams.

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BusinessAnalytics 2-3 Businessirteligerce

" Key characteristicsof data marts include :

1. Data Subset : Data marts contain a subset of data from the data warehouse that is
relevant to a particularbusiness function or user group. This subset is specifically
tailoredto meet the analyticalneeds of that departmentor team.
2. DepartmentalFocus : Data marts are typicaly designed to serve the needs of a
specific department. such as sales, marketing finance or human resources. They
provide a localized view of data that aligns with the specific requirementsof that
department.
3. Simplified and Pre-aggregatedData : Data marts often store pre-aggregatedand
summarized data to facilitate faster querying and analysis. They may apply specific
transformations,calculationsor aggregationsthat are relevant to the targeted user
group.
4. Faster Performance : Due to their focused nature and pre-aggregateddata. data
marts can deliver faster query response times compared to a comprehensivedata
warehouse. They are optimized for the specific analytical requirementsof the user
group.
" In summary. while both data warehouses and data marts serve as repositoriesfor data
s
6'

analysis, data warehouses are comprehensive. enterprise-widestorage systems hat

F1

integrate data from multiple sources. while data marts are smaller. focused substs
tailored to specific business functions or departments. Data warehouses prov ide a
centralized,historicalview of data. while data marts offer specialized.pre-aggregated
data sets for targetedanalytical purposes.Organizationsoften use both data warehouses
and data marts in combination to meet their data analysis and reporting needs at
differentlevels of granularityand scope.
2.1.1 Data Warehouse-Introduction
" Adata warehouse is a large. centralized repository of integrated and structured data
from various sources within an organization. t is designed to support business
intelligence.reporting and analyticalprocesses by providinga unified view of data for
decision-makingand analysis purposes.
" The primary purpose of adata warehouse is to enable etticient and etfextive data
analysis, allowing organizationsto gain insights. identify trends and make infomad
business decisions.It acts as a single source of truth for data, consolidatinginfomation
from differentsystemsand transformingit into a consistentand standardizedfomat.

TECHNICAL PUBUCA TIONSan uphsrauege

Business Analytics 2-4
Business Intelligence
Key characteristicsand componentsof a data warehouse include :
1. Data Integration : Datawarehouses bring
together data from multiple operational
systems., such as transactionaldatabases, CRM systems,
chain systems and more. This integration process financial systems, supply
involvesextracting relevant data
transforming it into a consistentstructureand loading it into the warehouse.
2. Structured Schema : Data in a
data warehouse is organized using a
schema, typicallya star schema or a snowflake structured
schema. These schemas involve
defining dimension tables (describing business entities
time, etc.) and fact tables (containing like customers, products.
events).
measures or numerical data related to business
3. HistoricalData Storage : Data warehouses store large
capturing a long-term perspective of business operations.volumes of historical data,
trend analysis, identificationof patternsand Historical data allows for
comparisonofperformanceover
4. Optimized for
Analytics: Data warehouses are designed to support time.
analytical queries and reporting. They are optimized for complex
enabling efficient execution of aggregations, analytical processing.
s
manipulationsrequired for data analysis. drill-downs, filtering and other data
6'

5. Data Quality and

F1

Consistency : Data warehouses prioritize data quality and

consistency.The integration process includes data cleansing,
transformation to ensure data accuracy, consistency and normalization and
eliminateduplicate records, resolve reliability. This helps
6. Separate from inconsistenciesand maintain data integrity.
Operational Systems : Data warehouses are separate from
operational systems, which are optimized for
separation ensures that the performanceof transactional processing. This
by analyticalqueries and operational systems is not compromised
" The
reportingactivities.
benefits of adata warehouse include:
1. Integrated and Unified Data : Data
warehouses provide a unified view of data
enabling organizations to have a consistent
operations.By integrating data from various and holistic understanding of the
data silos andgain insights from sources, organizations can elimina
2. Improved Performance: Data cross-functional analysis.
warehouses are designed for efticient querying
analysis. They are optimized to handle
reporting, resulting in faster query complex analytical queries,aggregations
compared to operationalsystems.
response times and improved performanc

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Business Analytics 2-7 Business Intelligence

warehouse and is designed to meet the specificreporting and analytical needs of a

particularbusiness unit or user group.
" Here are some key characteristicsand considerations related to data marts in data
warehousing:
1. Subject-Oriented: Adatamart is typicallyorganizedaround a specificsubject area.
such as sales, marketing.finance or human resources. It contains data that is relevant
andtailored to the analyticalrequirementsof that particularsubject or department.
2. Data Granularity: Data marts often store data at a more detailed and granular level
compared to the data warehouse. This allows for more in-depth analysis and
reporting within the specific subject area. Data aggregationand summarizationmay
stilloccur in the data mart, but at a level suitablefor the subject'srequirements.
3. Data Integration : Data marts can be created by extractingand transformingdata
from the central data warehouse or by directly integratingdata from various source
systems. Depending on the approach, data integration processes, such as ETL
(Extract, Transform, Load), are performedto populate and update the data mart with
the relevant data.
4. Data Modeling : Data marts have their own data models tailored to the specific
s

subjectarea. These models are designed to supportthe reportingand analyticalneeds

6'

of the subject, providing a simplified and focused view of the data. Dimensional
F1

modeling, such as star schema or snowflakeschema, is commonly used in data mart

design.
5. User-Focused: Data marts are designed to cater to the needs of specific user groups
or business units within an organization.They are optimized for the reporting and
analysis requirementsof those users, providinga user-friendlyand intuitive interface
to access and explore the data.
6. Performanceand Secalability:Data marts are designed to deliver high performance
for queries and reporting within their subject area. By focusing on a specific subset
of data,data marts can be optimized for faster response times and improved query
performance.However, it is important to ensure that data marts are scalable to handle
increasing datavolumes and evolving analytical needs.
7. IncrementalDevelopment : Data marts are often built incrementally,starting with
the most critical or high-prioritysubject areas. This allows for faster implementation
and quicker delivery of analyticalcapabilities to users. As the organization'sdata
warehousing needs evolve, additional data marts can be created to cover other
subject areas.

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BusinessAnalytics 2-8
Business Intelligenc
8. Data Governance : Data governance practices and standards stil apply to data
marts, ensuring data quality,consistencyand security.While data governancemay h
more focused withinthe scope of a specificdata mart, it is importantto align the dat
mart's practices with the overall datagovernance framework of the organization.
Data marts provide a means to deliver targeted, subject-specificdata and analytic
capabilitiesto users, enabling them to gain insights and make informed decisionswithin
their respective domains.They can be standaloneentities or integratedwith a larger data
warehouse infrastructure, depending on the organization's requirements and data
warehousing strategy.
Data marts provide a localized and tailored solution for specific user
groups, enabling
them to access and analyze data that is directly relevant to their business area. They
complenmentthe central datawarehouse by deliveringfocused analyticalcapabilitiesand
empoweringusers to make data-drivendecisionswithin their domain.
2.1.4 Cost Effective Data Mart
Creating a cost-effective data mart within a data warehouse involves implementing
strategies and best practices to optimize resources and minimize expenses. Here are
someapproaches to consider :
s
1. Data Mart Consolidation : Instead of creating multiple individual data marts for
6'

each subject area or department, consider consolidating related data marts into a
F1

single, unified data mart. This consolidation reduces the infrastructure and
maintenancecosts associatedwith managingmultipledata marts.
2. Incremental Development : Adopt an incremental development approach to build
data marts gradually. Start with the most critical or high-prioritysubject areas and
expand as needed. This approach allows you to prioritize resources and allocate
budget based on the immediateneeds and business value.
3. Data Mart Virtualization: Explore the possibilityof virtualizingdata marts rathe
thanphysicallycreatingseparate instances.Virtualizationallows you toleveragethe
existing infrastructureand resources of the data warehouse, minimizing additiona
hardware and softwarecosts associatedwith maintainingseparate data marts.
4. Data Mart Automation : Implement automation tools and processes for data ma
development,maintenance and updates. Automation reduces manual effort, save
time and lowers operational costs. This can include automating data integratio
transformation,data modelgenerationand metadatamanagementtasks.

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Business Analytics 2-9 BusinossIntelligono
5. Cloud-Based Solutions : Consider leveraging cloud-based data warehousing
solutions to create and manage data marts. Cloud providers often offer flexible
pricing models, allowing you to pay for resources and usage on a per-nced basis.
This eliminates the upfront infrastructurecosts and provides scalability options as
your data mart requirementsevolve.
6. Open-Source Technologies : Utilize open-source technologies for data mart
development and management. Open-source tools often offer cost-effective
alternativesto commercialsoftware,reducing licensingcosts, Additionally,the open
source community provides ongoing support, enhancements and a wide range of
resources for implementation.
7. Data Compression and Storage Optimization : Implement data compression
techniques to reduce storage requirements in the data mart. Compressíng data
reduces disk space usage and lowers storage costs. Additionally, employ storage
optimization techniques such as data partitioning, indexing and data archiving to
improve query performanceand minimize storage expenses.
8. Performance Monitoringand Optimization : Regularly monitor and optimize the
performance of data marts to ensure efficient resource utilization. ldentify and
s

address performancebottlenecks,optimize queries and indexes and fine-tune the data

6'

additional
mart's configuration.Optimizing performance reduces the need for
F1

hardware resources and can lead to cost savings.

and
9. Resource Sharing and Collaboration : Encourage resource sharing
from
collaboration among data mart users and stakeholders. By enabling users
models,
different departmentsor subject areas to share common data and analytical
marts for
youcan reduce redundantefforts and costs associatedwith duplicatingdata
similar purposes.
expansion of
10. ScalabilityPlanning : Develop a scalabilityplan for future growth and
evolving
data marts. Consider the projected data volumes, user requirements and
allowing
business needs. Design the data mart architecturewith scalability in mind,
over time.
for easy and cost-effectiveexpansion as the demands increase
organizationscan create and manage
" By implementingthese cost-effectivestrategies,
resources and
data marts within their data warehouse environment while optimizing
the specific
minimizing expenses. It is important to align these approaches with
cost efficiencies.
requirementsand constraintsof the organizationto achieve the desired

TECHNICAL PUBLICATIONS-an up-thrustfor knowledge

Business Analytics 2- 10
Business Intelligenca
2.1.5 |DesigningData Marts
Designing data marts in a data warehouse involves several steps and considerations.
ensure they effectivelymeet the analyticaland reporting needs of
specificuser groupsor
departments.Here is ahigh-leveloverview of the design process :
1. ldentify Business Requirements : Start by
understanding the specific business
requirenentsand objectivesof the user group or departmentfor which the data mart
is being designed. This involves
with stakeholders to gather conducting interviews, workshops and discussions
information about their data needs, reporting
requirementsand analyticalgoals.
2. Define Subject Area:
Determine the subject area that the data mart will focus on,
ldentify the key entities, attributes and
step helps in defining the scope and relationshipswithin that subject area. This
aligns with the business objectives. boundaries the data mart and ensures that it
of
3. Determine Data
Sources : Identify the relevant data sources that
necessary data for the data mart. This can will provide the
include data from the central data
warehouse, operationaldatabases, external systems or other
structure, format and quality of the data from each sources. Understandthe
the data mart. source to assess its suitabilityfor
s
6'

4. Data Modeling : Design the

data model for the data mart.
Dimensional modeling
F1

techniques, such as star schema or snowflake schema, are

mart design. Define the commonly used in data
dimensions, which represent the various attributes or
characteristicsof the subject area and the fact tables, which
metrics that will be analyzed. contain the measures or
5. Data Extraction and
Transformation
transformation processes required to populate theDetermine the extraction and
identified sources. This may involve data data mart with data from the
cleansing, data integration, data
aggregation and other transformationsto ensure the
aligned with the data mart's data is consistent, accurate ano
6. Define requirements.
Granularity Determine the level of granularity at which the
:
stored in the data mart. This data will b
the level of detail depends on the analytical needs of
required for reporting and analysis, Strike athe user group a
storing data at a granular level for balance betwe
query performance. detailed analysis and aggregatingdata for fas
7. Establish Data
Governance :
Implement data governance practices withinthe datd
mart design. This includes defining data quality standards,data
lineage, data securiy
TECHNICAL PUBLICATIONS-an up-thrustfor
knowledoe
Business Analytics 2- 11 Business Intelligence
and access controls. Ensure that the data mart design adheres to the organization's
data governanceframework and policies.
8. Develop ETL Processes : Create the Extract. Transform. Load (ETL) processes to
extract data from the source systems, transform it according to the data mart's
requirementsand load it into the data mart.This involves defining data mappings.
transformations,data validationrules anderror handling mechanisms.
9. Design Reporting and AnalyticalCapabilities : Determine the reporting and
analytical capabilitiesthat willbe provided by the data mart. This can include pre
defined reports, ad-hoc query capabilities,online analytical processing(OLAP). data
visualizationand other tools or technologiesto facilitate data analysis and decision
making.
10. PerformanceOptimization :Optimizethe performanceof the data mart by creating
appropriate indexes, defining partitions and implementing caching mechanisms.
Fine-tunethe data mart's configurationand query performanceto ensure efficientand
responsivedata access.
11. Test and Validate : Conduct thorough testing and validation of the data mart to
ensure its accuracy, reliabilityand usability. Test the ETL processes, data integrity.
s
query performance and reporting capabilities. Validate the data mart against the
6'

business requirements and gather feedback from users to make necessary

F1

refinements.

12. Deploy and Maintain: Deploy the data mart into the production environmentand
establish a maintenance plan for ongoing updates, data refreshes and pertormance
monitoring.Monitor the data mart's usage, performanceand user feedback to identifv
areas for improvementand make iterativeenhancements.
The design of data marts should be an iterative and collaborativeprocess, involving
close collaborationbetween business stakeholdersand data. The specific design process
may vary dependingon the organization'srequirements,technologiesused and available
resources. It is essential to involve stakeholders,data architectsand other relevant teams
throughoutthe design process to ensure alignment with business objectivesand optimal
utilization.

2.1.6 Cost of DataMarts

The cost of implementingdata marts can vary depending on several tactors, including
the organization's size, complexity of requirements, chosen technologies and
deploymentoptions, Here are somecost considerationsto be econsidered:

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 BusinessIntelligencA
2- 12
BusinessAnalytics hardware and software
support their
1. Infrastructurestorage
Costsand
: Data require
processing infrastructure
marts needs, This inchudes servers, storage device,t
Bus

cost of
database management systems. The these
networking equipment and requiremen
vary based on factors such as capacity, pertormance
componentscan infrastructureis used.
on-premises or cloud-based
and whether
and Sofware Costs : Depending on the technology stack chosen f
2. Licensing licensing fees associated with commercial
implementingdata marts, there may be
databases and analvtical tools. The cost can vary dependingon the numbe
sofware.
features required and vendor pricing models. Open-source options can
of users,
licensing fees but may require additiona
provide cost savings by eliminating
resources for customizationand support. 2.1
: The cost of developing and
3. Development and Implementation Costs modeling, data integration
implementingdata marts includes activities such as data
validation and testing. The level of
ETL (Extract, Transform, Load) processes,data
development costs
complexityand customizationrequired will impact the overall
consultants can also add to the
Hiring skilled resources or engaging external
expenses.
data quality and governancewithin
4. Data Quality and GovernanceCosts : Ensuring
s

tools and personnel dedicated to dat

6'

data marts requires establishing processes,

compliance.These activitie
stewardship,data cleansing,metadata managementand
F1

data lineage, dat

may involve additionalcosts for data quality tools, data profiling,
catalogingand regulatorycomplianceefforts.
5. Maintenance and Support Costs : Ongoing maintenance
and support costs should
performanc:
be factored in, including activities such as monitoring data mart
applying patches and upgrades, resolving issues and providing user support. Tk
levelof complexity,the size of the user base and the need for ongoing enhancemenë
orcustomizationswill influencethese costs.
Sr.
6. Training and User Adoption Costs : Training users on how to utilize the data mart
effectivelycan contribute to the overall cost. This includes training sessions, use
documentationand continuous support to ensure user adoption and maximizeth
value derived from the data marts.

7. Scalability and ExpansionCosts : If the organizationplans to scale or expand

hardwat
data marts in the future, additional costs may arise. This can include
Incorporatil
upgrades, softwarelicensingadjustments, data integration efYorts for
new data sources and accommodating additional user requirements.

TECHNICAL PUBLICATIONS® an
up-thrust for knowledge
 2- 13
Business Inteligence
Business Analytics

cloud-baseddata marts, costs can

8. Cloud-based Costs: If the organizationopts for
be more flexible and based on usage.Cloud providers typically
offer pricing models
based on resources consumed, storage capacity,data transfer and computing power.
I's importantto monitor and optimize cloudcosts to avoid unexpectedexpenses.
It's worth noting that the cost of data marts can vary significantly depending on the
organization's specificneedsand circumstances.Conducting a thorough cost analysis,
considering both upfront and ongoing expenses, will help in estimating and budgeting
for data mart implementation and maintenance. Additionally, exploring cost
optimization strategies such as infrastructure consolidation, open-source alternatives,
and efficientresource utilizationcan help minimizeexpenses.
2.1.7 Data Mart versus Datawarehouse
Data Mart and Data Warehouse are both components of a Business Intelligence (BI)
architecture,but they serve different purposes and have distinct characteristics.Here are
the key differencesbetween the two :
Warehouse Data marts Users
Data sources Stagingarea
s

0)
6'

Purchasing
F1

Operational Analytics
system

Metadata

Sales
Operational Reporting
system
Raw
Summary data
data

Flat files Inventory Mining

Fig. 2.1.1 Data mart versus Data warehouse

Sr. No. Parameters Data warehouse Datamart

1. Scope A data warehouseisa centralized A
data mart is a subset of adata
repositorythat stores large volumes warehouse and focuses on a
of integrated,historicaldata from specificsubject area, departmentor
multiple sources within an user group within the organization.
organization.It aims to provide a It contains a more focused and
comprehensiveview of the entire tailored set of data that caters to the
organization'sdata across different needs of a specific business
subject areas. function.

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Business Analytics 2- 14 Business Inteligencs
Data Data warehousesinvolve complex Data marts can be created by
Integration data integrationprocesses, extractingand transformingdata
includingdata extraction, from the data warehouseor other
transtommationand loading (ETL). relevant data sources. They are
They consolidatedata from various designed tosupport the specific
operationalsystems and external reportingand analysis requirements
sources, ensuring consistencyand of aparticularbusiness unit or
uniformity. domain.

Granularity Data warehousestypically store Data marts can have different levels
data at a detailed or transactional of granularitydependingon the
level. They contain highly detailed requirementsof the specific subject
and granular data that supports area. They can store data at a
complex analytics and ad-hoc summarizedor aggregated levelto
reporting. support specific reportingand
analysis needs.
4 Architecture Data warehousesare designed using Data marts typically follow a
a dimensionalor normalized data
dimensionalmodeling approach.
s

model. They often employ a star such as a star schema, to simplify

6'

schema or snowflake schema to data structures and facilitate easier

F1

facilitateefficientquerying and queryingand analysis withinthe

analysis across multiple dimensions specificsubjectarea.
and measures.

5. Usage Data warehouses serve as a central Data marts are tailored to the needs
hub for enterprise-widereporting, of a specific business unit,
analytics and decision-making. departmentor user group. They
They support strategic,operational provide a focused view of data,
and tactical analysis, enabling
supportingspecificoperational
business users to gain insights and reporting,analysis and decision
perform historical trend analysis. making within a particulardomain.
6 Data Data warehousestypically have Data marts may have their own data
Governance robust data governancepractices in
governancepractices,but they often
place to ensure data quality, inherit the data governancepolicies
consistencyand compliance.They and frameworks establishedat the
involve data stewardship,metadata data warehouse level.
managementand data governance
frameworksto maintain the
integrity of the data.
Business Analytics 2- 15 Business Inteligence

" While a data warehoUse serves as a centralizedrepository for integratedenterprise-wide

data.a data mart is a specializedsubset of a data warehouse that focuses on a specific
subject area or user group. Data warehouses are designed for comprehensive and
strategic analysis,while data marts cater to the specific needs of individualdepartments
or business functions.

ReviewQuestions
1. What are datawarehouse components.
2. Comparedata mart versus data warehouse.
2.2 Knowledge Management
Knowledge Management(KM) plays acrucial role in the field of BusinessIntelligence
(B) as it enables organizationsto effectivelygather, store, organize. analyze and share
knowledge to make informed business decisions. KM in BI involves the systematic
management of information, data and expertise, turning them into actionable insights
and creating a competitive advantage for the organization. Here's how KM is related to
BÊ:

1. Data Collection and Integration : Knowledge Management starts with collecting

s
6'

and integratingdata from various sources, including internal databases. external data
F1

feeds, socialmedia and more. The goal is togather relevant andaccurate infonation
to support BI processeseffectively.
2. Data Storage and Organization : KM ensures that the data collected is stored in a
structured and easily accessible manner. This organization is critical for B0 as it
allows analysts and decision-makers to quickly locate and use the required data for
analysis.
3. Data Analysis : KM provides the tools and methodologies for data analy sis. In BI,
this involves the use of various techniques such as data mining, statistical analy sis.
machine learning and artificial intelligence to derive meaningful insights trom the
data.
4. Knowledge Sharing and Collaboration: KM promotes knowledge sharing and
collaborationamog employees, which is vital in BL. When Bl insights are shared
across different departmentsand teams, decision-makers canmake informed choices
based on aholistic view of the business.
5. Reporting and Visualization : KM helps in creating interactive and visually
appealing reports and dashboards. These visualizations are erucial in BI as they

TECHNICAL PUBLICATIONS-
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Business Analytics 2- 16 Business Intolligonco

enable decision-makersto grasp complex information quickly and make timcly

decisions.
6. Learningfrom Past Decisions: KM in Bl allows organizationsto capture and lcarn
from past decisions and their outcomes. This process helps in refining business
strategiesand improvingdecision-makingprocessesover time.
7. Identifying Knowledge Gaps : By analyzing data and knowledge assets, KM can
identify areas where additional informationor expertise is needed. This insight helps
in directing efforts towards filling knowledge gaps and improving the overall
decision-makingprocess.
8. Supporting Business Strategy : Knowledge Management aligns with the
organization's strategic goals and ensures that BI efforts are directed towards
supportingthose goals effectively.
9. Data Governance and Compliance : KM in BI helps in establishing data
governance policies, ensuring dataquality and maintaining compliancewith relevant
regulations.This ensures that the Bl process is built on reliableand accurate data.
2.2.1 Key Elements of Knowledge Management
Knowledge Management is an integral part of Business Intelligence, as it enables
s
6'

organizationstoturn raw data into meaningful insights and supports effective decision
making at all levels. A well-implementedKM strategy enhances the value of BI by
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ensuring that knowledge is effectively captured, shared, and utilized across the
organization.
" Knowledge Management (KM) is the process of capturing, organizing, storing.
retrieving, and sharing knowledge within an organizationto enhance learning, improve
decision-making,foster innovation, and increase overall productivityand efficiency. It
involves creating an environment where knowledge and expertise are valued, and
employees are encouraged to collaborate, learn from one another, and leverage
collectiveknowledge to achieve organizationalgoals.
" Key elements of Knowledge Management include :
1. Knowledge Creation : This involves generating new
knowledge through research,
analysis and innovation. It can be the result of individual insights, team
collaborationsor external informationassimilation,
2. Knowledge Capture: Knowledge needs to be captured and recorded in
various
formats,such as documents, databases, wik1s, videos or other repositories,Capturing
knowledge is essentialto preserve it and make it accessibleto others
TECHNICAL PUBLICATIONS-an up-thrust for knowledoe
Business Analytics 2- 17 Business Intelligence

3. Knowledge Organization : Once captured, knowledge needs to be organized and

categorized in a manner that allows easy retrievaland use. Taxonomies. metadata.
and indexing systems are often used for this purpose.
4. Knowledge Storage : Knowledge is stored in databases. content management
systems or specializedknowledge management platforms. The storage infrastructure
must be secure and easily accessibleto authorized personnel.
5. KnowledgeRetrieval : Making knowledgeeasily retrievable is crucial for effective
knowledge management. Employees should be able to access relevant knowledge
quicklywhen needed.
6. Knowledge Sharing : Sharing knowledge throughout the organization is a
fundamentalaspect of KM. This can be facilitatedthrough formal training programs.
knowledge-sharingsessions,internalcommunicationsand collaborationtools.
7. KnowledgeTransfer : When employees leave the organizationor move to different
roles, knowledgetransferprocessesensure that their expertiseand insights are passed
onto others, preventingknowledgeloss.
8. Knowledge Application : The ultimate goal of knowledge management is to apply
the captured knowledge to improve decision-making,problem-solvingand business
s
processes.Knowledgeis a valuableasset only when it is put to practicaluse.
6'

9. Continuous Improvement : KM is an ongoing process of continuous learning and

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improvement. Organizationsneed to regularly assess their KM strategies, identify

areas for enhancementand adapt to changingbusinessneeds and technologies.
KnowledgeManagementcan be categorizedinto two types :
1. Explicit Knowledge Management: This refers to the managementof tangible and
codified knowledge that can be easily documented, written down and shared.
Examples include reports, manuals, databasesand other structured content.
2. Tacit KnowledgeManagement: This involves managing intangibleknowledgethat
resides in people's minds, experiencesand expertise. Tacit knowledge is often more
challenging to articulate and share, but it is valuable for decision-making and
problem-solving.
Effective Knowledge Management fosters a culture of learning and collaboration,
leading to improved innovation,competitive advantage and overall organizational
performance.

TECHNICAL PUBLICATIONs®-an up-thrustfor knowledge

Business Analytics 2- 18 Business Intelligence
2.2.2 Knowledge
The
ManagementProcess
Knowledge Management (KM) process involves several steps to capture, store.
organize, share and apply knowledge within an organization. These steps can
their implementation objectives.
vary in
needs and
typicalstages of the KMdepending
on the organization's Here are the
process :
1. Knowledge ldentification : The first step is to identify the
knowledge that is
valuable and relevant to the organization. This knowledge can be
explicit
(e.g., documents,reports, databases)or tacit (e.g., expertise,experiences,skills).
Z. Knowledge Capture : Once the valuable
knowledge is identified. it needs to be
captured and documented. This process involves gathering
intormation through
variousmeans, such as interviews,surveys, workshopsand data collection.
3. Knowledge Organization:Captured
knowledge must be organized and categorized
to facilitate easy retrieval and usage.
Taxonomies, metadata and indexing are
employed to structure andgroup knowledge items eftectively.
4. Knowledge Storage : The captured and organized know ledge is then
repositories, databases, content management systems or specialized stored in
management platforms. The knowledge
storage infrastructure should ensure security,
s

accessibilityand version control.

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5. KnowledgeRetrieval:
Employees should be able to retrieve knowledgequickly and
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efficientlywhen needed. User-friendly search interfaces and intuitive navigationaid

in knowledgeretrieval.
6. Knowledge Sharing : Sharing
of KM. This can be facilitated knowledge across the organizationis a crucial aspect
through training sessions, workshops, intemal
communications,collaborativeplatformsand knowledge-sharing events.
7. Knowledge Transfer : When
employees leave the organization or transition to
different roles, knowledge transfer
are passed on to others. processes ensure that their expertise and insights
Mentoring, shadowingand knowledge handover sessions are
common methods for knowledgetransfer.
8. Knowledge
Application : The ultimate goal of KM is to apply the
knowledge to improve decision-making. captureo
Knowledgeshould be problem-solving business processes.
and
integratedinto daily workflowsand strategic
9 Knowledge Evaluation : Continuousassessment and planning.
are essentialto identify evaluation of the KM proces
from users and key
strengths, weaknesses areas for improvement. Feedba
and
performance
effectiveness of KM efforts.
indicators (KPIs) can be used to gauge the

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Business Analytics 2- 19 Business Intelligence

2.2.3 Knowledge ManagementTools

Some common tools andtechnologiesused in Knowledge Management:
1. Knowledge Management Systems (KMS) : These are specialized software
platforms designed to capture, store, organize and share knowledge within an
organization. KMS often include features such as document management.
collaborationtools, knowledgebases and searchfunctionalities.
2. Content Management Systems (CMS) : CMS platforms enable organizations to
create, store and manage digital content, including documents, articles and
multimedia.They play a role in organizingand sharingexplicitknowledge.
3. Intranet Portals : Company intranets act as centralizedhubs where employees can
access important information, documents and knowledge resources. They often
include communicationtools, news feeds and collaborationfeatures.
4. Wikis : Collaborative wikiplatforms allow employees to contribute,edit and update
knowledgecollaboratively.Wikis are valuablefor capturingand sharing both explicit
and tacit knowledge.
s
5. Document Management Systems (DMS) : DMS software organizes, tracks and
6'

manages electronicdocuments. It helps in version control and ensures that the latest
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information is available to users.

6. Learning ManagementSystems (LMS) : LMS platforms facilitate employee
training, developmentand knowledge sharing through courses, quizzes and leaming
resources.

7. Collaborationand CommunicationTools : Tools like instant messaging, video

conferencing and team collaboration platforms encourage real-time knowledge
sharing and collaborationamong employees.
8. Data Analytics and Business Intelligence Tools:These tools aid in analyzing data
and generating insights from various sources, contributing to the organization's
knowledge assets.
9. Social Media and Enterprise Social Networks : Social media platforms and
intermal social networks foster informalknowledge sharingand communication
among employees.
10. Knowledge Mapping Tools : These tools help visualize knowledge networks,
expertise and relationshipswithin the organization,aiding in identifying knowledge
gapsand areas for improvement.
Business Analytics 2- 20
BusinessIntel igenics
Implementing a thoughtful combination of knowledge management processes a
appropriate tools can significantly enhance an organization's ability to leverage
collectiveknowledgeand achieve improved efficiencyand innovation.
2.2.4 Knowledge ManagementUse Cases
" Knowledge management (KM) finds application across various
industries and busines
functions. Here are some common use cases where knowledge
significantrole : management plays :
1. Customer Support and Service: KM
helps customer support teams access relevat
information quickly, enabling them to address customer queries and
effectively.A knowledge base with FAQS, troubleshooting guides and issues
documentationempowerssupport agents to provide accurate and timely produc
2. Employee On Boarding and Training : KM facilitatesthe assistance.
providing new employees with essential resources, onboarding processby
practices. This ensures a smooth transition into training materials and bes
their roles and accelerates ther
productivity.
3. Best Practices and
Lessons Learned:KM captures and shares
lessons learned from past projects or best practices and
s

experiences. This knowledge is invaluable i

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avoiding repeated mistakes and promoting

future endeavors. efficiencyand effectivenessin current and
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4. Innovation and
R&D : KM supports
patents and technological insights innovation by making research findings
easily
idea-sharing forums encourage employeesaccessible. Collaboration platforms and
to contribute their
culture of innovation. ideas, fostering
5. Compliance and
Regulatory
compliant with regulations Requirements: KM helps
by maintaining organizations sta)
compliance documentation.It ensures that up-to-date policies, procedures and
employees have access to the necessay
informationto adhere to industry standardsand
6. Sales and legal requirements.
latest Marketing Enablement KM equips sales and marketingteams
product information, :
customerinsights. marketing materials,
This knowledge enables them
with th
competitive intelligence and
tailor their strategiesto market to present
7. Project Management : KM
demands. solutions effectively
supports projectteams by
documents, templates and relevant
managers can learn from information
from providing access to projext
successful
efficientprojectexecution. project outcomes andprevious projects. Proje
apply best for
practices
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Business Analytics 2-21 Business Intelligence

8. Risk Management : KM helps identify, assess and mitigate risks by sharing risk
management methodologies, historical risk data and risk analysis reports. This
knowledgeaids in making informed decisionsto minimize potential negative impacts
on the organization.
9. Knowledge Sharing Communities : Organizationscan create knowledge sharing
communities where employees with similar interests or expertise can collaborate.
share ideas and solve problems together.
10. Business ContinuityPlanning : KM assists in creating business continuity plans by
documentingcritical processes,identifyingkey personneland providingguidelinesto
handle unexpectedevents and disasters.
11. CompetitiveIntelligence: KM enables the gatheringand analysis of market trends.
competitor insights and industry benchmarks. This information supports strategic
decision-makingand helps organizationsstay ahead of their competition.
12. Human ResourcesManagement :KM helps HR departmentsby storing employee
data, policies and training resources. It also facilitates talent management, career
developnmentand successionplanning.
13. Knowledge Transfer during Employee Transitions: When employees leave the
s

organizationor change roles, KM processes and tools ensure the smooth transfer of
6'

knowledgeto their successors,preventingknowledgegaps.

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14. Continuous Improvement : KM fosters a culture of continuous improvement by

encouraging employees to share their experiences, suggestions and feedback for
enhancingprocessesand practices.
These are just a few examples of how knowledge management can be applied across
different areas of an organization. The versatility of KM makes it a valuable asset for
improvingefficiency,decision-makingand overall organizationalperformance.

Review Question

1. Explain knowledgemanagementtools.
2.3 Types of Decisions
. In Business Intelligence(BI), decisions can be categorized into three maintypes based
on the level of the decision-makingprocess they support:

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Business Analytics 2- 22 Business Intelligence
1. StrategicDecisions :
Strategic decisions are high-level decisions made by top-level executives and
management that have a long-term impact on the organization. These decisions are
related to the overalldirection and goals of the business and often involve allocating
resources, entering new markets, forming partnershipsor making major investments.
BusinessIntelligence helps in strategic decision-making by providing insights into
industry trends, market opportunities,competitiveanalysis and performancemetrics that
aid in setting the organization'sstrategicdirection.
2. Tactical Decisions :

Tactical decisions are mid-level decisions made by middle management and

departmental heads to achieve specific objectives and improve operational efficiency.
These decisions involve optimizing processes, resource allocation and performance
improvementwithin the organization.Business Intelligencesupports tactical decision
making by providing real-time or near-real-timedata on key performance indicators
(KPIs),operationalmetrics, and departmentalperformance.BI tools enable managers to
monitor progress, identify bottlenecks, and take corrective actions to achieve their
objectives.
s
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3. Operational Decisions :
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Operational decisions are day-to-day decisions made by front-line employees and

supervisors to carry out routine tasks and handle operational issues. These decisions are
typically short-term and aim to ensure smooth workflow and meet immediate business
needs. Business Intelligence aids operational decision-makingby providing real-time
data. operational repots and dashboards that enable employees to quickly access
informationand make informed decisionsto address operationalchallengesefficiently.
Business Intelligencetools and technologiesplay acrucial role in supporting all these
ypes of decisions by providing timely, accurate and actionable insights. By analyzing
data and transformingit into meaningfulinformation, Blempowers decision-makersat
all levels of the organizationto make informed choices, improve business processesand
drive overallperformance.
Review Question

1. What are types of decisions.

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Business Analytics 2- 23 Business Intelligence

2.4 Decision Making Process

data-driven
" The decision-makingprocess refers to the systematic approachused to make
decisions based on insights and analysis provided by BI tools and technologies. It
involves the following steps :
1. Data Collection: Thedecision-makingprocess in Bl begins with collectingrelevant
data from various sources, such as databases, spreadsheets, data warehouses, cloud
based applications,social media and other data repositories.
2. Data Integration : Once the data is collected, it needs to be integrated and
consolidated into a central repository or data warehouse. Data integration ensures
that information from different sources is combined into a cohesive and consistent
format.
3. Data Analysis : The next step is to analyze the data using various BI techniques,
such as data mining, statistical analysis, machine learning and other analytical
methods. The goal is to derive meaningfulinsightsand pattens from thedata.
4. Data Visualization:Afterthe data is analyzed, the results are presented in the form
of visualizations,such as charts,graphs,dashboardsand reports. Visualizationshelp
decision-makersgrasp complex information quickly and make data-driven decisions
s
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effectively.
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5. Interpretation and Insights: Decision-makers interpret the visualizations and

insights to understand the implications of the data analysis. They seek to identify
trends, correlationsand patterns that can inform their decision-makingprocess.
6. Decision Making : Basedon the insights gained from the Bl analysis, decision
makers evaluate different options and make informed choices. They consider the
potential impact of each optionon the business and select the best course of action.
7. Implementation : Once the decision is made, it is put into action through specific
plans. projects or initiatives. The BI insights help in shaping the implementation
strategy and tracking progresstoward achievingthe desired outcomes.
8. Monitoring and Evaluation : After implementation,decision-makersmonitor the
results and evaluatethe effectivenessof their decisions. Bl tools play a crucialrole in
ongoing monitoring,allowing stakeholdersto assess whether the chosen actions are
producingthe desired outcomesor if adjustmentsare needed.
9. Feedback and Continuous Improvement: Feedback from the implementationand
evaluation stages is used to improve the decision-making process continuously.
Insights gained from Blanalyses are fed back into the system, enablingorganizations
to refine their strategiesand adapt to changingbusiness needs.
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 Business Analytics 2-24 Business Intelligence

The decision-makingprocess in Business Intelligence aims to empower organizations

with actionable insights, enabling them to make data-driven choices, optimize business
processes and achieve their strategic objectives,It is an iterative and continuousprOcess,
as organizationsmust continuallyupdate their data, analyze new information,and adapt
their decision-making approaches to remain competitive in the dynamic business
landscape.
2.4.1 Decision-makingMethodologiesand
Frameworks
There are various decision-makingmethodologiesand frameworks that individuals and
organizationscan use to approach different tvpes of decisions. Each methodology is
designed to address specific decision-makingchallengesand optimize the process based
on the context and available information. Here are some
common decision-making
methodologies:
Rational Decision-Making:
" Rationaldecision-makingis a systematic
approach that involves identifying objectives
generating alternatives, evaluating options based on criteria and selecting the best
alternative that maximizes the expected outcome. This approach
assumes
information, logical reasoning and the ability to evaluate all possible complete
s

objectively. outcomes
6'
F1

Bounded Rationality:
Bounded rationalityacknowledgesthat decision-makersoften have
time and cognitive abilities. It proposes that limited infomation.
individuals make
heuristics, intuition and satisficing (choosing the first acceptabledecisions based on
fully rational analysis. option) rather than
Intuitive Decision-Making:
Intuitive decision-makingrelies on instinct,
when decisions need to be made quickly and experienceand gut feelings. It is otten used
there is insutticient time or data for in
depth analysis.
IncrementalDecision-Making:
" Incrementaldecision-making involves making
small
implementing adjustments
practices or strategiesrather than or changes to existing
used in situations with a high level of
radical changes. This approach is ofte
preferredover major risks.
uncertainty, where continuous adaptationis

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 Business Analytics 2- 25 Business Intelligence

Group Decision-Making:
Group decision-makinginvolves multiple individualscollaboratingto reach a consensus
or majority decision. Various techniques, such as brainstorming, nominal group
techniqueand Delphimethod, can be employed to facilitategroup decision-making.
Analytic Hierarchy Process (AHP):
AHP is a structureddecision-makingtechniquethat helps prioritizemultiple criteria and
alternatives based on their relative importance. It breaks complex decisions into a
hierarchicalstructureand uses pairwisecomparisonsto determineweights and rankings.
Cost-BenefitAnalysis :
" Cost-Benefit Analysis (CBA) compares the costs of different alternatives with their
associated benefits.This methodologyquantifiescosts and benefits inmonetaryterms to
determinethe most economicallyviable option.
Six Thinking Hats :
The Six Thinking Hats method, developed by Edward de Bono, involves assigning
different perspectives or "hats" to decision-makers during a discussion.Each hat
s
represents a specific thinking approach, such as logicalthinking, creativity, critical
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thinking, etc., leading to well-roundedand comprehensivedecisions.

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Game Theory :
Game Theory is a mathematicalapproach used to analyze strategic decisio-makingin
situationsinvolvingmultiple parties with conflictinginterests. It helps in understanding
the possible outcomesand optimal strategiesfor decision-making.

2.4.2 Challengesin the Decision-MakingProcess

The decision-making process is a critical aspect of individual and organizational
success,but it is not without its challenges. Some common challenges that decision
makers may encounter include :
1. Limited Information : Often, decision-makers have access to incomplete or
ambiguous information, making it challenging to make well-informed choices.
Incompletedata can lead to uncertaintiesand increase the risk of making suboptimal
decisions.
2. Information Overload : On the other hand, decision-makers may face an
overwhelming amount of information, making it difficult to identify relevant data
andextract valuable insights. Information overload can lead to analysis paralysis,
delayingdecision-making.
 Business Analytics 2- 26 Business Intelligence
J. Time Constraints: In some situations.
decisions need to be made quiCkly, leaving
decision-makerswith limited time for thorough analysis and considerationof all
alternatives.Time pressurecan lead to rushed decisionsand potentialoversights.
4. Cognitive Bias : Decision-makers are susceptible to
cognitive biases, such as
confirmation bias, anchoring bias and overconfidence,which can distort judgment
and lead to irrationaldecisions.
5. Groupthink : In group decision-making,the desire for
consensus and conformity
can lead to groupthink, where critical analysis and diverse
perspectives are
suppressed,resulting in flawed decisions.
6. EmotionalFactors : Emotions can influence
decision-nmaking.leading to decisions
based fear, anger or personal preferencesrather than objectiveanalysis.
on
7. Resistance to Change : Implementing decisions may face resistance from
individualsor departmentsaffected by the decision. Overcomingresistanceto change
can be challengingand may impactthe success of the decision.
8. Uncertainty and Risk : Many decisions involve uncertainty and inherent
risks.
Evaluating potential risks and their probabilities accurately can be difficult,
impactingthe confidence in decision outcomes.
s

9. Lack of Expertise : Decision-makersmay lack the expertise or domain knowledge

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necessary tofully comprehendcomplex issues, leading to suboptimalchoices.

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10, Unforeseen External Factors : External events, such as economic changes.

technologicaldisruptionsor geopoliticalshifts, can significantlyimpact the outcome
of decisions,even when made with the best available information.
11. Ethical Dilemmas : Some decisions may involve ethical considerations andmoral
dilemmas,making it challengingto balance competing interestsand values.
12. Decision Reversals:In some cases, decision-makers may need to reverse
their
choices due to changing circumstances or new information, leading to time and
resource wastage.
Addressing these challenges requires a combination of critical thinking, data-driven
analysis. collaborationand a will1ngnessto learn from both successful and unsuccessful
decisions. Emphasizing transparency,continuousimprovement,and a culture that values
learning from mistakescan help mitigate decision-makingchallenges and enhancethe
overalleffectivenessof the decision-makingprocess.
Review Question
inthe decision-makingprocesS.
challenges
1. Discuss PUBLICATIONS8.
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TECHNICAL for
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Business Analytics 2- 27 Business Intelligence

2.5 DecisionSupportSystems
Decision Support Systems (DSS)are interactive computer-based information systems
designed to assist decision-makersin making informed and data-driven choices. DSS
provide tools, data and analyticalcapabilitiesthat help users analyze complex problems,
explore various alternatives and evaluate the potential outcomes of their decisions.
These systems are used in various donmains, including business, healthcare. finance and
logistics, to enhance decision-making processes.Here are the key characteristicsand
componentsof DecisionSupport Systems :
1. Data Management : DSS typically have access to a wide range of data sources,
including internal databases, external data feeds, historical data and real-time
information. They can also incorporate data from multiple sources to provide a
comprehensiveview of the decision context.
2. Model Management : DSS use mathematical models, algorithms and statistical
methods to analyze data and simulate scenarios. These models can be used to predict
outcomes, identify patterns and evaluate the impact of differentdecisions.
3. User Interface : DSS have user-friendly interfaces that allowdecision-makersto
s
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interact with the system easily. The interface may include dashboards. data
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visualizationtools and reporting capabilities to present information in a clear and

understandable manner.
4. What-IfAnalysis : DSS often support what-ifanalysis,allowing users to experiment
with different variables and assumptionsto understand how changes may aftect the
outcomes of their decisions.

5. Decision Optimization : Some DSS offer decision optimizationcapabilities,helping

decision-makers find the best possible solution based on predetined objectives,
constraintsand preferences.
6. Sensitivity Analysis : Sensitivity analysis allows decision-makersto assess how
changes in specific variablesor assumptionsinfluencethe overall decision outeomes.
7. Support for Group Decision-Making: DSS can facilitate collaborative deision
making by providing features for sharing intornmation, conducting discussions and
arrivingat consensusamong multiple stakeholders.
8. Drill-Downand Drill-Up: DSS enable users to drill down into detailed data or drill
upto higher-levelsummaries, providinga multi-levelview of thedecision context.
9. Decision Documentation : DSS often include features for dowumentingthe decision
making process, allowing users to review and track decisions made over time.
Business Analytics 28 duanes lntelligema
10. Integration with External Tools : Decision Support Systomv may inteyrate with
other software applications, databases or analytical toos lo leveraye
resourcesand enhance their capabilities.
exialing
Overall, Decision Support Systens aim o cnhanee decisio making prees thy
providing decision-makers with timely. relevant and actionable intomation, they
complement human judgment and expertise, enabling users to make more infomod.
efficientandeffectivedecisionsthat align with organizationalyoals and objectivex,
2.5.1 Challengesin Decision Support Systems
While Decision SupportSystenms (DSS) ofler nunerous benelits, they alo come with
certain challenges that organizationsand decision-makersnced to aldress to cllectively
leverage these systems. Some of the key challenges of Decision Support Sytemm
include :
1. Data Quality and Integration: DSS heavily rely on data tor analysis and decision.
making. Ensuring data quality, accuracy and consistency can be challenging.
especiallywhen data is sourced from various systems or extenalsources.
2. Data Security and Privacy : DSS often deal with sensitive and contidential
s
information. Ensuring the security and privacy of data is essential to prevent
6'

unauthorized access or data breaches.

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3. Complex Implementation : Implementing DSS can be complex and resource

intensive.Integrating DSS with existing systems, setting up databases and training
users require careful planning and expertise.
4. User Adoption : Encouraging user adoption of DSS can be a challenge. Some
decision-makers may be resistant to relying on data-driven insights and preler
traditional decision-makingmethods.
5. Overrelianceon Technology : While DSS offer valuable insights, decision-makers
should avoid blind reliance on technology. Human judgment andexpertise are still
crucial in interpretingresults and making context-specificdecisions.
6. Selection of AppropriateModels : Choosing the right models and algorithms lor
analysis is crucial. Using inappropriateor flawed models can lead to inaccurateof
misleadingresults.
Results : which
7. Interpretation of DSS may produce complex analysesandinsights. and
decision-makers may find challenging to interpret. Effective visualiztion
pommunicationof results are necessary to ensure understandingand usability.

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Business Analytics 2- 29 Business Intelligence

8. Lack of Real-TimeData : Some decision-makingscenarios require real-time data.

If the DSS lacks access to real-time data feeds, its relevance and effectiveness may
be limited.
9. Bias and Assumptions: DSS are only as good as the data and assumptionsfed into
them. Biases in data collection or inherent assumptions in the models can lead to
biased or flawed results.
10. Overwhelmingnformation: DSS can generate vast amounts of data and insights.
Decision-makersmay feel overwhelmedwith the volume of information, leading to
decision paralysis.
11. Cost and Resources : Developing, implementing and maintaining DSS can be
expensive. Smaller organizations or those with limited resources may find it
challenging to invest in advanced DSS.
12. Lack of Expertise : Utilizing DSS effectively may require specialized knowledge
and skills. Organizations may need to invest in training or hire experts to make the
most of their DSS.
13. Integration with Decision-Making Processes : Ensuring seamless integration of
DSS with existing decision-makingprocesses and workflows can be challenging.
s
6'

especiallyin large organizationswith complex structures.

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Addressing these challenges requires a holistic approach, including data governance

DSS
practices, user training, regular system updates and ongoing evaluation of
informed
performance. Overcoming these challenges can lead to more effective and
decision-making,ultimatelybenefitingthe organizationand its stakeholders.

2.5.2 Advantagesand Disadvantagesof Decision Support Systems

Decision Support Systems (DSS) offer numerous advantages and can significantly
come with certain
improve decision-making processes. However, they also
disadvantagesthat organizationsshouldconsider. Here are some of the key advantages
and disadvantages of DecisionSupport Systems:
Advantagesof Decision Support Systems:
choices on data
1. Data-Driven Decisions: DSS enable decision-makersto base their
and analytics rather than intuitionor subjectivejudgment, leading to more informed
and objectivedecisions.
2, Faster Decision-Making : DSS can process vast amounts of data quickly and
provide real-timeor near-real-timeinsights,acceleratingthe decision-makingprocess
and enabling timely responses to emerging issues.
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 Business itegere
Business Analytics 2- 30

analysis andadvanced algorithms.

3. Improved Decision Quality : By leveraging data human decision-makersmay
that
DSS can identifypatterns, trends and relationships
miss,resulting in higher-quality decisions. planning. allowing
analysisand scenario
4. Scenario Analysis : DSS supports what-if assess potential outcomesbefore
decision-makersto explore various alternativesand
making final decisions.
facilitate çollaboration among decision
5. Enhanced Collaboration : DSS ofen
and reach consensus.leading
makers, enablingthem to share insights,exchangeideas
to more comprehensivedecisions.
allocation by anal,zing
6. Better Resource Allocation : DSS helps optimize resource
leading to cost savings and
data on resource usage, demand patternsand constraints.
improvedefficiency.
7. Consistency and Standardization : DSS apply consistent methodologies and
criteria in decision-making processes. reducing the risk of bias and ensuring
standardized decision outcomes.

8. Risk Management : DSS can evaluate risks and uncertainties associated with
s
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differentdecisions,enabling decision-makersto identify and mitigate potential risks

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more effectively.
Disadvantagesof Decision Support Systems :
1. Cost and Complexity : Implementing and maintaining DSS can be costiy and
complex, requiringinvestmentsin hardware,software,trainingand ongoing suppont.
2. Data Quality and Integration : DSS heavily rely on accurate and integrated data.
Ensuring data quality and seamless integration from diverse sources can be
challenging.
3. Overrelianceon Technology : Overreliance on DSS can lead to
decisions made
solely based on data andalgorithms,neglectingthe human factor and
context-specific
knowledge.
4. Lack of Human Intuition:DSSmay lack the
ability to incorporatehuman intuition
and creativity, which can be valuablein certain
6 Bias and Assumptions: DSS are only as decision-makingscenarios.
in their algorithms.Biases in data
reliable as the data and assumptionsused
collection or underlying assumptionscan lead to
biased results.
 Business Inteligence
2-31
Business Analytics
insights
Resistance : Some decision-makers may be hesitant to trust the
6. User
decision-making methods or feeling
provided by DSS, preferring traditional
overwhelmedby the technology.
Security and Privacy Concerns : Storing and processingsensitivedata in DSS can
7.
measures are not in place
adequate
raise security and privacy concerns, especially if
to protect the data.
specializedknowledge and
8. Need for Expertise : Effectivelyusing DSS may require
experts to maximize the
skills and organizationsmay need to invest in trainingor hire
system's benefits.
improving decision
" Overall, Decision Support Systems offer significantadvantages in
organizationsmust carefully
making processes, but they also present challenges that
considerand address to fully harness their potential.

2.5.3 Applicationsof Decision Support Systems

industries and
Decision Support Systems (DSS) find applications across various
evaluating
domains, where they assist decision-makersin solving complex problems,
Decision
alternatives and making informed choices. Some common applications of
s
6'

Support Systems include :

to
1. Business Management : DSS are extensively used in business management
F1

financial
support strategic,tacticaland operationaldecision-making.They help with
analysis, resource allocation, performance evaluation, inventory management,
pricing decisionsand market research.
2. Supply Chain Management : DSS aid in optimizing supply chain operations by
analyzing inventory levels, demand forecasting, transportation routes and supplier
selection. They help organizations improve efficiency, reduce costs and minimize
disruptions.
3. Healthcare: In healthcaresettings, DSS support medical professionalsin diagnosing
diseases, planning treatments and prescribing medications. They assist in medical
research, patient monitoringand resource allocation in healthcarefacilities.
4. FinancialPlanning and Investment : DSS help investors and financial planners in
portfolio management, risk analysis, asset allocation and investment decision
making. They analyze financialdata, market trends and economic indicators to
provide insights for better financial planning.
5. Marketing and Customer Relationship Management : DSS aid marketers in
analyzingcustomerdata, segmentingmarkets and targetingspecificcustomergroups.

TECHNICAL PUBLICATIONS-an up-thrust for knowledge

 Business Analytics 2-32 BusinessIntel igens
They support personalized marketing campaigns, customer retention
customer satisfactionanalysis.
6. Human
strategies
Resources Management: DSS assist HR departmentsin talent
workforce planning. perfornanceevaluationand training needs analysis.
Optimize HR processesand align them with organizationalgoals. acquiTheysitihelon
7.
Environmental Management :
DSS support environmental
policymakers in analyzing environmental data, conducting risk scientistsS and
conservation.assessments and
Tomulatingstrategiesfor enyironmentalprotectionand
8. Emergency
aid in
Management In disaster and
:
emergency management
decision-making related to
response resource allocation, evacuationscenarios, Ds
planning an
9.
co-ordinationduring crises.
Urban Planning : DSS assist
urban planners in
infrastructure,transportation,population growth
analyzing data related n
sustainableand efficienturban and
10. development plans.
environmentalfactors to desiom
Educational Decision-Making :
curriculum planning, student DSS are used in educational settings to support
schools and universities. performance analysis and resource allocation for
11. Legal and
s

Judicial
Decision-Making
6'

analysis, legal research and : DSS help

predicting case outcomeslegal professionals in case
F1

precedents. based on past rulings and

12. Project
Management : DSS
resource allocationand risk support project managers in
These are just a few assessment for complex
projects. planning, scheduling
domains to improve examples of how Decision
Support Systems are applied in
outcomes. DSS
continuedecision-making
intelligence data analytics,
and
to evolve processes, enhance
with efficiency and
vartous
advancements
in optimz
makers across diverse fields. makingthem technology, artificial

Review Questions increasingly

valuable tools for decisiot-
1
Explain in detail decision
2
Discuss challenges in support systems.
decision support systems.
2.6 BusinessIntelligence
Business Intelligence(BI)
raw data into referstothe process of
actionable insights to support collecting,analyzing andtransforming
informed
TECHNICAL
PUBLICATIONS- an decision-making
up-thrust for knowledge
and strategie
Business Analytics 2 - 33 Business Intelligence

planning within an organization. BI involves various technologies, tools and

methodologiesthat help transform data into meaningfulinformation, enabling users to
understandtrends, patternsand relationshipsin their businessdata.
Key featuresand componentsof Business Intelligenceinclude :
1. Data Collection : BI starts with data collection from multiple sources, including
databases,spreadsheets, data warehouses, cloud-based applications, social media,
and other structuredand unstructureddata repositories.
2. Data Integration : Once the data is collected, it needs to be integrated and
consolidatedfrom differentsources into a centralizeddata repository,such as a data
warehouse,for easier analysisand reporting.
3. Data Analysis : BI tools and technologiesanalyze the integrated data to identify
patterns, trends and insights.Various analytical techniques, such as data mining
statisticalanalysisand machine learning,can be employedfor this purpose.
4. Data Visualization : BI presents the analyzed data in the form of visualizations,
such as charts, graphs,dashboards andreports. Visualrepresentationshelp decision
makers grasp complex information quickly and make data-driven decisions
effectively.
s
6'

5. Reporting and Dashboards : BI provides customizable and interactive reports and

F1

dashboards that offer real-time or near-real-time views of business performance and

key performanceindicators(KPls).
6. Query and Reporting : BI tools enable users to query the data and generate
customized reports to answer specific business questions and gain deeper insights
into their operations.
7. Predictive and Prescriptive Analytics : BI can go beyond descriptive analytics
(what happened) and offer predictive (what might happen) and prescriptive (what
actionsto take) analytics, helping organizationsanticipate future trends and make
proactive decisions.
8. Self-Service BI : Some BI tools support self-service capabilities, allowing non
technical users to access and analyze data without relying on IT teams, empowering
users to explore data independently.
Business Intelligence serves various functions and benefits organizations in numerous
ways :
1. Data-Driven Decision-Making: BI provides data-driven insights that aid decision
makers in making informed choices based on objectiveevidence.

TECHNICAL PUBLICATIONS-an up-thrust for knowledge

Business Analytics
2.
Improved Operational
2-34
Business Intel igence
Efficiency : BI identifies inefficiencies,
opportunitiesfor process improvement,leading to enhanced operational and
and cost savings. bottlenecks
3.
Competitive Advantage : BI enables organizationsto gain a ef iciency
competitive
identifying market trends, customer preferencesand strategic opportunities, edge by
4.
Enhanced Customer Experience: BI allows organizationsto understand
behaviorand preferences, enabling them to deliver
personalized and customer
services.
5. Better
Risk Management: BI helps in risk targeted
enablingorganizationsto develop strategiesforanalysis,
risk
identityingpotentialrssks and
6. Real-Time
Monitoring : BI provides real-time mitigation.
metrics,allowing for quick response to changes in themonitoring of critical busines
Overall, Business Intelligence is a businessenvironment.
their raw data into actionable powerful tool that empowers organizationsto tum
performanceand strategic growth.insights, driving better decision-making, improved
2.6.1 Importanceof Business
Business lntelligence(Bl)plays Intelligence
s
a crucial role in
6'

its significance and

impact on organizations. The
modem business environmentsdue to
F1

lies in the following key

aspects : importance of Business Intelligence
1. Informed
Decision-Making
enable decision-makers
: B1 provides
to make data-driven insights and analysis thal
reduces reliance on intuition and well-infommed and evidence-based choices. Ih
strategic decisions. subjectivejudgment, leading to more accurate and
2. Competitive Advantage : BI empowers
competitor activities and customer organizations to identify market trends.
landscape better. organizations can preferences. By understanding the
gain a competitive edge and busines
emergingopportunities. capitalize
3. Operational
Eficiency : BIhelps identify inefficiencies,
improvement in business processes. By optimizing bottlenecksand areas lo
enhance efficiency,reduce costs and operations., organizations ca
streamlineworkflows.
4. Customer Understanding: BI enables
preferences and buying patterns. Thisorganizationsto analyze customer behavior.
products and services to meet
customer needs, customer-centric
approach helps tailr
leading to customet
satisfactionand loyalty. improved
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Business Analytics 2- 35 Business Intelligence

5. Real-Time Insights : BI provides real-time or near-real-timedata analysis, allowing

organizationsto monitor key performance indicators (KPls) and respond quickly to
changingmarket conditionsand businessdemands.
6. Risk Management : BI assists in risk analysis and identification,enabling
organizationsto assess potential risks and develop strategies for risk mitigation. It
helps in identifyingearly warning signs and avoidingpotential pitfalls.
7. Strategic Planning : BI supports strategic planning by providing data-backed
insights into market trends, industry benchmarks and future opportunities. It helps
organizationsset realisticgoals and align their resourceswith long-term objectives.
8. Data Visualization and Communication : BI tools offer data visualization
capabilities, making it easier for decision-makersto interpret complex information
quickly. Clear visualizations enhance communication and collaboration among teams
and stakeholders.
9. Self-Service Analytics : Self-service BI empowers business users to access and
analyze data independently without relying on IT teams. It promotes a culture of
data-drivendecision-makingacross the organization.
to track
10. Performance Monitoring and Measurement: BI enables organizations
s
This continuous
6'

and measure performanceagainst predefined goals and objectives.

needed.
monitoring helps organizationsstay on track andcourse-correctas
F1

organizationsin
11. Improved Forecasting : BI's predictiveanalytics capabilitiesassist better
in
forecasting future trends and demand patterns. Accurate forecasting helps
resource planningand inventorymanagement.
supports organizationsin meeting
12. Complianceand RegulatoryRequirements: BI
transparency, auditing
compliance and regulatory requirements by providing data
capabilitiesand accurate reporting.
" In today's data-driven world, Business Intelligence
is no longer just a competitive
organizations to thrive and succeed. By
advantage; it has become a necessity for
can transform raw data into
leveraging BI tools and methodologies, organizations
valuable insights, driving strategic decision-making, operational excellence and
sustainable growth.

Examples of Business Intelligence System used in Practice

2.6.2
across various industriesand sectors.
Business Intelligence(BI) systems are widely used
BIsystems in practice :
Here are some examplesof real-worldapplicationsof

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Business Analytics 2-36 Business Intelligence
1. Retail Analytics: Retail companies use Bl systems to analyze sales data, customer
behavior and inventorylevels. Theseinsights help in optimizing product
pricing strategies and inventory management to meet customer demands and assortments,
maximizeprofitability.
2. FinancialAnalysis : Banks and financial institutions utilize BI
systems to analyze
transaction data, customer demographics and market trends. BI helps in risk
assessment,fraud detection,credit scoring and personalizedfinancial services.
3. Healthcare Analytics : Healthcare
organizations leverage BI systemsto analyze
patient data, medical records and treatment outcomes. BI assists in clinical
decision
support, patient care managementand health resource planning.
4. Supply Chain Management : Manufacturing and logistics companies use BI
systems to track inventory levels, monitor supplier performance and
optimize
transportation routes.BI aids in supply chain planning, demand forecastingand cost
optimization.
5. MarketingAnalytics : Marketing departmentsutilize BI systems to track
performance, analyze customer segmentation and measure the campaign
effectiveness of
marketing efforts. BI helps in targeted marketing, lead generation and customer
s
retention strategies.
6'

6. Human Resources Management : HR departmentsemploy BI

F1

workforce data, employee performance and training needs. BI systemsto analyze

acquisition,successionplanningand workforceoptimization. supports talent
7. Social Media Analytics : Companies use BI systems to
platforms for brand monitor social media
sentiment, customer feedback and market trends. BI assists in
social media marketingstrategiesand reputation
managemnent.
8. Sales Performance Analysis : Sales teams utilize BÍ
systems to track sales
analyze customer buying patterns and forecast sales revenues. BI helps in data.
sales
pipeline managementand sales performanceimprovement.
9. Customer Relationship Management (CRM) : BI systems integrated with CRM
platforms provide insights into customer interactions,sales opportunities and
customerservice performance. BI enhancescustomer engagementand
retention.
10. Traveland Hospitality: Travelagencies and
hospitalitybusinesses use Bl systems
to analyze booking data, customer preferences and revenue
streams. BI supports
yield management,customer loyalty programs and personalizedtravel offers.
11. Energy Management : Utilities and energy companies employ BI systems to
monitor energy consumption patterns, analyze distribution networks and optimize
energy usage. Bl aids inenergy conservationand cost management.
TECHNICAL PUBLICATIONS-an up-thrust for knowledge
Business Analytics 2- 37 BusinossIntoligonco

12. E-commereeAnalyties : E-commerce platforms use Bl systems to track website

trafic, analyze conversion rates and nderstand customer behavior. BÍ assists in
optimizingwebsite performanceand enbancinguser experience.
These are justa fewexamples of how businesses and oranizations use Bl systems to
gain insights, improve decision-makingand achieve better performanceacross various
sectorsand industries.The versatilityof Bl systems allows them to adapt to the specific
needsand challengesof different businessdomains.
2.6.3 Advantagesof BusinessIntelligence
Business Intelligence (BI) offers a wide range of advantages that positively impact
organizations and their decision-making processes. Some of the key advantages of
Business Intelligenceinclude :
1. Informed Decision-Making : BI provides data-driven insights and analysis.
enabling decision-makers to make well-informed choices based on objective
evidencerather than gut feelings or intuition.
2. Improved Business Performance : BI helps optimize business processes, identify
inefficienciesand streamline workflows, leading to enhanced operationalefficiency
s

and overall perfornmance.

6'

3. CompetitiveAdvantage : BIenables organizationsto gain a competitive edge by

F1

allowing them
analyzing market trends, competitoractivities andcustomer behavior,
tomake strategicdecisionsand capitalizeon opportunities.
4. Real-Time Monitoring : BI provides real-timeor
near-real-time data analysis.
and respond
allowing organizationsto monitor key performance indicators (KPis)
demands.
quicklyto changingmarket conditionsand business
organizations understand customer
5. Enhanced Customer Experience : BI helps
and services to meet
preferences and behaviors, enabling them to tailor products
satisfaction.
customerneeds and improve overall customer
Management : BI assists in risk analysis, identifying potential risks and
6. Risk helps organizations
opportunitiesand developing strategies for risk mitigation. It
pitfalls.
make proactivedecisionsto avoid potential
better resource allocation by analyzing
7. Efficient Resource Allocation : BIsupports leading to cost savings and
constraints,
data on resource usage, demand patterns and
improved resource management.
analytics, allowing organizations to
8. Predictive Analytics : BI enables predictive
customer behavior, enabling better
forecast future trends, demand patterns and
planningand decision-making.

TECHNICAL PUBLICATIONs-an up-thrustfor knowledge

 2-38 Business Intelligence
9. Data
or Visualization : Bl tools ofer data visualization capabilities, making it
easier
decision-makers to interpret complex information quickly and
insights morr etletively. coommunicate
l0. Self-Service
Analyties : Some Bl tools support self-service capabilities, allowing
non-technical userN to access and analyze dataindependently,empowering users to
explore data and make data-drivendecisions.
. Agility and Flexibility : Bl systems provide organizationswith the
quickly to changing business needs and market conditions. allowingability to adapDt
for more agile
and responsivedecision-making.
12. Complianceand
Reporting : Bl supports organizationsin meeting
regulatory requirements by providing accurate and auditable data. compliance
and
reportingprocesses.
13. Cross-FunctionalInsights : Bl
simplifying
breaks down data silos and enables data sharing
across difterent departments,fostering collaborationand
the organization'sperformance. providinga holistic view of
" Overal, Business Intelligence enables organizations to
transforming it into actionable insightsthat drive leverage data effectively,
and ultimately contributeto
achievingstrategic goalsdecision-making. boost performance,
s

and objectives.
6'

2.6.4 Disadvantagesof Business

Intelligence
F1

" While Business

lntelligence(Bl) offers numerous
disadvantagesthat organizationsshould be aware advantages,
of. Some of
it also comes with
the
certain
Business lntelligenceinclude : key disadvantages of
1. Cost and
Complexity :
Implementing
expensive, involving investments and maintaining a BI
in system can be
ongoing support. The complexityof datahardware, software licenses, training and
Overall cost. integrationand analysis can also add to the
2. Data
Quality Issues : BI heavily relies on
is poor or
inconsistent,it can lead to accurate and reliable data. If data
3. Data Security and erroneous insights and quality
data in a BI systemPrivacy
C decisions.
can raise Concerns: Storing and processing sensitive business
security
implement robust security measures to and privacy concerns. Organizations must
breaches. protect data from
4. Overrelianceon Technology:
unauthorized access o
based on data and algorithms, Overreliance
on BI can
lead to decisions made solely
which are essential in some neglecting human intuition and
decision-making scenarios.
TECHNNCAL PUBLICATIONs®-
domain
expertise.

an
up-thrust for
Business Analytics 2- 39 Business Intelligence

5. Lack of HumanContext : BIl systems may not consider the human context and soft
factors that can influence decision-making.leading to decisions that may not align
with organizational culture or values.
6. Incomplete Data : BI may not always have access to all relevant data sources.
leading to incompleteanalysisand potentialgaps in insights.
7. Data Interpretation Challenges: Analyzing complex data visualizations and
insights generated by BI systems can be challenging for some decision-makers.
leading to potential misinterpretationsor misjudgments.
8. Expertiseand Training Requirements : Utilizing BI effectively may require
specialized knowledge and skills. Organizationsmay need to invest in training or
hire experts to maximize the system's benefits.
9. Resistance to Change Some stakeholders may be resistant to adopting BI.
particularly if they are accustomed to traditional decision-makingmethods or feel
overwhelmedby the technology.
10. Integration with Existing Systems : Integrating BI with existing systems and
workflowscan be challenging, especially in large organizations with complex IT
infrastructures.
s
11. Bias and Assumptions : BIsystems are only as reliable as the data and assumptions
6'

used in theiralgorithms.Biases in data collectionor underlyingassumptionscan lead

F1

to biased results.
12. Data Overload : BI systems can generate vast amounts of data and insights.
Decision-makersmay feel overwhelmed with the volume of information, leading to
decision paralysisor informationfatigue.
" It is essential for organizations to carefully consider these disadvantages and take
appropriate measures to address them. Organizations should ensure data quality.
implement robust security measures and strike a balance between data-driven insights
and human judgment to make the most of business intelligence while mitigating
potential risks.

Review Question
1. Explain importance of businessintelligence.

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Business Analytics 2- 40
Business Intelligence

2.7 Online Analytical Processing(OLAP)

" OLAP (Online Analytical Processing) is a technology that enables multidimensional
analysis of large volumes of data from different perspectives. It provides a way to
organizeand analyze data to support complex and interactivedata exploration,reporting
and decision-making,
" Here are some key characteristicsand components of OLAP:
1. MultidimensionalData Model : OLAP uses a multidimensionaldata model to
representdata in a structurecalled a cube. This model organizesdata into dimensions
and measures. Dimensions represent the different perspectives or attributes of the
data (e.g.,time, geography, product), while measures represent the numericalvalues
or metrics that are being analyzed (e.g. sales revenue, quantitysold).
2. Data Aggregation: OLAP allows for data aggregationacross multiple dimensions.
It can summarize andaggregatedata at different levels of granularity,such as rolling
up data from adetailed level (e.g.. daily sales) to higher levels (e.g., monthly or
yearly sales). Aggregationsfacilitatefaster query performanceand theability to view
data from different hierarchical levels.
s
6'

3. InteractiveAnalysis : OLAP provides an interactiveand user-friendlyinterface for

analyzingdata. Users can drilldown to more detailed levels, drillup to higher levels
F1

of aggregation. pivotdimensions,slice and dice data and apply various calculations

and aggregations on the fly. This flexibility allows users to explore data from
differentangles and gain insightsquickly.
4. Fast Query Performance : OLAP technologies are designed to deliver fast query
performance, even when dealing with large volumes of data. Pre-aggregationsand
indexing techniques are often used to optimize query response times. OLAP
databases are specifically designed for analytical workloads and are optimized for
complex calculationsand aggregations.
5. Complex Calculations : OLAP supports advanced calculations and calculations
across multiple dimensions. Users can define custom
calculations, perform
mathematical operations,create derived measures and apply business rules within the
OLAP environment. This capability enables the creation of
sophisticatedanalysis
andsupportscomplex decision-makingprocesses.
6 Hierarchical Navigation : OLAP enabes users to navigate
through hierarchical
cteuctureswithin dimensions. For example, a timedimension can have levels such as
roar au1arter. month and day. Users can ari up or down
through these levels to
analyze data at differentlevels of detail. This hierarchical navigation
explorationand comparison of data across differentdimensions allows for easy
TECHNICAL PUBLICA TIOws® - an up-thrust for
knowledge
 Business Analytics 2- 41 Business Intelligence

sources, including
7. Data lntegration : OLAP systems can integrate data from various
data warehouses, operational databases and external systems. Data integration
ensures that all relevant data is available for analysis in aconsolidatedand consistent
manner.

" OLAP technology has found applications in various domains, such as business
intelligence, financial analysis, sales forecasting and performance management. It
and
empowers users to gain insights from data quickly, make informed decisions
discover patterns and trends that may not be apparent in traditional tabular
representationsof data.

2.7.1 OLAPGuidelines (Dr. E. F. Codd Rule)

" Dr. E. F. Codd, a pioneer in the field of relational databases, proposed a set of 12 rules
known as "Codd's 12 Rules"for OLAP systems. These rules provide guidelines for
effectivenessand adherence
designing and implementingOLAP systems to ensure their
from Codd's rules :
to the principlesof OLAP. Here are some of the key guidelines
provide a
1. Multidimensional Conceptual View : The OLAP system should
multidimensionalconceptual view of data, allowing users to analyze data from
dimensions,
different dimensions simultaneously. The system should support
s
structure.
6'

hierarchies and measures to represent data in a multidimensional

transparentto the user, abstractingthe
F1

2. Transparency :The OLAP system shouldbe analyze data

and
underlying data complexities. Users should be able to access
or retrieval.
without needing to understandthe technicaldetails of data storage
easy and efficient access to data
3. Accessibility : The OLAP system should provide interactive analysis and
times,
for end users. It should support fast query response
flexibledata explorationcapabilities.
ensure consistent reporting and
4. Consistent Reporting : The OLAP system should
of detail. The system should
analysis results across different dimensions and levels
accurately to maintain data
handle data aggregation and drill-down operations
consistency.
system should support dynamic
5. Dynamic Database Reorganization: The OLAP the system to be shut
reorganization of the database structure without requiring
hierarchies and measures
down. This allows for modifications to the dimensions,
is data.
without disrupting user access to
should employ a client-server
6. Client-Server Architecture : The OLAP system
component
architectureto facilitate efficient data retrievaland analysis.The server
provides a user
handles datastorage and processing,while the client component
data.
friendly interface for interacting with the
to

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 Business Intelligenca
Business Analytics 2- 42
handle
should be ableto dimensions
levcs,
of
7. Generic Dimensionality: The OLAP system
hierarchies with multiple varied
arbitrary complexity. It should support
aggregationsand flexible calculations.
OLAP system should provide intuitive and
8. Intuitive Data Manipulation : The to drill down, roll up,
data. Users should be able
natural operations for manipulating operations easily and in a user-friendl
slice, dice and perform other analytical
manner.

OLAP system should be flexible in accommodatingchanges to data

9. Flexibility : The
support the additionor removalof
structures, dimensions and measures. It should
signiticant system
dimensions, hierarchies and measures without requiring
modifications.
be optimized for
10. Multidimensional Performance : The OLAP Sy stemn should
multidimensionalanalysis. Itshould provide fast response times for complex queries
involvingaggregations,calculationsand navigationacross multipledimensions.
These guidelinesserve as principlesfor designingOLAP systems that support elicient
and effective data analysis. While the original rules were proposed in the context of
relational databases,they have influenced the development of OLAP technologiesand
s

continue to shape best practices in the field.

6'

2.7.2 Characteristics of OLAP

F1

Fast

01
Analysis

02
Shared

03
Multidimensional

04
Information

05
Fig. 2.7.1Characteristicsof OLAP

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Business Analytics 2- 43 Business Intelligence

Fast
With the elementary analysis lasting little more than one second and very few taking
more than 20 seconds, it identifieswhich system was intended to provide the majority of
feedback to the client in approximatelyfive seconds.
Analysis
It specifies how any business logic and statisticalanalysis pertinent to the functionand
the user can be handled by the methodwhile yet keeping the methodsimple enough for
the intended client. We exclude products (like Oracle Discoverer)that do not allow the
user to define newAdhoc calculations as part of the analysis and to document on the
data in any desired product that do not allow adequate that one do not think it is
acceptable if all applicationdefinitions have to be allow the user to define new Adhoc
calculationsas part of the analysis and to document on the data in any desired method,
without having to programme.
Share
" Notall functions require the user to write data back, but an increasingnumber do, so the
system should be able to manage multiple updates in a timely, secure manner. It defines
whichthe system tools all the securityrequirementsfor understandingand if multiple
s
writeconnectionsare needed. concurrentupdate location at an appropriatedlevel.
6'
F1

Multidimensional
Due to the fact that this is unquestionably the most logical way to analyse businesses
and organizations, OLAP systems must offer a multidimnensional conceptual
representationof the data, including fullsupport for hierarchies.
Information
" All the data required by the apps should be able to be stored on the system. It is
importantto handle data sparsity effectively.
Here are the key characteristicsof OLAP (Online Analytical Processing):
1. MultidimensionalAnalysis : OLAP systems organize and analyze data across
multiple dimensions, allowing users to explore and analyze data from different
perspectives simultaneously.Dimensions can include attributes such as time,
geography,product,customerand more.
2. Aggregation and Summarization : OLAP enables the aggregation and
summarizationof data, allowing users to view data at various levels of granularity.It
supports roll-up and drill-downoperations,which involve aggregatingdata to higher
levels or drillingdown to more detailed levels, respectively.
TECHNICALPUBLICATIONS®.an up-thrust for knowiedge
 BusineSsintelligenca
2- 44
Business Analytics optimnizedfor fast query response
systems are cachingto
3. Fast Query Performance : OLAPindexing. precomputationsand ensure
techniques like volumesoff information.
times. They employ dealing with large
quick access to data, even when
support compleX calculationsand
systems
4. Advanced Caleulations : OLAP Users can perform calculations apply
dimensions.
calculations across multiple define custom calculations to analyze data
and
formulas, create derived measures
based on specific requirements.
allow users tO navigate hierarchica
5. Hierarchical Navigation : OLAP systems
example, a time dimension can have hierarchie,
structures within dimensions. For
month and day. Users can drill down or roll up through thess
such as year, quarter,
detail.
hierarchiesto analyze data at differentlevels of
Interactive and Ad hoc Analysis : OLAP systems offer interactive and ad hoc
6.
Userscan slice
analysis capabilities,enabling users to explore data dynamically. dimensionsto
dice, pivot and filter data, perform on-the-flycalculations andchange
answer specificanalyticalquestions.
7. Data Consolidationand Integration : OLAP systems consolidate data from varios
s

sources into a single view, ensuring consistency and coherence in the analytical
6'

process. They integrate data from data warehouses, operational databases and other
F1

systems to provide a unified and comprehensiveperspective.

8. Support for Data Visualization: OLAP systems often include data visualization
features, such as charts, graphs and dashboards. Visual representationshelp usen
understandand communicatecomplex data patterns and trends effectively.
9. Time Intelligence : OLAP systems provide support for
time-based analysis and
calculations. Users can perform time-based comparisons, track trends over
calculateyear-over-yeargrowth rates and analyze data within specific time
10. Scalabilityand Flexibility: OLAP periods.
data and scale as the data and user
systems are designed to handle large volune
demands grow. They offer flexibilityto adapt
changing business requirements, allowing
and hierarchieswithout modifications to dimensions, meas
significantdisruption.
" These characteristics make OLAP
systems powerful tools for processin
enabling users to gain
insights, analytical and make
discover trends, perform in-depth
informed decisions based on
multidimensionalviews of analySIS
data.
Business Analytics 2-45 Business Intelligence

2.7.3 Advantagesof OLAP

OLAP (Online Analytical Processing)offers several advantagesthat make it a valuable
technology fordata analysis and decision-making.Here are some key advantages of
OLAP:
1. MultidimensionalAnalysis : OLAPallows users to analyze data from multiple
dimensions simultaneously. This multidimensional view enables a deeper
understandingof data relationships,patterns,and trends that may not be apparent in
traditionaltwo-dimensionalviews.
2. Faster Query Response Times : OLAP systems are optimízed for fast query
performance. They employ specializedindexing, caching and pre-aggegation
techniques that enable rapid retrieval and analysis of data, even with large volumes
of information.This speed enables users to explore and analyze data interactively.
3. Flexible Data Exploration : OLAP provides interactive and ad hoc analysis
capabilities,allowing users to slice, dice, pivot and drill down into data easily. Users
can dynamically explore data, apply filters, perform calculations and change
dimensions to answer specific analytical questions. This flexibility empowers users
to gain insightsquickly and make informeddecisions.
s
6'

calculations
4. Complex Calculations : OLAP supports advanced calculations and
across multiple dimensions. Users can define custom calculations, apply
F1

mathematicaloperations,create derived measures and apply business rules within the

OLAP environment. This capability enables sophisticatedanalysis, forecasting and
modeling.
hierarchical
5. Hierarchical Navigation : OLAP systems allow users to navigate
up
structures within dimensions. Users can drilldown to more detailed levels or roll
tohigher levels of data aggregation.This hierarchicalnavigationprovides the ability
various
to analyze data at different levels of granularity and view data from
perspectives.
6. Consistent and Consolidated Data: OLAP consolidates data from multiple
sources, ensuring data consistency and coherence. By integrating data from data
warehouses, operational databases and other systems, OLAP provides a unified and
comprehensiveview of data for analysis.This consistencyhelps in accurate reporting
and decision-making.
7. Data Visualization : OLAP systems often include built-in data visualization
capabilities, such as charts, graphs and dashboards.Visual representationsof data
make it easier to understand complex patterns, trends and relationships. Data

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Business Analytics 2- 46
BusinessIntelligencs
visualizationenhances data exploration,analysis and communicationof insights.
8.
Scalabilityand
of data and scale Adaptability
: OLAP systems are designedto handle large
as data and user demands grow. They can accommodate volumes
data sizes, user
concurrency and evolving business requirements. OLAP i n cr
offer flexibility in modifying dimensions, measures and hierarchies to systems
e asi n g
changing analyticalneeds. adapt to
9. Improved Decision-Making: By providing a multidimensionalview of data, fast
query response times and interactiveanalysis capabilities, OLAP
empowers users to
make data-driven decisions quickly.The ability to explore datafrom
different angles
perform complex calculations and visualize insights enhances the decision-makine
process.

" Overall, OLAP technology provides powerful tools for data analysis, reporting and
decision-making.Its advantages lie in its ability to handle complex analysis, suppor
multidimensionalviews, enable fast queries and provide flexibility in data exploration.
2.7.4 Disadvantagesof OLAP
While OLAP (Online Analytical Processing)offers numerous advantages, it also has
s
6'

some disadvantages that organizations should consider. Here are some potential
F1

drawbacks of OLAP :
1. Data Latency : OLAP systems typically rely on periodic data updates from the
underlyingdata sources, such as data warehouses.As a result, there can be a latency
period between when the data is updated in the source system and when it becomes
available for analysis in the OLAP system. This latency may impact the timelinesso
insightsand decision-making.
2. Data Complexity : OLAP requires careful design and modeling of the undery
data structures,dimensions, hierarchiesand measures. Setting up and
OLAP system can be complex, especially when dealing
maintanms
with large and diverst
Correctly
datasets. Designing and configuring the OLAP cubes and dimensions
requires expertiseand effort.
ofien
3. Implementation and Infrastructure Costs : Implementing an OLAP System and
involves significant upfront costs, including hardware, software licenses
Systems
specialized expertise for design and development. Additionally, OLAP
requirementso
require robust infrastructureto handle the storage and with
processing
multidimensional data. These costs can pose challenges for organizations
limited resources.

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up-thrust for knowledge
Business Analytics 2- 47 Business Intelligence

4. Data Volume and Scalability: While OLAP systems are designed to handle large
volumes of data, extremely large datasets may pose scalability issues. As data
volumes increase, query response times may slow down and additional hardware
resources may be required to maintain performance. Scaling an OLAP system to
accommodategrowing data sizes can be a complex and costly task.
5. Complexity of Data Updates : Updating data in an OLAP system can be more
complicatedthan in transactionalor operationaldatabases. When new data is added
or existing data is nmodified, the OLAP cubes may require rebuildingor refreshingto
reflect the changes. This process can be time-consumingand resource-intensive,
especiallyfor large datasets.
6. Limited Real-time Analysis:OLAP systems are typically designed for analytical
processingand are not well-suitedfor real-timeor near-real-timeanalysis. As OLAP
relies on periodicdata updates, it may not be suitablefor scenariosthat requireup-to
the-minuteinsights or data streaminganalysis.
7. Steep Learning Curve : Using and leveraging the full capabilities of an OLAP
system may require users to undergo training and become familiar with the system's
s
functionalities and query languages. The learning curve for effectively utilizing
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OLAP tools and features can be steep, especially for users who are new to the
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technology.
8. Data Governance and Consistency: OLAP systems rely on consolidated and
integrated data from various sources. Ensuring data quality, consistency and
governance across multiple source systems can be a challenge. Inaccurate or
inconsistentdata can impact the validityand reliabilityof analysis results.
While the disadvantages of OLAP exist, organizations can mitigate some of these
challenges through careful planning, robust infrastructure,ongoing maintenance and
user training. It's important to evaluate the specific needs and requirements of the
organizationbefore decidingto implementan OLAP system.
2.8 Analytic Functions
Analytic functions in Business Intelligence(Bl) refer to a set of powertul data anaBysis
capabilitiesthat help users gain insights from their data. These tunctionsare available in
BÊ tools and platforms and are designed to perform complex calculations and
aggregationson data, providing meaningfuland actionable insights for decision-making.
Some common analytic functions in Business Intelligenceinclude :

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Business Analytics 2- 48 Business Intel igonca
1. Aggregation Functions
: Aggregation functions perform calculations
summarize data, such as SUM. AVG (average), COUNT, MIN and MAX. thar
functions are used to totals, averages and other statistical
caleculate These
numericaldata. measures for
2. Ranking Functions: positionsto data
Ranking functions assign ranks or based on
specified criteria. such as RANK. IDENSE RANK and NTILE. These
ldentty top performers,best-sellingproducts or high-valuecustomers. functions help
3. Window Functions : Window
functionsoperate on a specificsubset of data defined
by a window or partition. Examples include ROW_NUMBER, LEAD, LAG an
RANK, which allowusers to perform calculationswithin adefined window of data
4. Time-Series Analysis : Time-series analysis functions help in analyzing data over
time, such as moving averages, year-to-date calculations and growth rates. These
functionsassist in identifyingtrends and seasonal patterns.
5. ForecastingFunctions: Forecastingfunctions use historical data to
predict future
values. such as TREND, FORECAST and PREDICT. These functions support
predictiveanalyticsand aid in forecastingsales, demand or financial performance.
s

6. Percentile Functions : Percentile functions, such as

6'

PERCENTILE CONT and

PERCENTILE DISC, calculate values at specific percentiles in a dataset. These
F1

functions help analyze data distributionand identify outliers.

7. Cumnulative Functions
Cumulative functions, like CUME DIST and
PERCENT RANK, provide cumulative results over ordered data. They help analyz
the relative position of data points within a sorted dataset.
8. Time-Based Aggregations : Time-based
aggregations,like ROLLUP and CUbt.
allow users to aggregate data along multiple dimensions and hierarchies,
enabuis
more comprehensivedata analysis.
9. Analytical Hierarchies : Analytical hierarchies, using functions like GROUPING
SETS or ROLLUP, allow users to create custom ysis, simplitying
hierarchiesfor analys
complex data structures.
10. Regression and Correlation Functions : These functions, such as CORRand
LINEST, help analyze relationships between variables and identity correlations
regressioncoeficientsindatasets.
11. StatisticalFunctions: Bl tools often include a functions,such
standard variety of statisticaldistributions,for
as deviation (STDEV), variance (VAR) and
advanceddata analysis. probability

TECHN
Business Analytics 2- 49 Business Intelligence

These analytic functions empower users to perform sophisticateddata analysis and gain
deeper insightsinto their business data. By leveraging these functions, BI users can
make data-drivendecisions, identify patterms and trends,and understand the underlying
factors driving their business performance.

2.8.1 Importanceof Analytic Functionsin BusinessIntelligence

Analytic functions play acrucial role in Business Intelligence(B) and have significant
importance in enabling organizationsto extract valuable insights from their data. Here
aresome key reasonswhy analytic functionsare essential in BI:
1. Deeper Data Analysis : Analytic functions allow users to perform complex
calculations and aggregations on data, enabling deeper and more meaningful data
analysis. Users can gain insights that go beyond basic data summaries, helping them
understand trends, patterns and relationshipsin their data.
2. Data Visualization : Analytic functions support data visualizationby providing the
necessary calculations and metrics that drive the creation of informative charts.
decision-makersto
graphs and dashboards. Data visualization makes it easier for
understandcomplex informationquickly and make data-drivendecisions.
s
6'

data
3. Enhanced Decision-Making : By providing comprehensive and accurate
F1

well-informed
analysis, analytic functions empower decision-makers to make
reducing
choices. Analytic insights support evidence-based decision-making,
reliance onintuitionand subjectivejudgment.
functions help
4. Identificationof Key Performance Indicators (KPls) : Analytic
that are critical for
identify and calculate key performance indicators (KPls)
to track progress toward
measuring business performance.KPls enable organizations
goals and objectiveseffectively.
time-series analysis, enabling
5. Trend Analysis : Analytic functions support
Trend analysis helps in
organizations to identify trends and patterns over time.
decisions.
forecastingfuture performanceand making proactive
perform comparative
6. Comparative Analysis : Analytic functions allow users to
which help identify top
analysis, such as ranking and percentile calculations,
areas.
perforners,high-valuecustomersand underperforming
facilitate forecastingand
7. Forecastingand PredictiveAnalytics: Analytic functions
future trends and plan
predictive analytics, allowing organizations to anticipate
management and
accordingly.Forecasting supports resource planning, inventory
demand prediction.
Business Analytics 2- 50 BusinessIntelligence
8. Data
Exploration
data analysis,
: Analyticfunctions provide the ability to perform

This
exploratory
enabling users to drill down into data and discover
approach helps identify new opportunities and potential hiddenexplinosiragtohtrys
9.
improvement. areas for
Performance Evaluation : Analytic functions assist in performance
calculating metrics like growth rates, return on investment(ROI) and evaluation by
These evaluationsaid in measuring the success of business
initiatives and profitability
10.
areas for improvement.
Data-Driven Culture :
identifying
The
availability analytic functions
of
driven culture within organizations. encourages a data.
It promotesthe use of data for
atall levels,empowering
11. Efficiency and decision-making
employeesto make better choices based on data insights.
Productivity : By automating complex calculations and analysis
analytic functions save time and effort for users. This increased
users to focus on interpretingresults and efficiency allows
In summary, analytic deriving actionable insights.
functions essential components of Business
are
enabling organizations to derive actionable insights Intelligence,
from
evidence-based decision-making, facilitate data exploration and their data. They support
s

business performance, making them critical tools for enhance overall

6'

business environment. success in today's data-driven

F1

2.9 Tvwo Marks Questionswith

Answers
Q.1 Explain data warehouse.
Ans. : A data warehouse is a large,
centralized
various sources within an organization.It is repository of integratedand structureddata from
and analytical processes by providing a designed to support business intelligence,reporting
purposes.
unified view of data for decision-makingand analysis
Q.2 Define Datamart.
Ans. : Data mart is a subset of a
data warehouse that
department within an organization. It is asmaller, more focuses on a specific subject area
and is designed to meet the specific focused version of a data warehous
or user group.
reporting and analytical needs of a particularbusiness u
Q.3 What is OLAP ?
Ans. : OLAP (Online Analytical Processing)is a technology that enables multidimensional
analysis of large volumes of data from different perspectives. It provides a way to organizeand
analyze data to Support complex and interactive data exploration,reporting and decision-
making.
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Business Analytics 2-51
Business Intelligence

Q.4 Inshort explain analyticfunctions.

Ans. : Analytic functions in Business Intelligence(Bl) efer to a set of powerfuldata analys1s
capabilities that help users gain insights from their data. These functions are available in BI
tools and platformsand are designed to perform complex calculationsand aggregationson data,
providing meaningfuland actionableinsights for decision-making.
Q.5 In short explain knowledge management.
Ans. : Knowledge Management(KM) plays a crucialrole in the field of Business Intelligence
(BI) as it enables organizations to effectively gather, store, organize, analyze and share
knowledge to make informed business decisions. KM in BI involves the systematic
management of information, data and expertise, turning them into actionable insights and
creatinga competitiveadvantage for theorganization.
Q.6 What is decision making process ?
Ans. : The decision-makingprocess refers to the systematicapproach used to make data-driven
decisions based on insights and analysis provided by BI tools and technologies.
Q.7 Explain what is DecisionSupportSystems (DSS).
information systems
Ans. : Decision Support Systems (DSS) are interactive computer-based
s
DSS provide
designed to assist decision-makers in making informed and data-driven choices.
6'

various
tools, data and analytical capabilitiesthat help users analyze complex problems, explore
F1

are used in
alternatives and evaluate the potential outcomes of their decisions. These systems
enhance decision
various domains, including business, healthcare, finance and logistics, to
making processes.

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 UNIT II

3 Business Forecasting

Syllabus
Introduction to Business Forecastingand Predictive analytics - Logic and Data Driven Models
Data Mining and PredictiveAnalysis Modelling-Machine LearningforPredictiveanalytics.

Contents
3.1 Introductionto BusinessForecastingand PredictiveAnalytics
3.2 Logic and Data Diven Models
s

3.3 Data Mining and PredictiveAnalysis Modelling

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3.4 Machine Learningfor PredictiveAnalytics

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3.5 Two Marks Questions with Answers

(3 - 1)
Business Analytics 3- 2 Business Forecasting

3.1 Introductionto Business Forecastingand PredictiveAnalytics

Using informationfom the past and present, forecasting is the practice of speculating
on what willoccur in the future.In essence, it is a decision-makingtool that, by looking
at historical data and trends, aids organisations in minimising the effects of future
uncertainty.It is aplanning tool that enables companies to map out their next actions
anddevelop budgets that, ideally, will account for any potential risks.
Forecasting's goal is to give managers information that will make decision-making
easier. Almostevery organisation,whether it be public or commercial, works in a
dy namic and uncertain environment with incomplete foresight. Organisations need a
forecasting process that enables them to accurately and promptly predict the future as
forecasting is a crucial component of the planning and control system. Making the
proper decisions and being able to predict the future are key components of effective
corporateleadership.
" Even though there may stillbe some degree of uncertainty in these business decisions.
forecastingcan be utilised as a tool to help. The general objective of top managementis
to make judgements based on forecasting economic elements that are important for
s
strategic planning and execution. Forecasters can lessen the level of uncertainty
6'

surroundinga business choice even though they cannot predict the future with absolute
F1

precision.
" Every functionalarea of business can benefit from the use of forecasting, which is a
strong instrument. Forecasting is used by productionmanagers to direct their inventory
managementand production plan. Cost reduction for materials and labour is an issue for
businesses with different product lines. The production process also heavily depends on
market trends, labour and material availability and plant capacity. In light of new
product lines, new markets and ambiguous demand conditions,
production
require regular short-term predictions of product demand as well as long-termmanagers
demand
projections.
. Marketers need projectionsto help them make decisions, justlike production
do. Making decisions on marketing strategy and advertising plans managers
and expenditures
requires accurate forecasts of the market's size and features, including market
share.
price trends,sources of competitionand market demography.The projectionmight also
1ake into account inventory, sales income and product demand. A crucial
component of
product research is forecasting.Marketers create their forecasts using both qualitative
and quantitative methods. The Delphi method, sales force estimations. sonsumer
intention surveys and executive opnion juries are examples of qualitative forecasting
techniques.
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Business Analytics 3-3 Business Forecasting

These methodshave drawbacks since they rely on subjectivejudgements. which inject

biases. uncertainties and inconsistenciesinto the forecast. The time series method or
causal models are the quantitativeapproachesthat are used to forecast market situations.
" Good projectionsare beneficial to a variety of service sector sectors, including financial
institutions, airlines, hotels, hospitals, sports and other entertainment organisations.
Forecasting is used by the accounting and finance departments in many different
contexts. Financial forecasting enables the financial manager to foresee events before
they happen,especially the requirement for raising money from outside sources. The
creation of several pro forma, or projected, financial statements is the most thorough
method of financial forecasting. The firm can predict its future levels of receivables,
inventory,payables,and other corporate accounts,as well as its anticipatedearnings and
borrowingneeds, based on the projectedstatements.
and estimates of
Making company decisions requires careful considerationof cash flow
necessary for asset
revenue and expense rates. Additionally, accurate forecasting is
forecasts of
market speculation.Both large and small airlines can profit from accurate
occupancy rate
the load factor, fleet management, fuel and other costs. Accurate hotel
provided in the
projections,for instance, have an impact on all other guest services
s
emergency
hospitality and entertainment sectors. To anticipate costs and use of
6'

Forecasts are
department staff, hospitals have traditionallyused forecasting systems.
F1

tickets will be sold for each event.

used in the sports industry to determine how many
year or years.
Revenue estimates are derived ona team's performanceover a given
ultimately need, human resource
When deciding howmany employees a company will
departmentsmust use forecastsheavily.
requirementfor personnel training.
" This has an impact on the firm's resourcesand the
benefit from estimates of the
Resource planning and management decisions might
wvorkforce (e.g., part-time
number of employees in functional areas, the makeup of the
and productivity.
versus full-time),trends in absenteeismand tardiness of
to inform macroeconomic choices. Forecasts
" In the public sector, forecasts are used policy, Good
foundation for economie
significanteconomic indicators serve as a
product (GNP), employment.
predictionsare essentialfor estimating the grossnational
inflation rate, industrial production and
estimated income tax receipts for both
the governmentto direct the
individuals and corporations.These forecasts are used by
monetary and fiscal policy. Among the various applications for forecasts.
nation's
inirastructure,soCial insurance and healtheare is one
planning government spend1ng on
relies on (or
population demographic)estimates.
that heavily
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Business Analytics 3-4 Business Forecasting

The aforementioned examples of forecasts' anplications in different commercial and

economic activities are by no means all-inclusive. This only illustrates torecasting's
importanceand range in decision-making.
3.1.1 The ForecastingProcess
An organisation must have a systematic forecasting process that can be swiftly
implemented and adjusted as necessary if it wants to regularly produce accurate
projections. The forecaster benefits by following aprocedure that is based on the
scientificmethod, just like in any other scientificendeavour.
" The instructionsthat make up the language of the scientific method are descriptionsof
sequences of acts or procedures that are precise enough for anyone to follow. These
guidelinesare referred to as "operationaldefinition."
An operational definition ought to list all the steps required to repeatedly produce the
same results. Forecastingproceduresmight be straightforwardor intricate.
s

Management's
question/problem
6'
F1

Data gathering
Feedback
loop
Model formulations

Design the forecastingexperiment

Analysis and interpretation

No
Valid results?

Yes

Report results

Fig. 3.1.1 Forecastingprocess

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 Business Forecasting
Business Analytics 3- 5

organization's management needs a justification for a management

It starts when an
whether aproduct's enhancements willresult
choice. For instance, they caninguire as to
in a material rise in demand.
projection if they must devote
In other circumstances,the management could request a business
or if a circumstance in the
a significant amount of resources to a project
environment indicates that a choice must be made.
goals are spelt out indetail.
" The forecasteris in charge of making sure that the forecast's
how the outcomes will be
It is crucial to understand why the forecast is required and
organisations create
used. Depending on the type of issue and the forecast's duration,
uniqueforecasts.
or monthly, capital
For instance, opposed to productionprojections that are weekly
to create a forecast, a
budget forecasts are long-term in nature. Once the choice is taken
theoretical model that addresses management concerns must be created.
are clearly stated.
The forecaster is in charge of ensuring that the forecast's objectives
essential.
Understanding the forecast's necessity and the intended use of the results is
the forecast's
Organisations develop distinctive forecasts based on the issue kind and
s
6'
time frame.
production
For instance, capitalbudget forecasts are long-termn in natureas opposed to
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a forecast. a
projections that are weekly or monthly. After deciding to make
management-focusedtheoreticalmodel needs to be developed.
gather
Unless it is essentialto their everyday operations, businesses frequently do not
disaggregateddata. The firm may need to obtain such data when highly disaggregated
data are requiredto produce a projection.
forecasting more
It might take more time and money to do so, which would make
difficult. When faced with a situation like this, the forecaster must weigh all of the
potential outcomes before making a prediction. Data analysis should not be viewed as
only a mechanicalprocedure.
" The forecastershould become quite familiar with the characteristicsof the firm and the
sector it represents before estimating the forecasting model. The market structure in
which the firm operates, the sources of competition,the company's position within the
industry, etc., are all examples of informationthat aids in forecasting and should be
thoroughlyexamined.
ASa result, the forecastercan see the predicted model in a dynamicway. Changes can
be made at thispoint if a need to reassess the results arises.Models should be examined
for validityand reliability.To evaluate the model's accuracy, forecast and actual results
should be compared.
 Business Forecasting
BusinessAnalytics 3-6
At this point, evaluation acts as a control procedure. When additional variables are
is altered.the
included, the time frame is adjusted, or the data's periodicity model's
validity and dependabilitycan sometimesbe increased.
" The forecastshould be modified appropriately using the feedback loop.
Presenting
findingsto managementis the last step in the forecasting process. The management of
the
the companyrequesting the prediction must realisethat, eventhoughthe effort of
a forecast may be finished, the process of fine-tuningthe forecast has not. giving
" To be clear, a good
forecast is dynamic rather than static. The management would
benefit from developinga process for regularly assessing its projectionsand from beine
aware that unforeseen market conditions can affect the forecasted model's underlving
assumptions,necessitatinga new estimate.
" Forecastersin the informationage have access to a wide range
of databases that mav be
quickly accessed for use in predicting. Aggregate and disaggregatedata for private and
public sector organisationsis sourced from these databases.
" Business choices are made in light of the
general state of the economy.The forecast for
the nation's economy influences how
s

businesses choose to
distribution, and marketing. An economy's performance is invest in manufacturing.
6'

influenced by long-term
F1

trends. seasonal patterns, cyclical movements, and eratic

projectionsrequires an understandingof the connections influences. Making
sectors. between the differenteconomic
It was noted that
enterprisestake their
theyoperate while talking about the cues from the economicenvironment in which
a business cycle. cyclical links that hold the economy together
Businesses increase production and operation when during
"
macroeconomicconditionsare present. favourable
Slower growth patterns are
economic growth has not always typically caused by economic
by variables been consistentbecause it can contractions. Long-ten
" including inflation, unemployment,
be negatively
impacis
We noted before how recession and depression.
business cycle. We canimportant
it is for
forecasters to grasp the
different stages
trough, or recovery by usingpredict how the economy
the four stages of the will act during peak.
a
o1
recession.
The historical analysis of
American business cycles economic cycle.
folowing intriguingfindings: given in this chapter leads to the
Over time, fluctuations have
become less
deviationunpredictable
Romer (1999) used the standard and more predictable.
of
macroeconomicindices, includingindustrial growth rates for numerous
and production, GNP, commodity
unemploymentrate, to gauge economic volatility. output.
TECH
Business Analytics 3-7
Business Forecasting

Thesedata suggest that between the pre-1916 and the post-1948 eras, the volatility
rest
of the U.S. macroeconomy has decreased by 15 o to 20 %. Forecasters can
casy knowing that the adoption of multiple monetary and fiscal stabilisers has
reduced macroeconomicvolatility.
Over time, recessionshave not gotten any shorter. According to research, the
average recession lasts one month longer in the post-World War II era than it did in
the pre-WorldWar I era. Romer (1999) discovered that the length has grown
through time in termsof expansion. The average amount of time between one peak
and the next high seems to have been around 50 %longer in the postwar era than it
had been in the prewar era. It is noteworthy that expansions were, on average. a
little bit shorter in the unstable interwarperiod than in the postwarera.
The American economy had been growing for 93 months as of December 1998.
The average postwar duration increased to S6.1 months after this extensive
extension, which is 65 percent longer than the median prewar expansion.
Forecasters use macroeconomic models to make predictions about the GNP.
inflation, interest rates, and other macroeconomic variables.
These models are instruments for defining how economic variables interact with one
s
another and for measuring the effects of these interactions. Macroeconomic models are
6'

effective forecasting tools. However, they are not advised for usage by particular firms
F1

due to their complexity and high cost. How well these models foretell future events is
still up for debate. Although these models are theoretically based, the forecaster's
expertise and judgement ultimately determine how well they perform. The severe
economic slump of 2008 served as a reminder of the intricacy of the macroeconomic
variables.
In the 1950s,the first iteration of these models appeared. The American economy was
originally studied using a macroeconomicmodel by economists Klein and Goldberger.
These models have a big impact on the economy as a tool for policy. By creating models
that illustrate the connection between input/output analysis and the macroeconomic
models. other academics have expanded on the work of Klein and Goldberger.
Corporate clients have been offered economic forecasting models by a number of
organisations, including commercial organisations,due to the difficulty and expense
involved in creatingthese models.
3.1.2 PredictiveAnalytics
Almanagement,accordingto the late management and quality expert Dr. W. Edwards
Deming, is prediction.He was suggestingthat management should take the future into
aceount while making decisions. Financial experts,for instance,cannot make wise
BusinessAnalytics 3- 8 Business Forecasting
investment choices without anticipating stock price movements, and airlines
decide when and how much to buy jet fuel without anticipatingchanges in oil cannot
Trendlines depict howthese qualitieschangethroughouttime. Regression priisces.a
common technique used in many other predictive analytics applicationsanalysis
to
correlationsbetween one or more independent variablesand a dependentvariable.analyse
Based on a poll that gauges consumer attitudes towards the brand, bad word of
and income level, a marketing wish to forecast the desire
mouth,
researcher may to
specific car model. Based on the demographics of its clients, an insurance purchase
a
need to forecast the volume and cost of claims. Managers of human firm might
resources may need
to forecast the demand for various workforce capabilities in order to
create plans for
recruitingand training. Fantasy sports enthusiastsmay seek to forecast a player's worth
based on avariety of performancemetrics.
Regressionanalysis and trendlinesare techniquesfor creating predictivemodels. gaining
a fundamental grasp of the use and interpretationof trendlines and regression
models,
the statisticalchallenges involved in interpretingthe findings of regression analysisand
the practical considerations involved in using trendlinesand regression as decision
s
6'

making and evaluation tools.

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When developing predictive analytical models, it's crucialto comprehend both the
mathematical principles and the descriptive characteristics of various functional
relationships.In order to comprehendthedata and determine the best kind of functional
relationshipto include in an analytical model, we frequently start by making a chart of
the data. We employ a scatter chart for eross-sectionaldata and a line chart for time
series data.
The following list includes typical categories of mathematical operations used n
predictive analyticalmodels as shown in Fig.3.1.2.
The equation y = ax + b is linear. Over the range of x. linear functionsexhibl
constant increases or declines. The simplest kind of function utilised in predictive
models is this one. It approximatesbehaviour reasonably well over narrow range
of values and is simple to comprehend.
Y = log,bx is alogarithmic function. When a variable changes quickIy before
levelling off, as in thecase of diminishing returns to scale, logarithmic function
increases in
are used. In marketing models, where,for instance, constant
percentage
advertisingresult in constant, absolute increases in sales, logarithmicfunctions ae
frequentlyused.
Business Analytics 3- 9 Business Forecasting

Y = ax+ bx +c (second order-quadratic function)., y= ax + bx + cx + d (third

order-cubic function) and so forth are examples of polynomial functions. Athird
order polynomial has one or two hills or valleys, whereas a second-order
polynomial is parabolicin form and only has one hillor valley. Priceelasticity is
frequently included in evenue models through polynomialfunctions.
Y= aN is a power function. Power functions explain phenomena with a
predeterminedrate of growth. Power functions are frequently used to represent
learning curves that express improvingperformancetimes for a task.
Y = ab is an exponentialfunction. Exponentialfunctions have the characteristic
that y increases or decreases at a constant rate. For instance, as the wattage of a
lightbulb increases, the apparent brightnessdecreases. In this instance, b would fall
between 0and 1and a would be a positive value. A common definition of the
exponentialfunction is y = ae, where b= e or the base of naturallogarithms(about
2.71828), is used.
R-squared. R2 will
The "fit" of the line to the data is gauged by R2, also known as
R2 value.
have a value between 0 and 1. The better the fit, the higher the
s
30000 Samples
y= ax
6'

Power function
Linear function y= ax+b
F1

Logarithmicfunction y= log bx
25000 Exponentialfunction y= aebx

20000

15000
2%
10000

1000 m
500 m
100 m
operations
Fig. 3.1.2 Categoriesof mathematical
forecasts about upcoming eventsor outcomes using historical data, statistical
Making
and machine learning approaches is known as predictive analytics. Data
algorithms,
order to predict prospectiveeffects and
patterns., trends and linkages are eXamined in
take preventative measures.

knowledge
TECHNICAL PUBLICATIONS-an up-thrustfor
 Business Forecasng
3- 10
combinesdata
snss Anatics analytics
forecasts,predictive An outline of the
mining. statisticg
" To prtue insights and
learning
algorithms. predictive analytis
mdelling and machine
prvture is provided beloW obtained and kept for analysis from variety
a of
Relevant data is transactions, sensor
Data colection :
customer records, financial data. soca
including
interactions.
media fnts andwebsite prepare it for analysis,raw datais cleaned
preprocessing : In orderto addressingmissing values. normalisingthe daa
Uata entail
prved. This stage could
and engineeringfeatures.
Insights. correlations. trends, and anomalies
analysis : variables for modellings
Exploratory data exploration. Selectingpertinent
discovenrdthrough data
aided bv this step.
models are created using statistical and machi
development: Predictive random forests. ne
o Model anaBysis, decision trees,
leaming methods. Regression examples of regularlyused methods
machinesare
networksand supportvector metrics like accuracy.precision
evaluation: Using relevant
o Model training and (AUC), the models' pertormance is assessedate
s
rall. or aea under the curve
6'

data.
being trained on historical production setting after beg
F1

The model is deploved in a

o Model deployment : predictions onfresh, untainteddata.
trainedand assessedto make model's effectivenssn
updating : To guarantee the deploved
o Monitoring and Periodicallyupdating it to include n
accuracy throughouttime. it is monitored.
circumstancesis possible.
informationor make adjustmentsfor shifting
Numerous sectors can benefitfrom predictiveanalytics.For instance:
" strategies
personalised,pricing
Marketing : Marketing campaigns can be
analytics.
optimisedand client attritioncan be predictedusing predictive
fraudulent transactions
Finance : It can support the detection of
forecasting,credit risk analy sis and investmentportfoliooptimisation.
forvastig.hyt
Healthcare: Predictiveanalytics can help with disease outbreakhospital etti
risk patient identification.treatment plan optimisation and
enhancement.
Manufacturing: Demand forecasting, supply chain optimisation.
and
breakdown detection production process enhancement are all

-an u-st r &nouiege

 Business Analytics 3- 11 Business Forecasting

It enables the dermand forecasting,supply chain optimisation, equipment breakdown

detection and improvementof the productionprocess.
Review Question

1. Explainthe forecastingprocess.

3.2 Logic and Data Driven Models

" Future probabilitiesare typically predicted using predictiveanalysis and models.
To better understand client patterns, business partners and product offerings and to
categorize potential hazards and opportunitiesfor a company, predictive models are
used in the business world to analyze past facts and current data.
It uses a variety of techniques, like statisticalmodeling, data mining and machine
learning,to help analystsgeneratemore accuratebusinessforecasts in the future.
More informationabout predictivemodeling is provided in the following points :
" The core of commercialdecision-makingis predictivemodeling.
More than science, creatingdecision models is an art.
s
An ideal decision model must include :
6'

" A solid command of the functionalbusiness aspects.

F1

Understandingof traditionaland contemporarybusiness proceduresand research.

Logical aptitude.
" It is always advised to begin simply and add to the models as needed.
1. Logic - driven models
It uses statistics to forecast results. Predictivemodeling can be used to identify any form
of unknown event, regardless of when it occurred, even if the event one wants to
anticipateis typicallyin the future.
" Predictive models, for instance, are frequently used to identify suspects and track down
criminals after a crime has been committed.
In many instances, the model is chosen based on detection theory to attempt to
anticipate the probability of an outcome given a predeterminedamount of input data,
such as when estimatingthe likelihoodthat an email is spam given its content
Inorder to estimate the likelihoodthat a set of data, such as spam or "ham," belongs to
another set, models may employ one or more classifiers.

TECHNICAL PUBLICATIONS-an up-thrust for knowledge

 Business Forecasting
BusinessPredictive
Analytics modeling is equivalent3-to,12or substantially overlaps with,the topic ot machine
learning, as it is more widely knownin academicorresearchand developmentcontexts,

dependingon definitionallimits.
to as predictive analytics when use
Predictive modeling is frequently referred
" commercially.
Logic-driven models base their judgments on sound logic and subject-matterexpertise,
Instead of relying entirely on facts, these models are constructed using pre established
rules and hypotheses.
include human expertise in the
They are frequently utilized when there is a need to
unavailable.
when data is scarce or
decision-making process or logicdriven
An expert'sknowledgeis formalized into aset of rules or asSumptionsin a
hand.
model.Decisionsare then made by applvingthese rules to the tacts at
action
" The choice that is made as a result dirccts the business'scourse of
Usage
" In order to estimate a response (output) given a specifc set of characteristics(input),
predictivemodels can either be employcddirectly or indirectiy to inform the selectionof
s

decision-makingrules.
6'

Depending on the prediction methods util1zed. t n frequcntly posble to devclop a

F1

formula thatcan be enteredinto a spreadshect program

The key benefit for end users or decision-makcrs is fam1liar1ty with the product itvelt.
which lowers the adoption barrier
Nomograms are helpful visual aids that show a prcdsctive nodel Iheir utility s
dependent on the approach selected, just lihc with sprcadshcct software.Nomograms
have the advantage of being able to quickBy calculate forecasts without the need of
computer.
" One of the simplest ways to illustrate aprodictive tool is with point estimates ables.
Here, a combinationof interest-relatedtraits can be displayed as a table or a graph, w
the corespondingpredictionbeing read from the y-axis or the table itself.
One of the mostvisually understandableways to communicatepredictions is using
based systems (such as CARTand survivaltrees).
strateg).
" They can only be used with approaches that employ this particular modeling represented
which has a number of disadvantages. Decision rules can also be graphically
using trees.
decisions.
Score charts are visual representationsof forecasts or guidelines for making

TECHNICAL PUBUCATIONS -an up-thrustor knowedge

Business Analytics 3- 13
Business Forecasting

A set of assumptionsabout how the observeddata and similar data from a broader
populationwere produced are embodied in a statisticalmodel.
A modeldepicts the data generation process, frequently in a highly idealized manner.
Some of the probabilitydistributionsdescribed in the model assumptionsare believed to
be a good approximationof the distributionfrom which a certain data set is sampled.
Experience, knowledge and logical linkages between variables andconstants linked to
the intended performanceoutcome provide the foundation of a logic-drivensystem.
Diagrammingtechniques are helpful for conceptualizingthe relationshipspresent in a
system.
causes and an outcome
" An individual can speculate on connections between potential
conceptualizingconnectionsbetween
using a cause and effect diagram. Anothertool for
company performancelinks is the influencediagram.
Example time. The
six times a year and spends $50 each
A typical restaurant patron eats there
profit for the business.
average mealand beverage bill bringsin a 40%
s

profit.
$50(6X0.40)equals $120for a customer'sannual gross
6'

= |/3
do not come back. Customer lifetime average
F1

" Each year. 30 % of clients

= 3.33 years.
$400.
gross profit is $120 (3.33) times
" An average customer's
profit = $120/.3 = $400
OR Customer average gross
R× Fx M
V=
D

Consequently, economicvalue of acustomer.

loyal client representsthe
V=Value of a
purchase.
R= Revenue for each annually)
Frequencyof purchases(numberof visits
F=
margin.
M= Stands for the gross leave each year.
defection rate, or the percentage of customers who
D= Stands for samplespace and the current
the
and postulationsprovidedby understandingof business
On the basis of inferences built. It takes a thorough
conditions.logic-drivenmodels are abilitiesto more effectivelyassess argumentsand
reasoning
functionaldomains, logical researchto create logical
models.
proceduresand
knowledgeof business about six times
per year
of a customer who frequents a restaurant
Let's use the
example
visit to help us comprehend. On the amount billed each
for
per
and spends about 5000
up-thrustfor knowledoe
TECHNICALPUBLICATIONS-an
 Business Analytics
visit, the
3- 14
BusineS6 Forecaslng
annual grossrestaurant makes about 40 % of its profit. It turns out that this
eustomerccusustotommerety ,
profit is 5000 x 6 x 0.40, or $12,000 per year. 70 % of
each year,
who never comebringing in more revenuefor the restaurant, comparedto 30 o/% of retury
" W1/.3 = back.
3.33 vears is
stays a customer). the estimated average customer lifetime (length of
time a
12000 3.33 = 39,960.
x Therefore, a typical customer'saverage grosS profit comes clem
out to he
With the help of the aforementioned
information, we can logically draw a
and develop the model shown below for the
Each customer's econonmicvalue (V) is aforementionedproblem statement :
calculatedas (RF M)D.
Conclusion
R=Revenue produced per customner.
F =Annual visit
M=
frequency
Margin of profit
D= Stands for the annual percentage of
On thebasis of inferencesand non-returningcustomers.
postulations provided by the
sample space and the current
conditions,logic-drivenmodels are built. It takes a thorough
functional domains,logical reasoningabilities to more understandingof business
s

knowledgeof business proceduresand research to createeffectively assess argumentsand

6'

logical models.
F1

Let'suse the example of a customer who

frequents arestaurantabout six times per year
and spends about 5000per visit to help us
comprehend. On the amount billed for each
visit, the restaurant makes about 40 % of its
profit. It turns out that this customer's
annual gross profit is 5000 x 6 x 0.40 or $ 12,000 per
year. 70 % of customers returm
each year, bringing in more revenue for the
who never come back.
restaurant,compared to 30 % of customers
To make wise judgmentsand derive insights from
data, business analytics employs bou
logicand data-drivenmodels. Let's go over each
strategy in greater detail and inciuue
diagram to help visualizethe ideas.
2. Data-driven models
On the other hand, data - driven models heavily rely
on data to elucidate patte
connectionsand insights.
These models examine enormous amounts of data using statistical and mathematical
techniquesto provide predictionsor suggestions.
When there is an abundance of data accessible and a desire to get it. data-
insightsfrom
driven models are frequently used.

TECHNICAL PUBLICATIONS-an up-thrustfor knowledge

Business Analytics 3- 15
Business Forecasting

The contiguratormodel components are dynamicallyinjected intothe model using the

Data Driven Modeling (DDM) technique based on information obtained from other
systems like catalog systems, Customer RelationshipManagement (CRM), Watson and
others.
Based on the parametersof the service request, the omni-configuratorengine creates the
modelelements, such as the option class and option item, during runtime and populates
related attributesbefore running the configuratormodel's internal business logic.
attributes,a modeler
By using the SterlingConfiguratorVisual Modeler tool with DDM
can design a configuratormodel using the DDM approach.
the catalog
These propertiesdescribe the data source and selection criteria for injecting
for each system or data
items into the model. Data source adapters that have been set up
source are used to retrieve the data from it.
acquire the data based on the model's
The appropriatedata source adapters are called to
specifieddata source.
source adapter, model components are
Based on the information given by the data
dynamicallybuilt in the configuratormodel.
s
it
data-driven model collects it and preprocesses
6'

To prepare raw data for analysis, a

transformation,and feature engineering.
F1

using techniques likecleaning, clusteringmodel,

data-drivenmodel, such as a regressionmodel, classificationmodel,
A data.
techniquethat is applicable, is then trained using the preprocessed
or any other
trained modelis utilized to generatepredictionsor suggestions.
Based onfresh data, the suggestions.
decisionsmade are guided by these forecastsor
The business and uses.
data-driven and logic-drivenmodels have advantages
" Both data to find insights and patterns,
vast amounts of
Data-drivenmodels excel at utilizing
excel when expert knowledgeplays a criticalrole.
while logic-drivenmodels approaches are frequentlyused in
business analytics,both
Tooptimizethe advantagesof
practice.
approach offers the followingadvantages :
DDM
Comparedto static modeling,the components by the modeler that
represent
of model
removing the manual building
By Ownership(TCO,
of
within models, it lowers Total Cost
configurator
items system, it
dynamically updated in responseto changes inthe catalog
Sincethe model is
market.
shortensthe time to
up-thrustfor knowledge
TECHNICALPUBLICATIONS-an
 BusinessAnalytics 3- 16 Business Forecastino
Dinerencesbetween static and dynamic modeling techniques(usingbDDM)
Static Dynamic
The modeler had to manually change the model The model doesn't require manual updating. The
each time a new item was introducedto the DDM-based model is created by the modeler
catalog in order for the new option items to be withplaceholdersfor dynamic options. As a
seen in the UI. result, the applicationdynamicallyupdates the
model whenever a new item is added to the
catalog andpresents the new choice items in tha
UI.
Datafrom several sources is not There is support for several data sources, A
supported. Only
one datasource may be used by the modelto DDM-based model can be updated using input
receive data. from many data sources.

DDM framework
" Utilizingthe selection criteria, the DDM framework enables you to retrieve data from a
data source and then inject configuratormodel componentsinto the model.
Price cache
s

Only if the model incorporatesDDM injected componentsdoes the price cache become
6'

upgraded to check for SKUadditions. In these situations,a second call to the pricing
F1

engine is conducted to get the prices for the new SKUs. The new additions are updated
along with the pricing cache.
DDM scenarios
TwoDDM scenarioexamples are provided in this section.
" Without having a comprehensive
understanding of the physical characteristicsand
behavior of the system, the primary goal of the data-driven model concept is to ident1ty
relationshipsbetween the state system variables(input and output).
The data driven predictive modeling uses a
predictive
results and generates the mnodelingapproach from the methodology to predict future
Even when there is a ton of data, it is only
collectionof availabledata.
variables or systemare clearly unknown. You are
data-drivenwhen the links among
based on the evidence. The modelmay include anmerely making predictionsin
this case
unobserved, hidden combination o
variables rather than being builtona set of hand-selected variables.
. Reeression analysis is a tool for creating mathematical and statisticalmodels tha
describe relationshipsbetween one or more independent, or explanatory. variablesanda
dependentvariable(which must be aratio variable and not acategorical variable).allof
which are numericalbut may be eitherratio or categorical.

TECHNICAL PUBLICATITIONS-an up-thrust for

knowledge
 Business Forecasting
Business Analytics 3- 17

time-series data,
Regresston models of cross-sectionaldata and regression models of
and the focus is on
where the independentvariables are time or some function of time
are frequently
future prediction, are the two primary kinds of regression models that
employed inbusinesscontexts.
ReviewQuestion
1. Explain logic and data - driven models.

B.3 Data Mining and PredictiveAnalysis Modelling

correlationsand insights in
Data mining is the process of identifying useful patterns,
algorithms to extract
massive databases. It entails employinga variety of strategiesand
major purpose is to
useful information and knowledge from raw data. Data mining's
can aid in decision-making and
transform data into actionable knowledge that
prediction.
involved in data mining:
" Here are the key steps and concepts from
collection : The first step in data mining is to gather relevant data
Data web
spreadsheets, sensor data, social media or
various sources, such as databases,
s
6'

logs.
mining is to compile pertinentdata from a
Datagathering : The initial step in data
F1

including databases,spreadsheets,sensor data, social media and

variety of sources,
online logs.
phase, analysts explore the data to gain a better
Data exploration : In this
its characteristics, distributions and relationships between
understanding of
visualization is often used to identifyinitial patternsand trends.
variables. Data
mining techniques are applied to uncover interesting
Pattern discovery : Data
the data.
patterns or relationshipsin
data mining tasks
include :
common
" Some
Discovering relationships between items in transactional
Associationrule mining :
a.
finding items frequently boughttogetherin a store.
databases, e.g., identity natural clusters in the
similardata points together to
b. Clustering : Grouping
data. categoriesor classes based on
Classification : Assigning data points to predetined
C.
their attributes.
analysis: Predictingnumericalvalues based on input features.
Regression

an up-thrustfor knowledae
TECHNICAL PUBLICATIONS-
 Business Forecasting

deviate
Business Analytics
3- 18

Identifying
unusual or rare
patternsthat
significanty
Anomaly detection: rules, the results need to be
or
fromthe norm. patterns, models, Validation techniques, such a
discovering usefulness.
o Evaluation : After quality and performance on unseen data
evaluated to assess their test the nodels'
CrOss-Validation,are used to patterns and insights discovere
utilization : The knowledge can
Interpretation and knowledge knowledge. This be used to
o meaningful
interpretedto extract improve business processesor
are predict future trends,
make data-driven decisions, underlyingphenomena.
understandingof the including business, finance
gain a better domains,
eNtensively used in various It is closely related to
Data mining is detection and scientificresearch.
healthcare, marketing, fraud artificialintelligenceand statisticalanalysis,as it
learning,
other fields such as machine disciplines to derive valuable informationfrom
these
oftenleverages techniques from
data.
s

3.3.1 Discoveryand Prediction

6'

discovery and prediction of important information from vast databases are two
The
F1

seeks to discover patterns.

essential components of data mining. Data mining
educated decisions and
relationships and insights that may be used to make more
predictions.Let's take a closer look at each of these ideas :
1. Discovery in data mining : Discovery in data mining refers to the process o
identifying previously unknown or not easily visible hidden patterns,structuresor
knowledge inside data. The basic purpose of discovery is to obtain a bete
knowledge of the data and identify significant relationships between variables or
qualities.The followingare some commondata mining finding techniques :
a. Clustering : Clustering algorithms put comparable data points together basedon
their features, allowing natural groups or clusters in the data to be identified.
b. Association rule mining : This technique identifies interesting
relationship
correlations between various attributes in data. In market basket analysis. fo
example, might identify which items are frequently purchased
C. Anomaly detection: Anonmaly detection algorithmsrecognisetogether.
odd patternsordata
items that differ significantly from the norm. These abnormalities could pointto
probable fraud, errors, or other significant events.
BusinessAnalytics
3- 19 Business Forecasting
d. Text mining : Text miningis used to extract important insights from
unstructured
text data through techniquessuch as sentimentanalvsis, topic extraction and
identification. keyword
2. Prediction in data mining : Prediction. on the other
hand, entails makin8
predictionsor forecasts about future events or outcomes utilising identified patterns
and information from historical data. It is based on the development of
predictive
models that can generalise patterns and correlations to new, previously
unknown
data. Predictiontechniquescommonly employed in data mining
include :
a.
Regression analysis : Regression models are used to predict numerical values based
on the properties of the input data. It can predict future numerical results by
determiningthe link between dependentand independentfactors.
b. Classification : Based on their properties,classificationalgorithmsassign data
points
to predetermined categories or classes. It is often used for applications such as
detectingemail spam, image identificationand medical diagnostics.
C.
Time series analysis : Time series analysis is used to forecast future values in time
ordered data based on prior observations.It's commonly used to forecast stock prices,
s
6'

weather patterns and other time-dependentphenomena.

F1

d. Machine learning : For predictivetasks, machine learning methodsare widely used.

They can learn from data patterns and make accurate predictions on previously
unseen data.

" Both discovery and predictionare critical for gaining insights and influencing decision
making in a variety of fields like business, finance, healthcareand others. Data mining
techniques are constantly improving in order to manage larger datasets and extract
important knowledge from complex data.
3.3.2 Confirmationand Discovery
" In the context of data mining, confirmation and discovery are two distinct and
complementary processes that contribute to the understandingand utilization of data.
Let's delve into each of these concepts :
1, Confirmation in data mining : Confirmation, also known as validation or
verification, refers to the process of validating or verifying known hypotheses,
patterns, or models using data. It involves testing pre-existingtheories or expected
relationships in the data to determine their accuracy and reliability. The goal of
confirmationis to assess whether the discovered patterns or models hold true in the
given datasetor population.
 BusineSs orecasting

BusinessAnalytics 3-20

" Confirmationoften involves the following steps . researchersor data analysts develop
a. Hypothesisformulation: Priorto data analysis, previousfindings. These hypothese,
or
hypothesesbased on their domain knowlledge expectedto existinthe data
propose certain relationshipsor patterns
that are
analyzed using appropriatestatistical or data
b. Data analysis : The collected data is
assess whether the observed patternsor relationshipsalign wil
mining techniquesto
the formulated hypotheses.
evaluatedto determinethe degree of
C. Evaluation: Theresults of the dataanalvsisare
evaluationhelps in drawing conclusions
Support for the formulatedhypotheses.This
about the validity of the proposed patterns or models.
findings and tor avoiding the risk
" Confirmationis crucialfor ensuring the reliability of
associationsin the data.
of drawingerroneousconclusionsbased on chance
2. Discovery in data mining : Discovery. involves uncovering new, previously
unknown patterns,relationshipsor insights from thedata. It focuses onexploringthe
data without any preconceived notionsor hypotheses, with the objective of finding
interestingand valuable informationthat may not have been anticipatedbeforehand.
s

Discovery often involves the following steps:

6'

a. Data exploration : Data is examincd from multiple angles to identify interestiny

F1

patterns,correlationsor anomaliesthat might not have been initially apparent.

b. Pattern mining : Various data mining techniques, such as clustering, association
rule mining and anomaly detection, are applied to discover hidden structures and
relationshipsin the data.
c. Interpretation:The discovered patterns are interpreted and analyzed to gan
insights and knowledgeabout the data and the underlyingdomain.
d. Generalization : The discovered patterns are generalized to make
predictions or
inferences on new, unseen data.
" Confirmationand discovery are complementaryprocesses. Confirmation helps validat
the findings from discovery, ensuring they are not due to
chance or data peculiar1tie
On the other hand,discovery helps generate new
hypothesesand insights, which can
further confirmed through the validation of different
datasets or through
experimentation. Both processescontributeto the overall understanding and knowledge
extractionfrom data mining endeavors.

TECHNICAL PUBLICA TIONS.- an up-thrustfor

knowledge
BusinessAnalytics 3- 21
Business Forscastirng

3.3.3 PredictiveModeling
In order to erente (or train) a model that can forecast reults for new data. precdietive
modelling approaches utilise previous data, By puttingthese methods into practice,
firms can improve decision-makingand produce fresh insights that result in more
profitableand productiveactions.
" Predictivemodelling techniques, for instance, are used by healthcare organisations to
optimisediagnostic procedures,by banking institutionsto identify and prevent fraud, by
retailersto improve customer satisfactionand to optimise inventory stock, etc.
regular basis to account
" A predictive model is not static: it is evaluated or altered on a
it's not aone-and-done
for changes in the underlying data. To put it another way,
occurred in the past
prediction.Predictivemodels create assumptionsbased on what has
demonstratesthat what is happening now
and what is now occurring. If fresh evidence
impact on the expected future outcome must also be revised. A
has changed, the
company, for example, could compare historical sales data against marketing
software
modcl for future income basedon the
expenditures across several locations to build a
influenceof marketingspend.
complete their computationsin
s
operate quickly and frequently
" Most prediction models
6'

online
result, banks and retailers may, for example, forecast the risk of an
real time. As a
F1

card application and accept or deny the request virtuallyquickly.

mortgageor credit
are more complex than others, such as those used in
Some predictive models the resulting outputs take longer to
quantum computing:
computational biology and completed much faster than in the past
application but are
compute than a credit card includingcomputingpower.
technological capabilities,
due to advances in future and is more trustworthy
and accurate
to see the
Predictive analysis makes it easier iterative process that starts
Predictiveanalysis modelling is an
than earliertechnologies. modellingapproachesbased on the requirements.Predictive
with a datasetand then uses determine danger in the past, opportunities,trends and
analyticsallows organisationstomeasures.This is only possible when accurate forecasts
develop strategies for suitable
and unorganiseddata.
are made using organised
Types of predictivemodels
Classification model
Clusteringmodel
" Outliers model
Forecast model
" Time series model
knowledge
TECHNICAL PUBLICATIONS an up-thrust for
Business Analytics Business Forecasting
3- 22

Predictivemodeling and data analytics

general,
Predictive analytics is another term for predictive modelling.In
"predictie
modelling" is chosen in academic settings, but "predictiveanalytics"is favoured i
commercialuses of predictive modelling.
The successful application of predictive analytics is strongly reliant on
unrestricted access to large amounts of accurate, clean and relevant data. Wli havig
predictivemodels using decision trees and k-means clusteringcan be quite complex,t
most complex aspect is always the neural network: that is, the model by which
computers are trained to anticipate outcomes. A neural netwvork is used in machine
learning to uncover correlationsin extremely large data sets and "to learn" and recognise
patterns within the data.
Limitationsof predictivemodeling
Accordingto a McKinsey report, common limitationsand their "best fixes" include:
1. Errorsin data labeling : Labellingerrors in data can be solved using reinforcement
learningor generativeadversarialnetworks(GANS).
s
6'

2. Shortage of massive data sets needed to train machine learning : Massive data
F1

sets required to train machine learning are in short supply : A potential solution is
"one-shot learning." in which a machine learns from a limited number of
demonstrationsrather than alarge data set.
3. The machine'sinability to explain what it did and why it did it : Machinesdo mt
"think"or "learn" in the same way that humans do. Similarly, their computations
might beso complicatedthat humans have difficultyfinding, let alone following.the
rationale. Allof this makes it difticult for a machine, or humans, to describe the
work. However. model openness is required for a variety of reasons, the mo
important of which being human safety. Local-interpretable-model-agnostl
explanations(LIME) and attention approachesare promisingpotential remedies.
4. Learning generalizability,or rather its lack: Machines, unlike humans. hav
difficulties carrying what they've learnt forward. In other words, they have difficulty
adapting what they've learnedto new situations. Everything it has learnedis solely ofrise
applicabletoone use case. This is why we shouldn't be concernedabout the
making
Al overlords anytime soon. Transfer learning is a proposed solution for than
more
predictive modelling with machine learning reusable - that is, applicableIn
one use case.
Business Analytics
3- 23 Ausiness Forecasting
5. Data and algorithm bias :
Non-representationcan affect outcomesand lend to
mistreatmentof signiticantgroups of people.Furthermore,baked-in biases are harder
to detect and eliminate later. Biases, in otherwords, tend to
reproduce themselves
This isa moving target,with no clear solution in sipht.
Predictivemodellingtechniquesin data mining
Predictive modelling appears to be a beneficial data mining technique as data seience
reaches its pinnacle,enabling corporations and enterprisesto produce predictive results
based on already-availabledata. Data mining includes predictivemodellingsignificantly
since it improves understanding of future cvents and helps to design decision-making
processesto be more exact.
Data mining entailsa wide range of tasks and strategiesfor extractinguseful information
from huge datasets. Among the most typical data mining tasks are :
1. Classification: Classificationis asupervised learning task in which data examples
are assigned to specified classes or categories based on their attributes.The system
learns from labelled training data before predicting class labels for additional.
unlabeled data. Spam detection, sentiment analysis and disease diagnosis are
s
6'

examplesof typical applications.

F1

" Example :
Support
The most effective machine learning and data mining algorithms are
classifiesincoming data
Vector Machines (SVMs). The support vector machine
the predictive analysis
items into one of several predeterminedgroups as part of
process.
which means it takes into account
SVM typically functions as a binary classifier,
possibilityof two target values for the data. Support vector machines provide
the
prone to overfitting than other
dependable,accurate predictions and are less
classifiers.
method that SVM Uses to transtorm your data and it uses this
The kernel trick is a outputs.Simply put.
border between the possible
altered datato decide on an ideal choose, it
selecting how to divide your data into the labels or outeomes you
before transformations.,
sophisticateddata
performs anumberof incredibly that seeks to predict a
supervised learning problem
is a
2. Regression : Regression
valuerather than predicting classes.
To produce predictions,it
numerical
continuous
input features and the output variable. Predictin
models the link between the
on variables such as area, location and so on is one example.
based
housing values

up-thrust for knowledge

TECHNICALPUBLICATIONS-an
 Business Forecasting

3 - 24 which the
Business Analytics
unsupervised
learningjob in attributes. Its
algorithm
is an based on their goal is to
3. Clustering : Clustering instances predetermined
clusters together
comparabledata
data that do not have anomaly
clas
find natural groups or
clusters within
segmentation and detection all
segmentation, picture
labels. Customer
requireclustering. Association rule mining identifies interesting
Association rule mining transactional database. It aids in the
4. items in a
correlations between buy product A
also tend to buy
relationshipsor "people who
as
discovery of relationships such employed in market basket analysis and
frequently
product B." This activity is
recommendation systems.
patterns or data examples that difter
unexpected
Anomaly detection : Identifying detection entails. It is useful fr
5. what anomaly
significantlyfrom the norm is equipment failures in industrial
intrusions and
identifying fraud, network Language Processing) : Text mining is the
environments. Text Mining (Natural from unstructured text data. Sentiment
information
process of extracting useful categorization,and topic mnodellingare some
s

recognition,text
analysis,named entity
6'

of the tasks involved.

F1

series analysis is used to find patterns, trends and

Time
6. Timne series analysis: time. It's commonly used in
financial
seasonality in data points collected over
analysis.
forecasting,weatherforecasting,and stock market
Example:ARIMA
Integrated Moving Average. du
The term "ARIMA" stands for "AutoRegressive values
solely on a time series' current
it refers to a predictive modelthat relies
forecast future values. time
data from a
To generalise the forecast, ARIMA models simply need prior maintaining &
series. These models increase prediction accuracy while
straightforwarddesign. via
stationary one
ARIMA models transform a non-stationarytime series into a produe
data. To
differencing and then anticipate potential values using past averages over
predictions, these models employ auto-correlations and moving
residual data errors.
usetultor
Itis
Numerous sectorsuse ARIMA models for a variety of purposes.
forecastingdemand, such as estimatingfuture need for food.
BusinessAnalytics Business Forecasting
3- 25

7. Dimensionalityreduction : Dimensionalityreduction strategies try to reduce the

number of characteristicsin a dataset while retainingcrucial information.This aids in
data visualisationand the performanceof machine learning algorithms.
8. Feature seleetion : The process of identifving and selecting the most relevant and
informative features from a dataset is known as feature selection. It aids in the
simplificationof models, the reduction of computation time and the avoidance of
overfitting.
9. Pattern mining : Pattern mining is the discovery of intriguing patterns or rules in
analysis,
data that can reflect relationships,sequences, or occurrences.Market basket
DNAsequenceanalysis and web log mining all use this job.
techniques accessible. Various tasks
These are only a few of the numerous data mining
educated judgements,depending on
andstrategiesare used to gather insights and make
the unique challenge and the features of the data.
categories of tasks in data mining
Predictivetasks and descriptive tasks are two main
and data analysis,each serving distinct purposes :
s
IntelligenceProcess
3.3.4 CentralIntelligence Agency
6'

Intelligence Process is a systematic approach

F1

Intelligence Agency)
The CIA (Central intelligencematerial to support the
analyse and disseminate
used by the CIA to gather, United States government. The
policy objectives of the
national security and foreign serves a specific purpose. The
into stages, each of which
intelligenceprocess is divided
the CIA Intelligence Processare as follows:
essentialstages of
intelligence process begins with planning and
Planning and direction : The of
a.
intelligence requirements based on the demands
direction, which identifies consumers. These specifications
other intelligence
politicians,military leaders and collecting and analysisefforts.
of intelligence
influencethe scope and focus both human (HUMINT)and
many sources,
Intelligenceis obtainedfrom
b. Collection :
etc.) during the collecting phase. HUMINT 0s
technical (SIGINT, IMINT, such as informants and agents, SIGINT
human sources
intelligence obtainedfrom interceptingand analysingcommunications,
concerned with and
(SignalsIntelligence)is Intelligence)is concernedwith the analysis of satellite
whereas IMINT (pictures
aerial pictures.

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 BusinesS Forecastine
Business Analytics 3-26
Processing and exploitation : The intelligencegatheredis processed and exploited
C.
in order to extract meaningful and actionable information. This could include
coded s1gnals, or analysin
nterpretingdocuments in a foreign language, decrypting
rawdata to gaininsights.
d. Analysis andintegration : The intelligencethat has been processedis analysedand
integratedto createthorough and coherent assessments. Analysts look for patterns,
evaluate
cOrrelations,and potential dangers in datafrom multiple sources. They also
the information'sdependabilityand believability.
e. Production : The intelligence analysis is converted into finished intelligence
products at this level. These products may include written reports, briefings,
assessments,and visualisationsthat inform policymakersand other consumers about
the findings.
f. Dissemination : The finished intelligence products are distributed to the proper
recipients, such as thePresident, policymakers,military commandersand other key
officials.
s

Feedback : Feedback is an important aspect of the intelligence process.

6'

Policymakers provide commentson the use and accuracy of intelligenceproducts,

F1

which aids in the refinementof future intelligencerequestsand analysis.

To secure sensitive information and sources, the CIA follows tight security protocols
throughout the intelligenceprocess. To improve the efficacy of intelligenceefforts, the
agency also engages with other intelligence agencies, government departments and
Overseas partners.
It is criticalto understandthat the intelligenceprocess is iterative and continual.As new
information becomes available and global events change, intelligencerequirementsare
revised, and the process continues to guarantee that decision-makershave access to the
most relevant and up-to-dateintelligence.

3.3.5Cross-ndustryStandardProcessfor Data Mining

CRISP-DM stands for Cross-IndustryStandard Process for Data Mining,It is a wide
used and comprehensivemethodologyfor conducting data mining projects.The CRIS
DM framework provides a structured and systematic approach to guide data mining
tasks from the initial understanding of the business problem to the deeployment of the
final model. The process is iterative, allowing for continuous improvement and
refinementthroughoutthe project. CRISP-DM consists of the following six phasesas
shown in Fig.3.3.1.
BusinessAnalytics Business Forecasting
3- 27

Business research Data understanding

understandingphase phase

Data preparation
Deploymentphase phase

Evaluation phase Modelingphase

s
6'
F1

Fig. 3.3.1 CRISP-DM is an iterative, adaptive process

1. Business understanding:This phase involves understandingthe business objectives

and requirements of the data mining project.It includes identifying the business
problem, defining the goals of the project, and understandinghow the resuts willbe
used to support decision-makingand add value to the organization.
2. Data understanding : In this phase, data relevant to the project is collected and
explored to gain insights into its structure, quality and potential usefulness for
analysis. Data exploration and visualizationtechniques are employed to understand
the characteristicsof the data and identify any data quality issues.
3. Data preparation:Data preparationinvolves cleaning,transforming,and formatting
the data to make it suitable for data mining tasks. This phase includes data cleanine
to handle missing values and inconsistencies,data integrationto combine data from
multiple sources, and feature engineering to select, create, or transform relevant
features for analysis.
 Business Forecastins
3-28 appropriate data
Business Analytics
on selecting
performance. mining
The modeling phase focuses evaluatingtheir Different
4. Modeling : and
predictive models, tuned to find the most effective
techniques. building approachesare
tested and
algorithmsand modeling
model for the given problem. models is assessed using
performance of the the
5. Evaluation : In this phase, the effectiveness in meeting business
determine their
evaluation metrics to ensure their generalizationto
datasets to
validated on test
objectives.The models are
new, unseen data.
deploying the selected model into the
final phase involves and address the busipes.
6. Deployment : The support decision-making
operationalenvironment to into existing systems or processes
integrating the model
problem. This may involve
by end-users.
and ensuringits successfuladoption
CRISP-DM process, each phase may loop back to a previousphase if
Throughoutthe CRISP-DM allows for
insights or challenges arise. The iterative nature of
new
project progresses. CRISP-DM is a
continuous improvement and adaptation as the
structure and manage
s

flexible and widely adopted framework that helps organizations

6'

their data mining projects effectively.

F1

Review Questions

. Describein detail(CRISP-DM)Cross-IndustryStandardProcessfor data mining.

2. In detailexplaindata mining for predictiveanaltics.
3.4 Machine Learningfor PredictiveAnalytics
An introductionorganizationsgather enormous amounts of data from several sources.
including consumer contacts, internet behavior, sensor readings and more, in today's
data-drivenenvironment.
Business organizationshave a fantastic opportunityto gather insightful
make wise decisions thanks to thewealth of data. knowledy
Data scientiststhat specializein predictiveanalytics use machine learning algorithmsto
jdentify patterns in data and forecast upcoming events or
actions.
"ArtificialIntelligence (Al) is asubset that allows computersto learn from data without
explicit programming.
" It gives systems the ability to automatically enhance their performance Over time.
Machine Jearning algorithms examine past data in the context of predictive analyticsto
find trends.
BusinessAnalytics Business Forecasting
3- 29

Given the complexity and volume of data that exist today, as well as the increasing
demand for data-driven decision-making across variety of industries, predictive
analytics requires machine learning.
The following are some of the main justificationswhy machine learning is Vital or
predictiveanalytics :
Dealingwith big data organizationsare producingand gatheringenormous amounts
of datafrom severalsources as the digital age
progresses.
It might not be possible to process and derive useful insights from such huge
datasets using traditionalmethods of analysis.
Big data may be handled quickly by machine learning algorithms,which also find
patterns and connectionsthat would be difficult or impossible for humans to find
manually.
The following steps are often included in the predictiveanalyticsprocess :
1. Data gathering:
The initial step entails compilingpertinentdata from diverse sources.
Structured data from databases, unstructured data from written documents, photos, or
s
even real-timedata from sensorscould allfallunder this category.
6'

2. Preparing the data :

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Unprocessed data is frequently disorganized and may have missing values, outliers, or
noise.
Datapreparationinvolves preparingthe data for analysis by cleaning, manipulating,and
standardizingit.
Predictivemodeling does not require all data propertiesto be equally significant.
that will
The process of feature selection or engineering entailsselecting the features
model.
have the greatest bearing on the performanceof the
3. Splittingthe trainingdata :
test set.
The dataset is split into the training set and the
it has been
The test set is used to assess the machine learning model's performance after
trained using the training set.
4. Model selection :
" A number of machine learning techniques are available, including neural networks.
trees and random forests.
support vector machines,decision

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 BusinessForecasting
3-30
Business Analytics determine which model is
forecastingtask
particular
The type of data being used and the
best to use.

5. Modeltraining: machine learning algorithm so it

data are fed into the chosen
" In this step. the training
connectionsin the data.
may learnfrom the patternsand
6. Evaluation of the model :
evaluated usine
accuracy of the trained model are
The generalizabilityand prediction
the test dataset.
7. Model tuning :
changed to improve the
Hyperparametersof the machine learning algorithm can be
performanceof the model if it is not performingas expected.
to make predictionson
" Once the model has been trained and assessed, it is prepared
fresh, unused data.
Machine learning-based predictive analytics has applications across a wide range of
industries,includingfinance, marketing,healthcare,manufacturingand many more.
s

In order toobtain acompetitiveedge in the market, it enables organizationsto anticipate

6'

customerbehavior,optimize processes,find anomaliesand make data-drivendecisions.

F1

Machine learning for predictive analytics willcontinue to be essentialfor accessing

insightful information and promoting innovation across industries as technology
developsand more data becomes accessible.
" When working with sensitivedata, it's crucialto take ethical issues and privacy concens
into account.

3.4.1 Machine Learning Algorithmsfor PredictiveAnalytics

An efficient data analytics method that aids artificial
intelligence (AI) is predictive
modelling. Predictivemodellinguses a variety of machine learningtools and approachs
to forecast future occurrences and assess how
decisions will affect the present. Ins
machine learning methods that are helpfulfor predictivemodellingare briefly
here :
descr1beu
Regularregression:
"A straightforward and popular method for forecasting numerical
values based on
historical datais linear regression.
In order to enable continuous predictions, it builds a linear
relationship between the
input features and the target variable.

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Business Analytics Business Forecasting
3- 31

TWo types of supervisedlearning :

1. Classification :
. It predictsthe class of the dataset based on the independentinput variahle
" Class is the categoricalor discrete values. like the image of an animal is a cat or dog
2.Regression:
variable. like
It predictsthe continuous outputvariables based on the independent input
age. distance
the predictionof house prices based on different parameters like house
from the mainroad, location, arca, etc.
" Here. we willdiscuss one of the simplesttypes of regression
i.e. Linear regression.

3.4.1.1Linear Regression
approach known as "linear regression" determinesthe
A supervisedmachine learning independentfeatures.
relationship between a dependentvariableand one or more
linear feature:
regression occurs when there is only one independent
" Univariate linear are multiple independentfeatures.
s
regressionoccurs when there
multivariatelinear
6'

optimum linear equation that, given the

objective is to identify the
The algorithm's
F1

variable.
variables,can forecastthe value of the dependent
independent the
dependent and independent variables is shown bv
the
The relationship between
equationas a straight line. dependent variable changes when the
shows how much the
The slope of the line
changedby a unit.
independent variable(s)are
of the most significant.When learninga
one
supervised learningjob of regressionis Y valuesis
employed.
The recordswith X and
of
function in regression, aset predict Y from an unknown X.
Since we must
then be used to
" This function may case of regression given X as independent
of Y in the
determine the value forecasts continuous Y is necessary.
characteristics, afunction that variableand Xis called an
independentvariable
called a dependent or target
" Here Yis
predictorof Y.
also known as the modulesthat can be used tor regression.
of tunctions or
types
" There are many type of function.
simplest
A linear
function is the
muliplefeatures representingthe problem.
be a single feature or
" Here, X may

for knowiedae
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 Business Analytics 3- 32
Business Forecasltn
Linear regression performsthe task to predict a dependentvariable value
given independentvariable (y) on
" Hence, the name is linear (x). based
regression.
Sum of Squares
ResidualError (SSE) Regression/
best-fit line

Sum of Squares
Total (SST)

Sum of Squares Mean of actual /

Regression (SSR) response
variable value
s
6'

Fig. 3.4.1 Linear regression

F1

" In the Fig. 3.4.labove, X (input)is the

person.
work experienceand Y (output) is the salary olt
" The regressionline is the best-fit line
for our model.
Assumptionfor linear regressionmodel
Linear regression is a powerfultool for understandingand predicting the behavior of
variable, however, it needs to meet a few conditions in order to be accurateand
dependablesolutions.
1. Linearity :
The independent and dependent variables have alinearrelationship with oneanother.
" This implies that changes in the dependent variable follow those in the independe
variable(s)in a linear fashion.
2. Independence :
The observationsin the dataset are independent of each other. depen
not
" This means that the value of the dependent variablefor one does

value ofthe dependent variable for another observation

on the
observation.
TECHNICAL PUAI
BusinessAnalytics
3 - 33
3. Homoscedasticity : Business Forecasting
Across all levels of
the
" This indicates that theindependent
amount of variable(s).
the
the variance of the errors is constant.
variance of the errors, independent variable(s) has no impact on the
4.Normality:
The errors in the modelare
normally distributed.
5. No multicollinearity:
There is no high
correlationbetween the independentvariables.
Thisindicatesthat there is little or no
correlationbetween the independentvariables.
Hypothesisfunction for linear regression
As we have assumed earlier that our
independent
respective salary Y is the dependent variable. feature the experience i.e. X and the
is
Let'sassume there is a linear relationship
between X and Y then the salary can be
predicted using :
Ý=0, + 0,X
s
OR
y, = 0, +0,x,
6'

y,e Y (i= 1,2, .., n) are labels to data(Supervisedlearning)

F1

" x,E X (i= 1, 2. .... n) are the input independent training data (univariate - one input
variable (parameter)
Y(i=1,2. .... n) are the predictedvalues.
" The model gets the best regressionfit line by finding the best 9, and 0, values.
0, : Intercept
o 6, :Coefficient ofx
Once we find the best 0, and 0, values, we get the best-fit line.
So when we are finally using our modelfor prediction,it willpredict the value of y
for the input value of x.
Cost function
between tha
The cost function or the loss function is nothing but the error or difference
predictedvalue and the true value Y.
value The
It is the Mean Squared Error (MSE) between the predicted value and the true
cost function (J) can be writtenas :
Cost function (J) = n n

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Business Analytics 3-34 Business Forecastino
3.4.12LogisticRegression
targetvariablein binary
When there are just two
problems,
Because itlogistic
possible
regression
forecasts is applied.
the likelihood
for
outeomes the

that an event
clas ification
will fall into one class or the other,it is

situationslike predictingcustomnerturnoveror fraud detection.

appropriatefor
Logistic regression is a supervised machine learning algorithm mainly used
" clasification tasks where the goal is to predict the probabilitythat an instance of

belongingto a given class.

regression. It's referred fo
" I is used for classificationalgorithms,its name is logistic
function as input and ue
regressionbecause it takes the output of the linear regression
class.
asigmoid function to estimatethe probabilityfor the given
that linear regression
The differencebetween linear regression and logistic regression is
regressionpredictsthe
outputis the continuous valuethat can be anything while logistic
probabilitythat an instance belongs to a given class or not.
s
6'

given set of
It is used for predicting the categorical dependent variable using a
F1

independent variables.
variable.Thereforethe
" Logistic regression predictsthe output of a categoricaldependent
outcome must be a categoricalor discrete value.
instead of giving the exact
It can be either Yes or No, 0 or 1, True or False, etc. but
value as 0and 1, it gives the probabilisticvalues which lie between 0 and 1.
are use.
Logisticregression is much similarto linear regressionexcept that how they regression is
Linear regressionis used for solving regression problems, whereas logistic
used for solving the classificationproblems. logistic
"S" shaped
" In logistic regression,instead of fitting a regression line, we fit an
function, which predictstwo maximum values (0or 1). such as
something
The curve from the logistic function indicates the likelihood of weight,
etc.
based on its
whetherthe cells are cancerous or not, a mouse is obese or not theability
it has
Logisticregression is asignificant machine learning algorithmbecause
discrete
datasets.
to provide probabilitiesand classify new data using continuous anddifferenttypes of
data

Logistic regression can be used to classifythe observations using classification.

the
and can easily determinethe most effective variables used for
 Business Forecasting
BusinessAnalytics 3-35

Logisticfuunction(Sigmoidfunction): predicted values to

function used to map the
. The sigmoid function is a mathematical
probabilities.
real value into another value within a tange of0 and I. The value of the
It maps any beyond this limit. so It
which cannot go
logistic regression must be between 0 and 1.
forms acurve like the "S" form,
logistic function.
The S-formcurve is called the sigmoid function or the
we use the concept of the threshold value, which defines the
" In logisticregression, above the threshold value tends to l and
a
probabilityof either 0or 1. Such as values
as shown in Fig. 3.4.2.
value below the threshold values tends to 0

S-Curve

y=0.8
s
6'

0.5
F1

Threshold value

y= 0.3

regression
Fig. 3.4.2 Logistic

Type of logisticregression: regression can be classifiedinto three types:

On the basis of thecategories,logistic be only two possible types of
" can
n binomial logistic regression,there etc.
1. Binomial : as 0 or1, Pass or
Fail,
dependent variables, such
there can be 3 or more possible
the logistic regression,
Multinomial : In multinomial
as "cat, "dogs",or "sheep"
2. dependentvariable, such
unorderedtypes of the there can be 3 or more possible ordered
ordinal logistic regression, "medium",or "high".
3. Ordinal : In variables,such as
"low",
types of dependent
involved in logistic regression : regression applied to the dependent
erminologies involved in logistic
common terms
Here are soome
variable's predictions.
for knowledge
PUBLICATIONS- an up-thrust
TECHNICAL
 Business Analytics
3-36 Business Forecasting
Dependent
are trying to variable
: The target variable in alogistic regression model,
predict. which we
Logistic function: The formula
to represent how the
used
independent
dependent variables relate to0one another. The logisticfunctiontransforms an
variables into a probability value between 0and I. which representsthe ,the inp.
of the
dependent variable I
Odds : It is the ratio ofbeing or 0. likeliho.
different from probability assomething occurringto something not
the probabilityis the ratio of occurring. It
everythingthatcould possibly occur. something occurring.
o Log-odds : The
of the odds. In log-odds, known as the logit function, is the natural
also
logistic regression,the log odds of the dependent variablelogarithr
modeled linear combinationof the
as a ar.
independent variablesand the intercept.
Coeficient: The logistic regression model's estimated
independentand dependentvariablesrelate to one another.parameters,show how the
O Intercept : A constant term in the logistic
log odds when all regression model, which representsthe
independentvariablesare equal to zero.
s

Maximum likelihoodestimation: The method used to

6'

the logistic regression model, which estimate the coefficientsof

F1

given the model. maximizesthe likelihoodof observingthe data

3.4.1.3Decision Trees
A decision tree is one of the
most powerful tools of
supervised learningalgorithmsused
for both classificationand
" It builds a
regression tasks.
flowchart-liketree structure where each internal node denotes a test on
attribute, each branch represents an outcome of the test, an
and each leaf node (terminal
node) holds a class label.
" It is constructed by
recursively splitting the training data
values of the attributes until a stopping criterion is met, into subsets based on the
the tree or the minimum number of such as the maximum depth ot
samples required to split a node.
During training, the decision tree algorithm selects the best
based on a metric such as entropy or Gini impurity,
attribute to split the data
which measures the level o
impurityor randomnessin the subsets.
. The goal is to find the attribute that maximizes the informationgain or the reduction
impurityafterthe split.
BusinessAnalytics Business Forecasting
3-37
Both classificationand regression problems can be performed using decision trees,
which resembletrees.
They created a hierarchical decision-makingprocess by repeatedly grouping the data
into subgroupsaccording to the most usefulqualities.
It is one of the very powerful algorithms.And it is also used in random forest to train on
different subsets of training data, which makes random forest one of the most powertul
algorithmsin machine learning.
Decision tree terminologies
Some of the commonterminologiesused indecision trees are as follows :
1. Root node :
. t is the topmostnode in the tree, which representsthe completedataset. It is the starting
point of the decision-makingprocess.
2. Decision / Internal node:
" Anode that symbolizes a choice regarding an input feature. Branching off of internal
nodes connects them to leaf nodes or other internal nodes.
s
6'

3. Leaf / Terminal node :

value.
" A node without any child nodes that indicates a class label or a numerical
F1

4. Splitting :
a split criterion and a
The process of splitting a node into two or more sub-nodes using
selected feature.

5. Branch /Sub-tree:
internal node and ends at the leaf nodes.
" A subsection of the decision tree starts at an
6. Parent node :
more child nodes.
The node that divides into one or
7. Child node :
node is split.
The nodes that emerge when aparent
8. Impurity :
the target variable's homogeneity in asubset of data, It refers to th
A measurementof
in a set of examples.
degree of randomnessor uncertainty measurementsin decision
commonly used impurity
The Giniindex and entropy are two
trees for classifications task.
 Business Foreasin
Business Analytics 3-38

9. Variance : measures how much the predictedand the target variables vary in different
Variance

samples of adataset.
" Itis used for regressionproblems in decisiontrees.
half poisson deviance are
Mean squared error. mean absolute error. friedman mse. or
decisiontree.
usedto measurethe variance fortheregression tasksin the
10. Information gain:
splittingadatase
Informationgain is a measure of thereduction in impurityachieved by
on aparticularfeature in a decision tree.
greatest information
The spliting criterion is determined by thefeature that offers the
the
gain, It is used to determine the most informativefeature to split on at each node of
tree, with the goalof creatingpure subsets.
Measures for attribute selection :
Building adecision tree by dividing the source set into subsets depending on attribute
selectionmeasures,a tree can be "learned".
s

Decision tree algorithms employ the Attribute Selection Measure (ASM) criterion te
6'

assess the value of various attributesfor segmentingdatasets.

F1

In order to maximize informationgain, ASM seeks to determine the property that will
result in the most homogeneoussubsets of data followingthe split.
" It isknown as recursivepartitioningto repeat this operationon each derived subset.
" When the split no longer improves the predictionsor when the subset at a node has the
same value for the target variable,the recursion is finished.
" Theconstruction of adecision tree classifierdoes not require any domain knowledge or
parametersetting and therefore is appropriatefor exploratoryknowledge discovery.
" Decisiontrees can handle high-dimensionaldata.
Entropy:
" Entropy is the measure of the degree of randomness or uncertainty in the dataset. ln the
case of classifications,it measures the randomness based on the distribution of class
labels in the dataset.
Importantpoints related to entropy :
L The entropy is 0when the dataset IS completely homogeneous, meaning that each
instance belongs to the same class. t Is he loWest entropy indicating no uncertainty
in the dataset sample.

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BusinessAnalytics 3-39
Business Forecasting

2. When the dataset is equally dividedbetween multiple classes, the entropy s a

maximum value. Therefore,entropy is highest when the distribution ofclass laven t
even, indicatingmaximum uncertaintyin the dataset sample.
3. Entropy is used to evaluate the qualityof a split. The goal of entropy is to select ie
attribute that minimizes the entropy of the resulting subsets, by splitting the dataset
into more homogeneoussubsets with respect to the class labels.
criterion (i.e., the
4 The highest infornation gain attribute is chosen as the splitting
process is repeated
reduction in entropy after splitting on that attribute), and the
recursivelyto build the decision tree.
Giniimpurityor index: amongthe classitied
evaluates how accurate a split is
Gini impurity is ascore that
groups.
score in the range between 0 and 1, where 0 is when all
The Gini impurity evaluatesa random distributionof the elements within
1 is a
observationsbelong to one class, and
classes. possible.
want to have a Gini index score as low as
Inthis case, we model.
shall use to evaluateour decisiontree
s

the evaluation metric

we
Giniindex is
6'

variance that results from

F1

Informationgain : in entropy or
the reduction
Informationgain measures property.
a specific a feature by
splittinga datasetbasedon algorithmsto determine the usefulness ofthe class labels
decision tree respectto
" It is used in homogeneoussubsetswith
into more
partitioningthe dataset
predictingthe target
or target variable. the featureis in
informationgain, the more valuable
" The higherthe
variable.
working: classification.
algorithm to its
predict
Decisiontree
operatesby analyzingthedataset views the value of the root
tree algorithm
Thedecision where the
tree's root node, set.
commences from the record in theactualdata
" It attributeofthe next node.
to the branch and move to the
attributecompared proceedstofollow
the
by comparingits attribute
comparison,it subsequent node
" Based on the actionfor every further.
repeats this continuing theprocess
" The algorithm sub-nodesand
ofthe
valueswith
those leafnode ofthetree.
it reachesthe
until
I repeats

knowedge
up-thrustfor
TIONS- an
PUBLICA
NMCAL
 Business Analytics 3- 40
BusineS8
Forocasting
algorithm gIven below,
The complete mechanism can be better exDlainedthrough the complete
which contains the
Step 1 : Begin the tree with the root node sIVs S.
dataset.
Attribute Selcction Mcasure
Step 2 : Find the best attribute in the datasetusing
(ASM).
the best attributes.
Step 3: Divide the Sintosubsets that containpossible values for
Step 4 : Generate the decision tree node. which containsthe bestattribute.
dataset
Step 5: Recursivelymake new decisiontrees using the subsetsof the
created in step 3. Continue this process untila stage is reached where youcannot
further classify the nodes and called the final node as a leaf node classificationand
regressiontree algorithm.
Advantages of the decision tree :
1. It is simple to understand as it follows the same process which a human follows
while making any decision in real - life.
2.Itcan be very useful for solving decision -related problems.
3. Ithelps to think about all the possibleoutcomes for a problem.
s

4. There is less requirementof data cleaningcompared to other algorithms.

6'
F1

Disadvantages of the decision tree:

1. The decision tree contains lots of layers, which makes it complex.
2. It may have an overfitting issue, which can be resolved using the random forest
algorithm.
3. For more class labels, the computationalcomplexity of the decision tree may
increase.

3.4.1.4Random Forest Regression

To increase predicted accuracy and decrease overfitting,random forest is an ensemble
learning technique that blends various decision trees.
" It operates by averagingeach tree's predictions,creatinga strong and effectivemodel.
With the aid of several decision trees and a method known as bootstrapand aggregation,
also referred to as bagging, random forest is an ensemble methodology capableof
handling both regressionand classificationtasks.
This method's fundamentalprinciple is tontegrate severaldecision trees to get the final
tree.
result rather than dependingsolely on one decision
Mutiple decision trees serve as the fundamentar learning models in random forest.

knowledee
TECHNICAL PUBLICATIONS- an up-thrustfor
BusinesSAnalytiCs Business Forocasting
3- 41

3.4.1.5 Support Vector Machines(SVM)

SVM, or Support Vector Machines, is an effective technique used
for classtication
applications.
distinct classes while
.It locates the ideal hyperplane for separatingdata points from
maximizingthe distance between them.
that focuses on creating statistical
Machine learning is a subfield of artificial intelligence
future.
models and algorithmsthatcan learn from dataand predict the
machine learning method is linear regression,which learns from labeled
Another sort of
converts data points into the best-performinglinear functions that may be
datasets and
datasets.
used to predictoutcomeson fresh
understand what supervised machine learningalgorithmsare.
We should first
sort of machine learning from labeled data. Datasets with
The algorithm learns in this
that have been labeled.
known target values are those support vector networks) are
(SVMs, also known as
Support Vector Machines algorithms that examine data used for
related learning
s
supervised learningmodels with
6'

research.
regression andclassification Support Vector Machine
F1

definition of a
separatinghyperplane serves as the formal generates an optimum
" A words, the method
classifier. In other data (supervised
(SVM), adiscriminative given labeled training
fresh samples
hyperplane that classifies
learning).
Static Vector Machine points in space with as much space
is a mapping of the examplesas
" AnSVM model categoriesas possible.
the various classificationby
betweenthe examplesof classification in additionto linear
effectively do non-linear
" SVMs m may
inputs into large featurespaces.
Implicitlytranslating
their
that categorizes fresh examples accordingto
model
method creates a examples that have cach been tagged as
" An SVM training training
categories given a series of
one of two categories.
to one of the binary linearclassifier. Before moving on,
belonging algorithma
non-probabilistic
tromthis essay.
" This makesthe fundamentalconcepts
you grasp the Scikit-earn are prerequisites.Let's look at a little
make sure
Matplot-Lib,and
Numpy, Pandas, categorizationexample.
Supportvector
 Business Analytics 3- 42 Business Forecasting
mix them
all in
Every decisiontree has a significantvariance,but when we
variance is reduced since each decision tree is perfectly trained using parallel, the
that specific
sample of data, so the output is dependent on numerous decision trees ather
one. than jus
The majority voting classifier is used to determine the final output in a
challenge.
The tinaloutput in aregressionproblem is the mean of every output.
clas ification,
k-Nearest Neighbors (k-NN)
A straightforward and understandable approach for classification and
problems iscalled k-Nearest Neighbors(k-NN). regression
Based on the majorityclass or average of the k-nearestdata points in the feature space, it
forecasts the target value.
"A straightforward and understandable machine leaning technique called k-Neanest
Neighbors(k-NN) is utilized for both classification andregressionproblems.
" It is anon-parametricand lazy learning algorithm, which means that it doesn't explicity
learn a modelduring training and doesn't make any assumptionsabout the distribution
s
6'

of the underlyingdata.
F1

The whole training dataset is instead memorized and uscd during the predictionstage.
The k-NN algorithm steps :
1. Preparationof data :
For classificationor regression,the algorithm needs a labeled dataset with known input
features and associatedoutput labels or numbers.
2. Selecting k :
The user mustprovide a value for k, which denotes the quantityof closest neighborsto
take into account while producingpredictions.
In the case of binary classification,an odd integer is frequently chosen for k in order o
prevent ties.
3. Distance metric :

To determinehow similar two data points are, the algorithm uses a metric(such
as the Euclidean distance).
distance
" It determinesthe separationbetween each point in the training dataset and the inputdata
point.
BusinessAnalytics
3- 43 Business Forecasting

ANearestneighbors :
. Using the selected distance metric, the k-NN algorithm determines the kdata ponts
(neighbors)from the training dataset that are located in close proximityto theinput data
point.
s Classificationor Regression:
. For classificationtasks, k-NN polls the k nearest neighbors to determine which class
labelshouldbe predicted for the input data point.
It then chooses the most popular class label.
. The prediction for regression tasks is determined by k-NN, which averages the
numericalvalues of the k nearest neighbors.
. In the case of classification or regression, the algorithm assigns the anticipated
numericalvalue or class label to the input data point.
Key characteristics and considerations of the k-NN algorithm
1.Choice of k:
The value of k is a critical parameterin k-NN.
s
while a large k may
Asmallk may lead to noisy predictionsand sensitivityto outliers,
6'

"
local patterns.
result in overly smooth predictions anddifficultiesin capturing
F1

2. Computationalcost:
k-NN requires calculating distances for every data point in the training set, it can
Since
computationally expensive, especiallyfor large datasets.
be
important to consider the trade-offbetween predictionaccuracy and computational
" It is
costwhen choosingk.
3. Scaling of features:
scale of features.
" k-NN is sensitive to the ensure that all features contribute
normalize the features to
It is advisable to scale or
equallyto the distancecalculation.
4. Data imbalance:
class distributionscan aftect the predictionaccuracy
imbalanced
In classificationtasks, dominatethe predictions.
majority class may
OTk-NN, as the a surprisingamount of applications, particularlyfor
k-NN has
Despite its ease of use, data points with
the sane label have a propensityto
and when
low-dimensionaldatasets
cluster.
knowledge
TIONS an up-thrustfor
Business Analytics 3- 44 Business Forecasting
data
It can make a solid starting pointfor the initial exploratorystudy ofthe and actS as
a valuable baseline modelforcomparisonwith nmore complicatedalgorithms.
34.1.6Neural Networks
" A potent class of
machine learning models called neural networksis widely employed
tor predictiveanalvsis acoss many fields.
" They are a particular class of deep learning algorithm that draws
compositionand operationof the human brain. inspirationfrom the
" Neural networks are very good at identifyingintricatepatterns and
which makes them very useful for predictiontasks. relationshipsin data,
" Neuralnetworks steps :
1. Preparationof data : The initialstage in any predictive analysis is to
obtain and
prepare the data.
This entails gathering pertinent data,cleaning it up and putting it into a
neural
format that
networkscan understand.
s

2. Architecturalchoice :
6'
F1

Layers of connected nodes (neurons)structured into input,

hidden and output layers
make up neural determine the neural network's
number of layers and neurons in each layer.
architecture, which includes the
3. Scaling of features :
In order to make sure that the
features in the data fall within asimilar range, tie
features in the data must be scaled or
normalized.
a. Training data split:
" Atraining set and a
val1dation(or test) set are created from the labeled dataset.
" The neural network is trained using the training set and its assessedand
overfittingis avoided using the validationset. performance
is
b. Neural network training:
" During training, the neural
network learns
parameters(weights and biases)so thatthe from the data to its
internal
moditypossible.
Optimization algorithms like stochastic prediction error is as small as
used to accomplishthis. gradient descent (SGD) or its
derivativesart

" An activation function is applied by each

sum of its inputs. neuron in a neural tothe
weighted
 BusinesaAnalythcs Business Forecasting
3- 45
inject
RelU(Rectified Linear Unit), sigmoid andtanh are common activationfunctions
"
on-linearityinto the model and enable itto learnintricatepatterns.
A. Forwardpropagation:
propagation is the method by which input data is supplied into the neural
. Forward
network and the outputs are generated layer-by-layer.
function :
6. Loss
.Aloss function (or cost function), which measures
how far the predictionsare from the
real labels, is defined to mcasure the predictionerror.
(such as classificationand regression).
Different loss functions are used for various tasks
parameters in the direction that runs
Backpropagationis used to update the network's
to the gradient of the loss function after forward propagation. To reduce the
counter
weights and biases.
predictionerror, this techniqueiterativelymodifiesthe
tuning :
6. Hyperparameter model, numerous hyperparameters
of a neural network
" To improve the performance adjusted.
batch size, and number of hidden layers) must be
s
(such as learning rate,
6'

Outputs
F1

Output layer

activity
Fowarded Weights

Middle or
hidden layer

Weights

Input layer

Inputs
Neural Networks
Fig. 3.4.3

knowledge
/CATIOg -an up-thrustfor
 BusineSs Forecastin
3- 46
Business Analytics
3.4.1.7Gradient BoostingMachines combinesa number of
gradientboosting weal
technique, model,
" Another ensemble learning produce apowerfulprediction
the
learners,typically decisiontrees,to newtree correctsthe flaws of previous Ones,.
cach
" lteratively developingthe model,
3.4.1.8Time Series Analysis
field of predictive analytics that deals wit,
" Time series analysis is a
specialized
sequentialobservationsover time.
use techniques like Seasonal Decompositionof Time
" Timeseries forecasting frequently (ARIMA).
and Autoregressive IntegratedMoving Average
Series(STL)
3.4.1.9Clustering
Although clusteringtechniquesare not specificallyfor prediction,they can be useful for
"
data explorationand segmentation.
clear patterns and trends
They combine related data points, assisting in the discovery of
that can then be applied to predictive modeling.
s

These are but a few of the numerous machine learning methods that are accessible for
6'

predictiveanalytics.
F1

The type of predictiontask (classificationor regression).the nature of the data, the size
of the dataset and the desired level of interpretabilityall have a role in the technique
selection.

Toselect the best model for a specific predictiveanalyticschallenge, it is crucial to test

out various algorithmsand adjust their parameters.

Fig. 3.4.4 Clustering

 BusinessAnalytics
3- 47
Business Forecasting
Needfo clustering
" As it establishesthe natural groupingamong the available unlabelled data, clusteringis
crucial.
There are no requirementsfor effective clustering, It relies on the user and the
Criteria
they choOse to meettheir needs.
Eor instance, we might be interested in locating homogeneous group representatives
(data reduction),locating "naturalclusters"and describingtheir unknown characteristics
("natural" data typeS), locating appropriateand useful groupings("useful" data classes).
orlocatingunusual data objects(outlierdetection).
This algorithm must make some assumptionsregarding the similarityof the points and
each assumptionresults in a differentclusterthat is equally legitimate.
Clusteringmethods
1. Density-basedmethods:
similaritiesand
These methods consider the clusters as the dense region having some
differencesfrom the lower dense region of the space.
two clusters.
These methods have good accuracyand the abilityto merge
s
of Applicationswith Noise),
6'

Example:DBSCAN (Density-Based SpatialClustering

F1

ClusteringStructure),etc.
OPTICS (OrderingPoints to ldentify
2. Hierarchicalbased methods :
method fornm a tree-type structurebased on the hierarchy.
this
" The clusters formed in one. It is divided into two category
the previously formed
New clusters are formed using
Agglomerative(bottom-upapproach)
Divisive(top-downapproach) BIRCH (Balanced Iterative
Representatives),
: CURE (Clustering Using
Examples Hierarchies),etc.
KeducingClusteringand using
3. Partitioningmethods : andeach partition forms one cluster.
objectsinto k clusters
These methods partitionthe criterionsimilarityfunction such as when
usedto optimizean objectiveK-Means, CLARANS (Clustering Large
This method is parameter example
major
the distance is a Randomized Search), etc.
Applications based upon
finite number of cells that form a
Grid-based methods : formulated into a
space is
" In this method, the data
grid-like structure.
for knowledge
TIONS- an up-thrust
 Business Forecastin
Business Analytics 3-48
All the clustering operationsdone onthese grids are fast and independentof the number

of data objects. CLIQUE

Example: STING(Statistical Information Grid), wave cluster, (CLusteringIn
Quest), etc.
Clusteringalgorithms
unsupervised learning algorithmth.
K-means clusteringalgorithm : It is the simplest
solves clusteringproblem.
k clusters where each observatiom
K-means algorithm partitions n observations into cluster.
as a prototypeof the
belongs to the clusterwith the nearestmean serving

s
6'

Fig. 3.4.5
F1

Advantagesof machine learning for predictiveanalytics :

Organizationsgain a competitive edge by embracing machine learming for predictht
analytics.
rivals
Businesses can quickly adjust to shifting market conditions and outperformtheir
by using data-driveninsightsto make educateddecisions.
" In general, machine learning for predictive analytics is essential for businesses
generas
sectorslooking to harness the power of datato improve customer experiences,
better predictions,optimizeoperationsand gaina competitiveadvantage.
o
Predictive analytics can make use of a wide variety of techniques under the umbrella
machine learning.
andthe
" Different machine learning methods can be used,
depending on the type ofdata
precisepredictionjob.
Review Question
llustratethe machine learningtechmiques for predictiveanahvics
TECHNICAL PUBLICATIONS® an
up-thrust for knowledge
AUsinesS
Analytics
3- 49
3.5/
Two Marks Questions with Answers Business Forecasting

ist the type of dataanalytic.

Typesof data analytics
Ans.:
There are four majortypes of data analytics :
Predictive(forecasting)
Deseriptive(business intelligenceand data mining)
Prescriptive(optimizationand simulation)
Diagnosticanalytics
Define logic-driven models.
Q.2
Re " Logic-driven models are deterministic,meaning that they always produce the same
autput for agiven set of inputs, based on the rules they have been programmed with. These
models are well-suited for tasks that have clear and explicit rules, where human expertise can
used in expert systems.
he codified into a set of logical statements. They are commonly
reasoningand inferenceare essential.
decision support systems and applicationswhere
Q.3 Compare static and dynamic
modeling.
s
6'

Ans. :
Dynamic
Static
F1

updating.
model The model doesn'trequire manual
The modelerhad to manuallychange the The DDM-based model is
created by the
the
eachtimeanew item was introducedto modelerwith placeholdersfor
dynamic
be
catalog in order for the new option items to options.As a result,the application
whenevera
seen in the UI. dynamicallyupdatesthe model
the catalogand
new item is added to UL.
the new choiceitemsin the
presents
A
support for several data sources.
There is
supported. Only updatedusing
Datafrom several sources is not DDM-basedmodel can be
the modelto data sources.
one data source may be used by input from many
receive data.
predictive models.
0,4 List the types of modelsare:
analytics
predictive
Ans.:"TheClassification
top five
model
Clusteringmodel
Forecast model
Outliers model
Time series model knowledge
up-thrustfor
PUBLICATIONS-an
 Business Forecas
Business Analytics 3 - 50

Q.5 Write benefitsof predictive modeling money when

outcomes. Environmental
Ans. : Predictiveanalytics,elements. competition
in a nutshell,
and
projecting
information,regulatorychanges and busimarkang
saves time, effort

situations can all be included in the mathematicalformula to provide more comprehensipe

Demand
ìnsights at a forecasting.
lower cost. worktforce planning, churn analysis, external factors, competit.
analy sis. fleet and IT hardware maintenanceand financial hazards are examples of specialise

sorts of forecastingthat can benetit tirms.

Q.6 Give the challenges of predictivemodeling.
Ans. :
technology uncovers is relevant, it is critical to keep predi
BecaUse noteverything this insights. Some mined informationis
mert
delivering useful business
analytics focused on business implications. Getin
curiosity and has little or no
useful for fulfilling one's
sidetracked is a costly distractionfor few firms.
use more data in predictive modelling is only advantageousto
Furthermore,the ability to
calculation and result in a nonsensicalor incorrectresult
s

point. Too much data can bias the

However, only to a
6'

the outside temperature drops, for example, more coats are sold.
As
degrees Fahrenheit outdoorsthan whe
F1

buy more coats when it is - 20

degree. People do not
Fahrenheit. At some point, cold is cold enough to prompt the purchasingat
it is - 5 degrees
alter that pattern.
coats andcolder temperaturesno longer significantly
security and privacy will also be difficult given the large volumes of dai
Maintaining
of machine learning provide turie
involved in predictive modelling. The limitations
obstacles.

Q.7 What need for predictive analysis.

Ans. : discover ne
problems and
Predictive analytics is used by businesses to solve real-time
opportunities. detectiv
pattern
refine high-pertorma
Identifyingfraud : Acombination of several analytical methods can
and prevent ccriminal behavior. As cyber security becomes an issue,
detect
to
behavioral analytics monitors all activities on a network in hard-real time
abnormalfeature that may reflect asign of threat. Custoner
responst
businesse
Optimizing trrading campaigns: Predictive analysis is used to examine c help
" business models. and to promote opportunities. These models may
create new
grow their most profitablecustomers.
attract, retain and

CHNICAL
AusinessAnalytics 3- 51 Business Forecasting

Enhancementin operations : Most industries use predictive models to predict inventory

management of resources predictive analytics helps organizations to function more
and
efficiently.

Q.8
Give the predictivealgorithms.
intelligence
Ans.:
Machine learning or deep learningis used in predictivealgorithms. Artificial
is used in
encompasses both. Structured data, such as spreadsheets or machine data,
(A) such as video,
machinelearning(ML). Deep learning(DL) is concerned with unstructured data
social media posts and images - basically, everything with which humans
audio, text,
communicatethat is not a number or metric read.
Q.9 Write about random forest.
none of
Random forest : This approach is derived from a combinationof decision trees,
Ane. : and
and can categorise large volumes of data using both classification
which are related
regression.
Q.10 Define the prophet.
capacity planning in time-series or forecast models, such as
Ans. : This method is used for extremelyadaptableand can easily
s
resource allocations. It is
inventory needs, sales quotas, and
6'

of helpful assumptions.
incorporateheuristics and a wide range
F1
 UNIT IV

HR and Supply Chain

4 Analytics
Sjllabus Training and Development- Supply chain network
Planning and Recruitment - Chain -
Ueman Resources - Logistics- Analyticsapplicationsin HR & Supphy
planning Demand, Iventory and Supply -
HR Analyticsto make a prediction of the demand for hourlyemployeesfor ayear.
Apphing

Contents
Human Resources
4.1
Supply Chain Network
4.2
s
SupplyChain
AnalyticsApplicationsin HRand
6'

4.3
Answers
F1

44 Two Marks Questions with

(4- 1)
 Chan
BusinessAnalytics 4-2
HRanl Supply Analytics

4.1 Human Resources

function within a company
or
" Human resources, often referredto as HR, is a department
the
supporting employees. Its main goal is to cnsure that
that focuses on managingand
skills and abilities to achieveits
the organization has the right people with the necessary
objectives.
term "Human Resource"was first coined by Johm R. ComnOUS, M Americon
" The IN93. b,
publishedin
institutionaleconomist, in his book The Distribuionof Wealth,
compamy. It handles
sinmplerterms, human resourcesis like the "peopledepartment" of u
training and development
tasks such as recruitingand hiring new employees. providing employe
opportunities, managing employee benefits andcompensation. maintan1ng
workplace.
records and addressingany issues or conflictsthat mayarise in the
promoting
" HR also plays a crucial role in crcating a positive work environment,
employee wellbeing and fostering a culture of teamwork and productivity. It acts as a
bridge between the employees and the company. helping to facilitate communication,
resolve conflicts and ensure that everyone is treated fairly and in accordance with the
company'spoliciesand applicablelaws.
s
6'

" Overall. human resources focus on taking care of the comnpany's most valuable asset its
F1

people to ensure that they are supported, motivated and engaged, which ultimately
contributestothe success of the organization.
4.1.1 Planning and Recruitment
Human resource planning
" In human resources. planning refers to the process of forecasting and aligning an
organization's workforce needs with its strategic goals and objectives. It involves
assessing the current and future workforce requirementsto ensure that the right people
with the right skills are availableat the right time. Human resources planning is crucial
for maintaininga competentand efficient workforce,enabling an organizationto met
its businessobjectivesand stay competitivein the market.
Key elements of human resourcesplanning include :
1. Workforce analysis : Analyzing the current workforce composition, including the
number of employees. their skills, experienceand demographics.This analysis helps
identify potentialskills gaps and areas for improvement
2. Forecasting future needs : Predicting future workforce requirements based on
business growth projections, industry trends, technologicaladvancementsand other
factors that may impact the organization'sworkforce.
 Ausiness
Analytics
4-3
HR and SupplyChain Analytics
3. Succession planning ldentifyingand developing employees with high potential to
:
fill critical roles within the
smoothtransition of organizationin thefuture. Succession planning ensures a
leadership
A. Talent acquisition and
and key positions.
and hire candidates whorecruitment
:
t
S possess the Strategizing the recruitment process to attract
skills and aualities needed to achieve tne
organization'sgoals.
s Training and development : Designing and
implementing training
upskill employees and enhance their capabilities,ensuring they remainprograms
to
competent
andadaptableto changes in the business environment.
t 6. Performance management : Establishing performance standards, providing
feedback and conducting regular evaluations to align employee performance with
organizationalobjectives.
7. Retention strategies : Developing initiativesto retain top talent, reduce employee
a turnoverand maintain a positive work environment.
,
8. Restructuring and downsizing : When necessary, planning for workforce
e
restructuring or downsizing to address changing business needs, economic
conditions,or organizationalshifts.
s
6'

in maintaining a competitive
Overall, human resources planning plays a critical role
the right workforce with the right skills and
F1

advantage for the organization by ensuring it has

strategic goals. It involves collaborationbetween HR professionals,
capacitiesto achieve its about human capital
make informed decisions
Management and other stakeholders to
Management.
Why planningis crucial ?
resources for several reasons :
Planning is crucial in human planning ensures that the HR
e organizationalgoals : Effective
al I. Aligning HR with are directly aligned with the organization's
activities workforce
et department's initiatives and professionals focus on the mostcritical
helps HR
overallstrategicgoals. It company'ssuccesS.
that supportthe forecasting and analysis, HR planning
heeds and objectives Through
needs : HR to anticipatechanges in
2. Anticipating workforceworkforce
requirements.It alows organization
to be proactive
ps helps identifyfuture shortages, orsurplus,enablingthe
skill demands, talent workforce
addressing potentialchallenges. understandingthe organization's
on in allocation : By budget, time
of resources, such as
er 3. Efficient resource
for efficient allocation
allows
needs, HR planning knowledge
up-thrust for
TECHNICALPUBLICATIONS - an
 HRand Supply Chain
4 4
are targeted
toWard. Analyic,
Business Analytics
HR initiatives
optimization ensuresthat
and effots. This
the most attentionand investment. organizationscan identify higk
that require plan,
proper HR roles. Successionplannin,
4. Succession planning : With athemfor futureleadership transition during
potentialemployeesand groom and ensures asmooth leadershi
reducesthe risk of leadershipgaps
the organizationt
changes.
well-thought-out HR plan equips
5. Adaptabilityto change :Aconditions,technologicaladvancementsand shifts ina
adaptto changing business resiliencein the workforce,enablingthe organizati
industry. It fosters agility and
and opportunities.
to respond effectivelyto challenges setin
performance management : HR planning provides a basis for
6. Improved turn helpsin evaluating employe
performance standards and expectations,which in
systenms can be aligned with the
performance objectively.Performancemanagement
and engagement.
organization'sgoals and values, drivingemployee productivity
identifying workforce needs and
7. Resource utilization and cost control : By
associated with
evaluating current capabilities, HR planning helps control costs
s

recruitment, training and development. It prevents unnecessary spending on

6'

resourcesthat may not align with the organization'sstrategicobjectives.

F1

8. Enhanced organizational culture : Effective HR planning contributes to the

development of apositive and inclusive organizationalculture. It ensures that HR
initiatives,such as trainingand developmentprograms,support the company's value
and foster a conducive work environment.

Phases of human resource planning

1. Environmental scanning : In this phase, the HR team analvzes the exteru
environment to identify factors that may impact the organization'sworkforce.
includes economic conditions, technological advancements,
demographic
labor market conditions, industry changes and legal and regulatory tre
developments
Environmentalscanning helps in understandingthe challenges and opportunitiesthal
mayarise inthe future, influencing
workforce planningdecisions.
2. HR inventory: During this phase, the HR
team conducts an assessment of the
organization's current workforce. This includes gathering data on the numberof
employees, their skills, qualifications,experience, pertormance and Potentialtx
advancement. HR professionals also assess the existing HR policies, proceduresarnd
practicesto understandthe
organization'sHR capabilitiesand limitations.
TECHNICAL PUBLICATIONS® an
up-thrust for knowledge
 BusinessAnalytics
4 -5
3. HR forecasting: HR and Supply Chain Analytics
Based on the
and HR
inventory phases, information
HR
gatheredin the environmentalscanning
Forecastinginvolves
based on the predicting the professionals project future work force needs.
demand for different types of skills and talent
changes in theorganization'
external
s strategic plans, growth projections and anticipated
environment. The goalis to
shortagesor surplusesand develop anticipate potential talent
strategiesto addressthem
4. Gap analysis : In this phase, HR compares the projected proactively.
(identified in the HR forecasting phase) with the currentfuture workforce needs
(identifiedin the HR inventoryphase). This gap analysis helpsworkforce capabilities
identify discrepancies
between the demand for certain skills and
the organization'scurrent supply of talent.
By understandingthese gaps, HR can develop targeted plans to bridge them. such as
recruitment,training, development,or successionplanninginitiatives.
5. HR action plans : Thefinal phase involves developingand implementing specific
HR action plans to addressthe identifiedgaps and align the organization'sworkforce
with its strategic objectives. HR action plans may include recruitmentand selection
enhance
strategies to attract the right talent, training and development programs to
s
future leaders and retention
6'

employee skills, succession planning to prepare

F1

initiativesto retain key employees.

human resource planning process, continuous monitoring and
Throughout the entire HR
essential. HR professionalsregularlyassess the effectivenessof the
evaluation are alignedwith the
make adjustmentsas needed to ensure they remain
action plans and
tochanging circumstances. By followingthese phases.
organization'sgoals and respond resource planningis
strategic,effective and
their human
Organizationscan ensure that environment.
business
responsiveto the dynamic planning for a fictionalcompany, XYZ Tech
human resource
Let's consider an example of
firm specializingin software development.
technology
Solutions, which is a fast-growing team conducts an assessment of the
HR
XYZ Tech Solutions' employees,their skills, qualitications
Assessment phase : numnber of growth
workforce. They analyze the
company's strategie objectives,
current also evaluatethe
and experience. They projects. team forecasts tuture
workforce
projectionsand upcoming on the assessment, the HR
developmentprojects
over the next two
Based software
f HR forecasting : increase in software This will require additional
an opportunities.
needs. They pproject
expanding
business
projectmanagers.
and
years due to assurance testers
quality
velopers,
knowiedge
up-thrustfor
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CHNICAL
 HR and Supply Chain

Business Analytics
4 -6
compares the
Analytics
projected

Gap analysis : In the gap

analysis,the HR team identifya talent future
workforce capabilities.They gap for
workforce needs with the current with expertisein
experienced project managers and software
developers emerging
technologies. the workforce with the
and align
" HR action plans : To addressthe talent gap team develops the following
companys
HR
HR action
strategic objectives. XYZ Tech Solutions'
plans:
HR team devises a targeted recruitment strateo.
The
O Kecruitment strategy : developers. Ihey collaborat.
and software
attract experienced project managers
attend industry-specificnetworkine
with recruiters, use online job portals and
events to reach potentialcandidates.
employees and equip them with the
o Trainingand development:To upskill current
necessary expertise, the HR team designs training programs on emerging
workshops.
technologies and project management best practices. This includes
online courses and mentoringsessions.
o Succession planning : To groom future leaders from within the organization,the
s

HR team identifies high-potentialemployees and outlines developmentplans for

6'

them. They provide opportunitiesfor these employeesto take on leadershiproles in

F1

smaller projects before handlinglarger ones.

o Employee retention : Recognizingthe competitivejob market, the HR team designs
employee retention initiatives, such as offering attractive compensationpackages.
providinggrowth opportunitiesand maintaininga positive work environment.
The HR team starts implementingthe HR action plans. They conduct interviews and hirt
experienced project managers and software developers. Simultaneously,they initiate train1n!
programsfor existingemployees and monitor their progress. The HR team regularly evaluates
the effectiveness of the HR action plans by tracking
key performance indicators, such a
recruitment success rate, employee satisfaction, training completion rates and employee
retention rate. They gather feedback from employees to ensure the
initiativesmeet their neeu
and expectations. By following this human resource planning example, XYZ Tech Solutions
can efficiently manage its workforce, ensure it has the right talent in place and Positionitself
for continued growth and success in the
competitive technology industry.

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AusinessAnalytics
4-7
Benefitsof,human
Human resource
resource planning HP ond Supply ChinAnolytr,s

planning
employees. Some of the key offers several
advantages benefits to organizations, HR departments and
include
1. Optimal
identifytheir workforce
current andutilization:
the right skillsto the futurc Human resource planning helps orpanizations
workforce needs. By aligning the right people with
effectively, which
right positions, HR planning Cnsuresthat employeesare utilized
maximizes
Talent acquisition and productivityand efficiency.
retention HR planning enables organizations to
proactivelyidentify talent gaps :

and devclop
effortsstrategies
Effective recruitment and retention to attract and retain top talent.
lead to a more skilled and
workforce, reducingturnover costs and enhancing engage
1 Succession overall performance.
planning:Human resource planning includes succession planning.
which involves identifyingand developing
positions. This ensures a smooth transition of high-potential employees for leadership
critical roles, reducing disruptions
during leadershipchanges.
4. Skill developmentand training:Through HR planning, organizations can identity
skillgaps and implement targeted training and development programs. Employees
s

gain the necessary skills to perform their jobs effectively,which leads to improved
6'

job satisfactionand career development.

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5. Employee performance and engagement: When HR planning is alignedwith

are clear and
performance management, employee's goals and expectations
Engaged employees tend to be
performance evaluations become more objective.
success.
more committed to the organization's
adaptability: HR planningequipsorganizationsto adapt to changes
6. Flexibilityand and industry trends. By anticipatingfuture
technology
in the business environment, respond promptly toemergingchallengesand
can
workforce needs,the organization
and
opportunities. resource planning optimizesresourceallocation
Effectivehuman helps
I. Cost control: training and talentdevelopment.It
and
unnecessary costs relatedto hiring, situations,whichcan be costly
reduces understaffing
avoid overstaffingor
organizations
inefficient.
an
resources planning
key issues to effectively manage
Key issues in human involves
addressingseveral
are
resource planning importantissues
Human ofthe
most
workforce. Three
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knowledge
TIONs- an
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 HR and Supply Chain
BusinessAnalytics 4-8
1. Workforce demand and supply forecasting : One of the primary challenges in Analyics
Human Resource Planning is forecastingthe future demand and supply of talen
within the organization. This requires HR professionalsto accurately predict the
number of employees and the types of skills needed to support the organization's
strategicgoals and objectives. On the supply side, HR must assessthe availability of
labor market.
talent both within the organization and in the external
workforce demand and supply ensuresthat the organizationhas the right people in Balancing
the right positionsat the right time, avoidingtalent shortagesor surplus.
Z. Talent gap analysis and succession planning: ldentifying talent gaps is a critical
aspect of humanresource planning. HR professionalsmust conduct a gap analysist
determinethe disparity between the skills and competenciesrequired for future roles
and the existing capabilities of the current workforce. Succession planning is a
related issue, focusing on developing employees with high potential to fill ke
positions within the organization as they become vacant due to retirements
promotions, or other reasons. Effective succession planning ensures a smooth
transitionof leadershipand helps retain institutionalknowledge.
3. Employee engagement and retention : Employeeengagement and retention are
essential considerationsin human resource planning. High employee turnover can be
s
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costly and disruptiveto an organization.HR professionalsmust implement strategies

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to foster a positive work environment, enhance job satisfaction and provide

opportunitiesfor employee growth and development. Engaged employecs are more
likely to be productive and committed to the organization,reducing turnover and
contributingto long-term organizationalsuccess. Human resource planning should
include initiativesto improve employee engagementand retention to ensure a
and motivated workforce.
stabe
By addressing these key issues in human
resource planning, organizations can develop
effectivestrategiesto meet their workforceneeds, align HR initiativeswith business objectives
and create acompetitiveadvantage in the market.
Human resource recruitment
Human resource recruitment, also known simply as
recruitment., is the process of
identifying atracting and hiring qualified candidates to fill job vacancies within at
organization.It is a crucial function of the human resources
department as it involves finding
the right people with the right skills and qualificationsto meet the organization'sstafing
needs.

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RUS0neSSAnalytics
4-9
HR and Supply Chain Analytics
recruitment processtypically follows
The several steps
1. Job analysis : Before initiatingrecruitment, :
HR professionals conduct a job analysis
to understand the specific
requirements the vacant position. This includes
of
identifying the essential duties, responsibilities,qualifications,skills and
neededfor the role. experienee
, Job posting : Based on the job analysis, HR
creates a job posting or
that outlines the job description,qualifications and other relevant advertisement
details. The job
posting is then shared through various channels, such as the company's website. job
portals, socialmedia and professional networks.
3. Candidate sourcing : HR professionals use various methods to source
potential
candidates, such as reviewing resumes and applications received through job
postings, conducting searches on job portals and professional networks and
networkingwith industrycontacts.
4. Sereening and shortlisting:HR conducts an initial sereening of the received
applicationsand resumes to shortlistcandidateswho meet the required qualifications.
s
Shortlisted candidates are then invited for further assessments or interviews.
6'
F1

5. Interviews : Shortlistedcandidatesare interviewedto assess their skills, experience

and cultural fit within the organization. Depending on the position's level and
complexity,multiple rounds of interviewsmay be conducted.
6. Selection: After the interviews, HR and hiring managers decide on the most suitable
candidate for the vacant position. A job offer is extended to the selected candidate.
which may include negotiationson compensation andother terms.
process
I: Onboarding : Once the candidate accepts the job offer, the onboarding
begins. Onboarding involves integrating the new employee into the organization,
the assimilateinto their role
providingnecessarytrainingand resourcesand helping
and the company culture.
building a talented and capable workforce, which is a
Effective
key driver of recruitment
essential for
is success.It requires a strategic approachto attract and retain top
organizational
lalent who can contributeto the organization'sgrowthand competitivenessin the marketplace.

ImportaAtncteracting
of recruitment in HR Process
top talent : Effective recruitment efforts help attract top talent to the
skilled and qualifiedindividuals
enhancesthe overall capabilityand
Organization. Hiring
the workforce,leadingtoimproved
organizationalpertormance.
of
 HR and Supply Chain
Business Analytics 4- 10
Building a talented workforce : Recruitmentensures that the organization has a po0) Analytics
of skilled employees who possessthe necessary expertise to meet current and futire
business needs. Atalented workforce is a valuableassetthat enables the organizationt

achieve its strategicobjectives.

Enhancing organizational competitiveness: By recruiting the best candidates,an
in the market.
organization can gain a competitive advantage
employees contributeto innovation, qualityimprovemnent and customer satisfaction High-performing
positioningthe organizationahead of its competitors.
Filing skillgaps : Recruitment addresses skill gaps within the organization. HR
professionals identify areas where specific expertise is lacking and actively seet
candidateswith the required skills to bridge those gaps.
Boosting employee diversity : A well-plannedrecruitmentprocess promotes diversiv
within the workforce. Diverse teams bring unique perspectives and ideas, fostering
creativity andproblem-solvingabilities.
Reducing turnover costs : Effective recruitment practices lead to better hiring
decisions,reducing the likelihood of early employee turnover. Lower turnover rates
result in cost savings related to recruitment,on boarding and training.
s

Improving employee morale : Hiring the right candidates who fit well with the
6'

organization'sculture and values positively impacts the existing workforce. Happy and
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motivatedemployeestend to be more engaged and productive.

Successionplanning: Recruitmentplays a vital role in
and hiring potentialfuture leaders succession planning.ldentifying
ensures that the organizationhas a pipeline of
individualsready to step into critical roles when needed. capabk
Building employer brand : A strong
recruitment process contributes to i
organization'semployer brand. Positive experiences
enhance the organization's reputation, during the recruitmentprocess a
candidates. making it an attractive choice for potent
"
Organizational growth : As the
requires steady influx of talent. organization
a expands and takes on new projects,i
An effective
organizationcan scale its workforce recruitment procesS ensures thatthe
Overall, recruitment is a appropriatelyto support growth.
acquiring skilledemployeesfundamental
who
part of the HR
process, serving as the gatewayto
recruitment strategy aligns
HR
contribute to the
organization'ssuccess. A well-executed
efforts with the
competitiveand adaptableorganization' s
the company to remain enables
in a dynamic
strategic objectives and
businessenvironment.
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BUSineSSAnalytics
4 - 11
HR and Supply Chain Analytics
4.12| Training and Development
istraining ?
What
Trainingin human resources refers to the process of
knowledge, skills and employees with specific
competenciesto improve their jobproviding
capabilities,It is a critical
aspect of human resource performance and enhance their
achievingorganizationalgoals and development and plays a crucial role in
maintaining acompetitive advantage.
aspects of trainingin human
Key
ldentification of resourcesinclude:
training needs : HR professionals
employeesthrough various methods,such as identify the training needs of
andfeedback froM managers and performanceappraisals,skill gap analysis.
employees, The goal is to determine the areas where
training can addvalueand inmproveemployee performance.
. Training program design: Once the training
needs are identified, HR professionals
design training programs that address those needs effectively.
Training programs can be
delivered in various formats, such as workshops, seminars, on-the-job
training,
e-learningmodules and coachingsessions.
Delivery of training : HR professionals or external trainers conduct the training
s
sessions. The training content is presented using various instructional methods.
6'

interactiveexercisesand practical examples to enhance learning and engagement.

F1

Skill development: Trainingaims to enhance employeestechnical and soft skills, such

as communication, leadership, problem-solving, time management and technical
expertise.Skill development enables employees to perform their current roles more
effectivelyand preparesthem for future career growth.
" Continuous learning and development : Human resource training is not a one-time
event. It should be a continuous process to keep employees updated with the latest
industry trends, technologies and best practices. Ongoing learning and development
1OSter a culture of continuous improvementwithin the organization.
demonstrates
Employeeengagementand motivation : Providingtrainingopportunities
development. Engaged
that the organization values its employee's growth and
work, leading to improved
CImployees are more motivated and committed to their
productivityand performance.
Training plays a crucial role in succession planning by preparing
Succession planning:
ployeestotake on higher-levelroles when
needed. Developing internaltalent reduees
and ensures a seamlesstransition of leadership.
the need for external hiring

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TECHNICAL PUBLI
BusinessAnalytics 4- 12 HR and Supply
Chain Analfie
Complianceand safety training: HR alsoprovidestrainingrelatedto
laws and regulations,as wellas safety guidelines.This ensures that emplovees. wi
of theirresponsibilitiesand the necessary precautions to maintain a
compliance
environment. safe wot
Overall, training in human resources is an essential investment in the
capital. It empowersemployees withthe skills they need to excelin their organi
roles,z at i o n' shum

Overallcontperfroibrmutanges
employee engagement and retention, and strengthensthe organization's
and competitiveness.
Role of a trainer
The role of a trainer in HR (Human
Resources) is critical in
evaluatingtraining programs to enhance the skills, knowledge and designing, deliverine sn:
The trainer's responsibilitiesextend to capabilitiesof emploves
various aspects of the training process. Here are som:
key roles and responsibilitiesof a trainer in HR :
Trainingneeds analysis :Conductinga thorough training needs
specific learningand developmentrequirementsof analysisto identify t:
s

involvesassessingskill gaps. job performanceand employeesand the organization.Tis

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Training program design : Developing trainingorganizational

F1

goals.
with the identified needsand programs and curriculum that al
plans and learningresourcesto objectives. trainer creates training materials, les
The
deliver effectivetrainingsessions.
Delivery training : Facilitatingtraining
of
room instruction, workshops., sessions using various methods, suchascla
training. The trainer ensuresthee-learning platforms, virtual classrooms and on-they
learning styles of delivery is engaging,interactiveand meets thediers
participants.
Subject matter expertise:
HR may be Possessing expertise
experts in various areas, in the content being taught.
Trainers
leadershi
includingandcompliance
development, performance management, diversity inclusion andtraining,
other HR-rel
H ate
topics.
"
Engaging
articipantsparticipants
: Creatingan
inclusive
are engaged and actively participate in the trainingenvironment
and positivelearming activities.lsiy
nteractive methods, group exercises to enhan:

learning. discussions,role-plavingand practical exer

 Analytics
Ausiness
Analytics 4 - 13 HR and Supply Chain

make training effective ?

to
How
maketrraining effectivefor employees,considerthe following steps : identify
To needs assessment to
Training needs assessment : Conduct a thorough training Thís assessment
could
addressed.
skills and knowledge gaps that need to be
thespecific appraisals and discussions with managers and
employees.
surveys, performance
include
objectives and outcomes. This helps
clear objectives: Clearly define the training
in their roles.
" Set understand what they will learn and howit will benefitthem
participants meet the specific needs of
Customize the training content to
Tailor training content : experience levels and learning preferences to
job roles,
theemployees. Considertheir
ensure reelevanceand engagement. engageparticipantsactively.
interactivetrainingmethods to
. Engage participants : Use role-playsto make the training
activities, group discussions,case studies and
Include
dynamic andparticipative. that
real-life scenarios and examples
real-life scenarios : Incorporate training concepts applyin
" Provide understandhow the
can relate to. This helps them
employees
s

theirdaily work. such as e-learningplatforms.

6'

technology-basedtrainingtools,
Utilize more accessible and flexible
Use technology:
F1

" to make training

reality simulations,
webinars, or virtual within the
learning
for employees. Foster a culture of continuous
continuous learning : and development to keep
training
Encourage opportunities for ongoing practices.
organization. Offer trendsand best
with the latest industry
training materials,jobaids or
employeesupdated participantswith and
materials : Supply training. This reinforceslearning
Providesupport refer back to after
the
can
handouts that they on-the-jobapplication. training's
ettectiveness through
for
providesa resource effectiveness : Evaluate the feedback from participantsto
Collect job
Measure training post-trainingsurveys. impact of the training on
or measure the
assessments, quizzes,
improvement and
for reintorcethe
identify areas sessions or coachingto
follow-up learnedin their
performance. reinforcement :
Provide applying whatthey have
and employeesare
Follow-up
Conceptsand
ensurethat
training
work.

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 HR and Supply Chain
BusinessCelebrate 4- 14
Analytics learning achievements: Recognizeand celebrateemployee'sachievements Analytics
Positive
in completingtraining programs or
acquiring newskills. reinforcement
can
boostmotivationand encourage further learning training program's
" Evaluateand adjust : Continuously evaluate
the
feedback and performance
effectiveness
outcomes
and
This
make nccessary adjustments based on
impactful.
ensuresthat the training remains relevant and
steps, organizations can create effective train1ing programs that eaui
B) tollowing these excel in their roles,
employees with the skills and knowledge they need to enhance
joh
satistactionand contributeto the organization'soverall success.
What is the difference between training and learning ?
Trainingand learningare related concepts but havedistinctdifferences:
Definition:
Training : Training refers to a structured and planned process of imparting specifc
skills, knowledge and competenciesto individuals to improve their performanceina
particularjob or task. It is typically a formal, organized activity aimed at achieving
specific learningoutcomes.
" Learning : Learning, on the other hand, is a broader process that involves acquiring
s
6'

knowledge.skills,attitudesand understandingthrough various means,includingformal

F1

education, training. personal experiences, observation and self-study. Learning is not

limited to a specificcontext or outcome and can occur informallyand spontaneously.
Purpose:
" Training : The primary purpose of training is to enhance job-related skills and
performance. It is designed to meet specificjob requirenmentsand improve employee
abilitiesto perform their roles effectively.
Learning : Learning, in a general sense, is focused on acquiring knowledge and skils
beyond job relatedtasks. It encompasses personal development, acquiring new hobbies.
understandingnew subjects and gaining abroader perspectiveon various aspectsof lli
Context :
Training : Training is often provided by organizations to their employees witn
specific focus on job-relatedtasks and responsibilities.It is designed to align wiln
organization'sgoals and objectives.
Learning : Learning can occur in various settings and contexts. including fornal
education institutions, online courses, workshops, seminars, self-directed stuay
informal settings like reading books or watchingdocumentaries.
TECHNICAL PUBLICATIONs-an up-thrust for knowledge
ALSineSSAnalytics
4 - 15
Scope : HR and Supply Chain
Analytics
Training : The
address specific
scope of training is
job-related skills and generally narrower and task-oriented. aiming to
Learning : Learning
and,areas of interest.
has a
broader
not limited to
compet
scope e nci
and can
e s required for a particularrole.

Application: encompass
job-relatedfunctions. a wide range of subjects
Training: Training is
more focused on
job performance. The
emphasisis on immediate application and transfer of skillsto
tasks.
practical knowledge and how it relatesto daily
. Learning :
Learning may involve adeeper
various subjects. It is not always
personal directly understanding
applied to
and criticalthinking
about
growth and a broader knowledge base. specific tasksbut can contribute to
Developmentin human resources
Development in Human Resources (HR) refers to the
avolution of HR practices, strategies and continuous improvement and
workforce and the
organization. It methodologiesto meet the changing needs of the
encompasses various aspects aimed at
s

employee potential, fostering a positive maximizing

6'

work culture and aligning HR

organization'sgoals and business objectives. initiatives with the
F1

Some key areas of development in HR include:

Employee training and development :HR focuses on
and development programs to providing learning opportunities
enhance employee skills, knowledge and
This includes conducting
workshops, seminars,
capabilities.
to foster online training, mentoringand coaching
employee growth.
Talent management : HR is involved in talent
career pathing to ensure the right people are in
identification,succession planning and
the right roles. Talent
includes strategiesfor attracting,retainingand developingtop talent. management
"
Performance management : HR is continually improving performance
processes to set clear goals, provide regular feedback and conductmanagement obiective
performance evaluations. The focus is on promoting a culture of
continuous
Improvementand accountability.
Employee engagement: HR aims to create an engaged workforce by promoting open
Communication, ecognizing employee contributionsand providing opportunities for
involvement in decision-making processes.

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Business Analytics 4- 16 HR and Supply Chain Analytics
Diversity, equity and inclusion(DE): HRis dedicatedto fostering diverse.
and inclusive work environments. This involves implementing DEI equitable
addressing biases, and ensuring representation and fairness across all levels of .initiatives
organization.
" HR technology and analytics : HR is adopting advanced HR technologies an
analytics tools to streamline HR processes,improve data-driven
enhance the overallemployeeexperience. decision-making
and

"Workforceplanning : HR engagesinstrategic workforce planning toanticipatefhutur:

talent needs, identify skillgaps and align the workforce with the organization'slong.
term goals.
Employee well-being and work-life balance : HR emphasizes employee well-being
and work-life balance by offering wellness programs, mental health support and flexible
work arrangements.
" Remote and hybrid work mnodels : With the rise of remote work, HR is
adapting
policies and practicesto support and manage distributedteams effectively.
" Agile HR : HR is becoming more agile in responding to organizationalneeds and
s
6'

marketchanges. This involves adopting flexible HR processes and structures to remain

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adaptableand responsive.
" Employer branding : HR works on building and maintaininga strong
employer brau
to attracttop talent and create a positive image of the
organizationin the job market.
Development in HR is an ongoing process that requires continuous assessment.
improvementand adaptation to create a workplace that fosters employee growth, engagenie
and success. By staying abreast of industry trends, best
practices and emerging technolog
HR professionals can drive positive organizational change
and contribute to the ove
success of the business.

Differencebetween training and development

Training is atargeted and short-term process aimed at improving current job-relatedskilk
while developmentis a broaderand ongoing processfocused on nurturing individual'soveral
growth and potentialfor future roles within the organization. Both training and develop1neM
the
are essential for building a skilled and competent to
workforc that can contribute
organization's success. Training and development are related concepts in the field of huma
resource management, but they have distinct differences:
 Analytics
AUsinesS
Analytics 4- 17 HR and Supply Chain

pefinition:
specificskills, knowledge and
Training: Training refers to the process of imparting
current job roles. It is
competenciesto individualsto improve their performance in their
enhancingjob-related skills and is often a formal, structured and short-term
focused on
process.
broader and long-termprocess that
Development: Development,on the other hand, is a involves
enhance an individual's overall abilities, knowledge and potential. It
aims to
and growth to prepare individuals for future responsibilitiesand
continuous learning
career advancement.

job
Purpose:
purpose of trainingis to address immediateskill gaps and
Training: The primary improving employees' proficiency in
It is geared towards
related performanceissues.
specificjob-relatedgoals.
their currentroles and achieving individuals for future roles and
focuses on preparing
Development : Development build a talent pool of
competentand
It aims to
responsibilitieswithin the organization. positionsas the need arises.
take on higher-level
capable individuals who can
s
6'

Time frame : with specific learning outcomes

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typicallya short-term process

Training : Training is period. Itis often targetedand time-boundto
a relativelyshort
that can be achieved in
performanceneeds. continues
meet immediate ongoing and long-term process that
an enhancement
Development : Development is continuous learning, skill
individual's career. It involves
throughoutan
extendedperiod.
and personalgrowth over an
task-oriented,focusing on job-
Scope : is usually narrow and
of training
Training : The scope for a particularrole.
knowledge required encompassing personal and
specificskills and broader scope, well-rounded
Development has a It aims to nurture
Development skills.
beyond job-specific
professional growth
potentialandadaptability.
individuals with leadership current job performance and
Focus: is primarilyfocused on
improving
immediate needs
of the organization and
Training: Training with the
concerned
It is more
efficiency.
employees. knowledge
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Business Analytics 4- 18 HR and Supply Chain
Development
emphasizesthe
:Development looks beyond immediate performance
needs
Analtiea
long-term potentialand career growth of individuals.It
organization'ssuccessionplanningand talent managementstrategies. aligns with the
Application:
Training:
resulting in
Training is directly applied to specific job tasks and
immediateimprovementsin performance.
Development Development
:
responsibiliti
to current job roles but may not always have an immediate and direct
How are training needs
prepares individualsfor future challengesand
career application
recognized in an progressiom
Training needs are identified through aorganization?
Once the training needs are systematic process of analys1S and assessment
identified. HR professionalscan design and
programs that address those needs effectivelyand implement training
contribute
development of the workforce. By following these steps, to the professionalgrowth and
specifictrainingneeds of their employees. organizations can identify the
" Job analysis :
Conduct a comprehensive job analysis to
requirementsof each job role within the organization.This understand the specii:
includes
tasks, responsibilities,skills and
competenciesneeded to perform the jobdetermining
the
s

effectively.
6'

Performanceappraisals : Review employee performance

appraisals to identify areas
F1

where improvement is needed.

Feedback from supervisors, managers and peers cm
highlight skillgaps and areas where additionaltraining
would be beneficial.
Skillgap analysis : Compare the existing
the skills required for their job roles. skills and competenciesof employeeswtt
This analysis helps identify gaps between th*
desired and actual skill levels.
" Employee surveysand feedback : Conduct surveys or solicit
to gather their input on the areas feedback from employe
where they feel they need trainingor
Organizationalgoals and changes : Analyze the organization's strategic development.
objectives. Identify areas where training is required to support goals a
technological advancements, process improvements or changes organizational growu
in the buste
environment.
Future skills requirements : Anticipate future skill requirenments based on indusD
trends, technological advancements and changes in the market. This forward-looke
approach ensures that employeesare prepared for upcoming challenges.
" Feed back from training programs : Assess the eftectiveness of previous training
wher
programs by gatheringfeedback from participants and managers. ldentity areas

TECHNICAL PUBLICA TIONs- an up-thrustfor knowiedge

 Arays
AsnesSAnantics 4- 19 HP 9r4 Suppy Chan
reinfnce
trainingdid not meet expectationsor where additional trainingis neededto
the
concepts.
Traditionalmethods of trainingin human resource:
encormpass a range f
context of human resource training, traditional methods Some of the
In the
onventionalapproaches used to impart knowledge and skills to employees.
traditionaltraining methods used in human resource management are :
common
involve partícípantsgathering in a
assroom training : In-classroomtrainingsessions instructor leds
conference hall. where an
nhysical setting, such as a training room or discussionsand
This method allows for face-to-face interactions, group
the training.
immediatefeedback.
On-the-job training involvesnew employeesearning
On-the-Job Training (0JT) : colleagues who
work alongside experienced
while performing their job tasks. They
instructionand mentorship.
provideguidance,hands-on subject matter experts defiver
presentations : HR professionals or
" Lectures and Participants
presentations. listen and take notes
or
informationthrough formal lectures
duringthese sessions. specific workplace
s

participants to act out

exercisesallow
6'

Role-playing: Role-playing interactions. It

conflict resolution or customer
F1

conversations,
scenarios,such as difficult abilities.
interpersonal skillsand problem-solving
helpsdevelop real-life workplace situationsor challenges that
Case studies : Case studies present critical thinking and decision-making
"
analyze and discuss. They encourage
employee
based on actualscenarios. interactivetraining sessions
seminarsare
and seminars : Workshopsand employee relations, performance
Workshops topics, such as
focus on specific HR-related
that inclusion. requirementsis essential in
managementor diversityand regulatory
training : Training on legal and aware of workplace policies, satety
" Compliance employees are
ensures
HR. Compliance training laws.
proceduresand employment expose employeesto different roles within
job rotationto broader understanding of the
" Job rotation : HR may use helpsemployeesgain a
method development.
the Organization. Thiscross-functionalskills experienced HR
prograns pair
business and promotes Coaching and mentoring
employees to provide personalized
mentoring: experienced
Coaching and
professionals or managers with less

guidanceand support. knowiedoe

up-thrustfor
PUBLICATIONS-an
TECHNICAL
 HR and Supply Chain
4 - 20
BusinessAnalytics such as
printed training materials, empik
" Printed materials : HR may provide supportlearning and reference.
guides,to
handbooks, policy manuals or training recordingsare
Pre-recorded videos or audio used
" Videos and audio recordings : These materials can
be Tned
their own pace.
deliver training content to participantsat
" available
Conferenceon various platformsfor
and workshop easy access.
attendance : HR professionals often attend indusr,
and best
workshops to learn aboutthe latest trends practica
conferences,seminars,and organizations.
human resource management, which they can then apply in their
in
traditional training methods are stillwidely used in humanresource developme
While
e-learning. gamification and interactine
modern approaches that incorporate technology,
engagement, flexibility and the over
platforms are increasinglybeing adopted to enhance
learningexperiencefor employees.
Modern approaches used in training in human resource
have evolved wit
Modern approaches in training in human resource management
advancemnentsin technologyand changes in learning preferences.These approachesleverag:
digitaltools and innovative techniques to create more engaging, flexible and personalize:
trainingexperiencesfor employees.Some of the modern approachesin HR traininginclude:
s

E-learning and online training : E-learning platforms deliver training conter

6'

electronically,allowing employees to access courses and modules at their conveniencz

F1

Itoffers flexibilityin terms of time, locationand pace of learning.

Microlearning: Microleamingbreaks down trainingcontent into bite-sized modules
short learning nuggets. It enables employees to learn in small increments, making
easierto absorb informationand apply it to theirjobs.
Gamification : Gamification incorporates gaming elements, such as points, rewr
and challenges,into the training process. Itenhancesengagement andmotivationatt
employees.
VirtualReality (VR) andAugmentedReality (AR) : VR and AR technologies cr
immersive learning experiences by simulating real-life scenarios and interacu
environments.They are particularlyeffectivefor hands-on trainingand simulations.
" Mobile learning: Mobile learningallows employeesto access training content onthe
smartphonesor tablets, enablinglearningon-the-goand cateringto a mobile workfor
Video-basedlearning : Video-based training includes instructionalvideos, interae
visual,
videos and video demonstrationsthat make training content more engaging and
appealing.

TECHNICAL PUBLICATIONS-an up-thrust for knowledge

 RASineSSAnalytics 4- 21
HR and Supply Chain Analytics
Sociallearning : Social learningleveragessocial media and collaborative platforms to
foster peer-to-peerlearning.knowledge sharing and discussions among employees.
Personalizedlearning paths : HR professionalscan create personalizedlearningpaths
foremployeesbased ontheirindividualnceds, preferences and career goals.
Virtual classrooms and webinars : Virtual classrooms and webinars facilitatelive.
"
interactive training sessions conducted over the internet, allowing participants from
different locationsto engage in real-time discussions.
Artificial Intelligence(A)-poweredlearning : Altechnologiescan analyze employee
nerformancedata, assess training needs and recommend personalizedlearning contentto
enhance training effectiveness.
analytics to measure training
Dataanalytics for training evaluation : HR can use data
employee performance and
outcomesand assess the impact of training programs on
organizationalgoals.
learning : Blended learning combines multiple training approaches, such as
Blended
training and on-the-job learning, to create comprehensiveand
e-learning,classroom
well-roundedtraining experiences.
professionals can deliver more effective,
s
modern approaches, HR growth and
By adopting these contributingto the professional
6'

training experiences,
engagingand learner-centric
F1

overallsuccessofthe organization.
developmentof employeesand the
Types of training models training is acomprehensiveandsystematic
: The system
model of identify trainingneeds,
System model process to
a)
training that emphasizesa step-by-step evaluate its effectiveness.
to and
approach
training programs,deliver training,efYectivewhen it is plannedand
design effective idea that training is most components of the system
based on the key
The model is organizationalsystem.The
larger
eXecutedas part of a
follows : needs based onthe organization's
modelare as
involves identifyingtraining andskill gap analysis.
phase assessments
o Input : This employee performance content and methods are developed
strategic goals, process phase, the training designed, training materials are
curriculumis
o Process : In the needs. The
identified deter1miued.
based onthe instructionalstrategiesare delivery oftrainingto the participants.
Prepared and focuses onthe methods, such as classroom
The output phase sessions using variouS
Output : training workshops.
conduct elearning,or
on-the-jobtraining,
Trainers
instruction, up-thrustfor
knowledge
TIONS- an
PUBLICA
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 Business Analytics HR and Supply
4-22
Chain
o Feed back :
the
Feedback is collected during and after the training sessions
to
Analasseytica
participants'learning and reactionsto the training. Evaluation
Include quizzes, assessments. surveys and observation of methods may
o
performance. participan
Outecome : The final phaseinvolves evaluatingthe training'simpact on
performance and the organization'sgoals. The training outcomes are
determinethe effectivenessof the training program. to
empl o
measured
ye
The system model
ensuresthat training efforts are aligned with organizational
and the training process is continually
b) Instructional System
improved based on feedback and evaluation. objective,
Development (ISD) model: The Instructional System
Development (ISD) Model, also known as the ADDIE model
Development, Implementationand Evaluation), is a systematic (Analysis, Desion
framework used to create effective training programs. Each instructionaldesign
a specificrole in the phase of the model plavs
trainingdevelopmentprocess :
o Analysis : In the analysis
phase, the
needs and performance gaps. Thisinstructionaldesigner identifiesthe training
involves
assessmentand understandingthe characteristicsofconducting a thorough needs
the target audience.
s

o Design : In the design

phase, the instructionalgoals and learning
6'

defined. The instructionaldesigner objectivesare

creates a detailed training plan, selects
F1

appropriatetraining methods and media and outlines the

the training program. content and structure ot
Development : During the development phase, the actual training
created. This includes designing and materials are
multimediaelements, and any developing training content, visual aids
o
supportingmaterials.
Implementation : In the
implementationphase, the training is delivered to
participants according to
the plan developed in the
conduct thetraining sessions and previous phases. Trae
o Evaluation : The participantsengage in learningactivities.
evaluation phase assesses the effectiveness of the
program. Feedback is collected from participants and tralle
training'simpact on employee performanceand stakeholders and
The ISD or ADDIE model is widely used in instructional organizational goalsasis aStructured
design and serves measu
guide for creating training programs that meet specific learning objectives and desired
outcomes.

TECHNICAL PUBLICA TIONS®-an up-thrustfor knowledge

AusineSS
Analytics 4- 23 HR and Supply Chain Analytics
c) Transitional model : The transitional model of training focuses on preparing
employees for a planned organizational change or transition. It recognizes that
organizationalchanges,such as restructuring.technologyimplementation,or process
changes, can significantly impact employee roles and responsibilities. The
transitional model aims to equip employees with the necessary skillsand knowledge
toadapt to the changes and performeffectivelyinthe transformed environment.Key
aspectsof the transitional model include:
Jdentifyingthe transition: The model starts by identifyingthe specific organizational
Ahanges that are planned or underway. This includes understandingthe reasons for the
transitionand its impact on employees.
Assessing training needs :Training needs are assessed based on the skills, knowledge.
andcompetenciesrequired to thrive in the new environment. This includes identifying
skillgaps and determiningthe trainingcontent needed to address these gaps.
Designing and deliveringtraining : Training programs are designed to help employees
adapt to the changes. The training may include orientationto new processes, technology
training,job role realignment,or skill developmentto meet the changing demands.
crucial during
Supportand communication : Effectivecommunicationand supportare
s

change, the benefits it will

6'

transitions.Employees need to understandthe reasons for the

F1

bring, and howit affectstheir roles and responsibilities.

evaluated based on employee's
Evaluation : The success of the transitionaltraining is
effectivelyin the transformedenvironment.
ability to adapt to the changes and perform
embrace organizational changes and reduces
Ihe transitionalmodel helps employees new work
and resources to succeed in the
Sance by providing them with the tools change, such
of significant organizational
Tonment.It is particularlyrelevantduring times
aS mergerS, acquisitions,or process overhauls.
Development in HR:A Case Study of XYZ Company.
Case study: Training and
Company is aleading multinationalcorporationoperating in the
ntroduction: XYZ strong tocus on innovation, the
a diverse workforce and a
technology sector. With continuous learning and developmnent to
importance of
recognizes the
company a competitiveedge in the market. This case study XYZ Company to enhance
highlightsthe training and
maintain HR department at
initiatives undertakenby the
development
employee skills,improve performance andfoster a culture
of growth and excellence.
conducted a comprehensive
Company, the HR department
Background : At XYZ skill gaps and areas for improvement among
identify
trainingheeds analysis to need for upskillingin various technical areas,
revealed the
employees. The analysis
knowledge
for
TECHNICAL PUBLICATIONS an up-thrust
Business Analytics 4- 24
HR and
Supply Chain
leadership development. communicationskils, and compliance training,
requirements.With this insight, the HR team formulated a robust
,amongAnalyiraothe
developmentstrategy to address these needs effectively.
Traininginitiatives:
training an
" Technical skill
development: The companyrecognizedthe rapidly evolving
the technology the need for employeesto stay updated with the nature of
industry and
and technologies. To
address this, the HR departmentimplementeda series oflatest took
training programsin areas such as data analytics, artificialintelligence, cybertechnia
and software development. These programs were delivered securit
through
platforms,workshops and inhouse expert-led sessions. The
company also encouraget
employees to attend external conferencesand workshops to gain
e-learring
trends in the industry. exposure to emerging
" Leadershipdevelopment: Recognizingthe significanceof effective
Company introduced a leadership development leadership,XYZ
program for mid-level and senigr
managers. The program focused on building leadership
intelligence,decision-makingskills and strategicthinking. competencies, emotional
Participantswere engaged i
s

experientiallearning,group activitiesand one on -

6'

mentors.
one coaching sessionswith executive
F1

Communication and soft skills training: To foster effective

collaboration,the HR department organized soft skills training forcommunicationand
levels. These workshops covered topics such
as effective
employees at al
resolution, teamwork and intercultural communication, contli
communication ensure a harmonious won
environmentand seamless cross-functional
to
interactions.
Diversity and inclusion training : XYZ
diversity and inclusion in its workforce.Company emphasized the importance
To promote a culture of
understanding, the HR team conducted diversity training workshops that respect
employees to embrace diversity, address unconscious biases and create anencouray"
inclusive
workplace.
" Complianceand ethics training : To comply with industry
ethical standards,the company implemented regular regulations and mam
compliance training.
were trained on topics such as data protection, anti-discriminationpolicies andEmplo
busines
ethics to ensure a responsibleand law-abidingwork culture.
 RAS0neSS
Analytics 4- 25 HR and Supply Chain Analytics

Evaluationand impact :
evaluated the effectiveness of the training
department at XYZ Company regularly
The HR post-
developnentinitiatives through various methods, inchuding feedback surveys. positive
and assessments and performance appraisals. The evaluation results indicated
raining
utcomes:
technical training programs
Improved employee performance : Participants indomains. leading to improved
respective
demonstrated enhanced expertise in their
productivityand performance.
contributed to a
advancements : The leadership development program
. Leadership equipped to handle
managers who were better
confident group of
more skilled and
teams effectively.
complexchallengesand lead their and diversity workshops resulted in
Soft skills training
Positive work environment : conflicts and a more inclusive work
interactions, reduced
improved employee
perspectiveswere valued.
environmentwhere diverse ethics training led to increased
awareness : Compliance and
Enhanced compliance practices, reducing the likelihood of
regulationsand ethical
employee awareness of
s
6'

compliance-relatedissues.
F1

Conclusion: significance of trainingand development

of XYZ Companyshowcasesthe skillgaps. promotingleadership
The case study strategicallyaddressing standards, XYZ
organizational By
success. upholding ethical
HR for communication and dynamic and competitive
effective the
CACellence, fostering that is equippedto
excel in
development has contributed
workforce and
Ompanyhas created a commitmentto continuouslearning it a leadingempiover
industry. The satisfaction, making
echnology
tothe companyy's growth,
innovation and employee
in the market.
HR plmningin detail
of
Review Questions Definethe key elements AU:Marks 7
planning ? ?
1. What is human resource trainingetectiveAU
2benefits.
and also explainany onecn make : Marks 6
bytraining? How AU : Marks 6
2. nderstand
What do you
deuit.
AU: Marks 7
development. ? Explauinin
3. Irainingvs. models
4. Compare
What are the different
Vpes of raining

knowledge
up-thrustfor
TIONS- an
PUBLICA
Business Analytics HR and
4.2 Supply Chain
4- 26
Supply Chain
The concept of a Network
Anali
"supply chain network" in human resource management
interconnected
workforce withinprocesses and relationshipsinvolved in acquiring, managing, and refers to the

human resource
an
chain in logisticsandorganization. deployinSuppyg
This analogy draws parallels between the traditional tie
the flow of talent within an organization. The supply chain
management encompasses various stages and
managing the workforce stakeholders network 0n
1. Talent
efficiently.Let's explore these elements : involved
acquisition: The first stage of the
talent needs, Sourcing candidates and supply chain network involves
positions. This process includes activitiesrecruiting suitable individuals foridentifying
such as job posting, candidate vacart
intervievwingand selection. screening
2. Onboarding and orientation:Once candidates are
orientation process begins. This stage involves selected, the onboarding and
organization, its culture, policies and introducing new employees to the
their roles. processes to ensure a smooth transition into
3. Training and development : Training and
enhance employee skills, competencies anddevelopment
s

initiatives are essential to

6'

job performance. HR
design and deliver training programs to professionls
F1

meet individual and

needs. organizationallearming
4. Performance management : Effective performance
aligning employee goals with organizational management is crucial tor
performance expectations,conducting regularobjectives.
This stage involves setting
evaluations, providing feedback and
recognizingemployee achievements.
5.
Compensationand benefits : Managing employee compensation and
critical aspect of the supply chain benetits iS
network in HR. This includes designly
competitive salary structures, managing payroll and
packages. providing attractive bene
6. Employee engagement and retention : Creating a work
positive and
environment is vital for employee satisfaction and retention, HR engaging
implement strategiesto foster employee engagement,promote professio
address employee concerns. wvork-lifebalance a
7. Succession planning and talent
development : Succession planning ensures
organizationhas a pool of qualifiedcandidates to fill key positions in the future.
identifies high potential employees and developstalent to preparethem for leadership
roles.
RUSineSS
Analytics 4-27 HR and Supply Chain Analytics

Employee relations :Employee relations activities aim to maintain positive

8. relationships between employees and the organization. HR handles grievance
resolution, conflict management and employee communication to foster a
harmoniouswork environment,

9.
Exit management:The final stage of thesupply chain network in human resource
management involves managing employee exits. HR professionals conduct exit
interviews, process paperwork and ensure a smooth transition for departing
employees.
10. Technology and HR information systems: An integral part of the supply chain
network is the use of technologyand HR informationsystems. These tools streamline
HR processes,track employeedata and support decision-making.
organizationscan improve
Byconceptualizingthe HR functions asa supply chain network,
flow of talent, optimize HR processes, and align human resource management withoverall
the
HR supply chain network contributes to
husiness goals. Effective management of the ultimatelydriving
motivated workforce,
attracting, developing and retaining askilled and
organizationalsuccess and competitiveness.
s
6'

4.2.1 Planning Demand

to the process of forecasting and
F1

supply chain management refers

Planning demand in within the supply chain. The goal of
products or services
estimating the future demandfor patterns accurately to facilitate effective
customer demand
demand planning is to predict management, productionschedulingand resource
deCisIon-makingin areas such as inventory that
anticipatingcustomer demand, organizationscan ensure
alocation.By understanding and available at the right time and place to meet
productsor services
y have the right amount of outs.
and stock
Customer needs while minimizing costs managementinclude:
supply chain
Key aspects of planning demand in relies on various forecasting techniques to predict
rorecasting : Demand
planning
trends, seasonal patternsand other
historical sales data, market
Tuture demand based on
basis for making informed decisios about
serve as a
relevant data. These forecasts
schedules.
Inventorylevels and production takes into accountthe variabilityin custOmer
planning promotional
Variability : Demand as seasonalchanges,
Demand fluctuate due to
factors such
preferences. Understanding demand
demand. Demand may customer
economic conditions
and
fluctuations and adjust inventory levels
activities, prepare for
variability helps organizations
accordingly. TIONS- an up-thrust
for knowledge
TECHNICAL PUBLICA
 HR and Supply Chain
Business Analytics
4 - 28

planning often involves collaboration

Analyica
" Collaboration : Effective demand an organization,such as
departments within sales
communication between different collaboration ensures that the
forecast
marketingconsiders inputs fromCross-functional
and operations. variousstakeholders and reflects a more comprehensive deman
understandingof customer needs.
Lead time considerations : Demand planning also considers lead times for procuring

finished goods. Longer lead times may require organizations.

raw materials or
advance to ensure timnely delivery to customers
anticipatefuture demand further in
" Demand sensing: Some organizationsuse demand
sensing technologiesand real-tin
These technologiesprova.
data analyticsto improve the accuracyof demand forecasts.
up-todate information on customer behavior and market trends, allowing for mes
responsiveand agile supply chain decision-making.
" Inventoryoptimization:Demand planningplays a crucial role in optimizinginventor
levels. By accurately forecasting demand, organizations can maintain an optiml
balance between holding sufficient inventory to meet customer needs and avoiding
excess stock that ties up capital and incurs carryingcosts.
s

" Customer satisfaction : Accurate demand planning contributes to higher

6'

customer
satisfactionby ensuring products or services are readily available when customers ned
F1

them.This minimizesthe risk of stock outs, backordersand delays in

orders.
fulfillingcustomer
Overall, planning demand is a foundational process in
underpins many critical decisions related to inventory supply chain management tha
allocation. By incorporatingdemand planning into theirmanagement, production and resourve
supply chain strategies, organizatio
can enhance efficiency,reduce
costs and improve overall
Main aspects of demand customer service levels.
planning
The three main aspects of
demand planningare :
1. Forecasting : Forecasting is a crucial aspect
predictingfuture customer of demand It involves
planning.
market trends and other demand for products or services based on historical
data.
relevant factors.
quantitative and qualitative methods, such asForecasting
time series analysis, statistical
can be done
Various
using models.
market research and expert
for judgment. Accurate forecasting providesthe foundation
effective demand planning,
and align their supply enabling
chain processes organizationsto anticipate
needs
Custonmer

accordingly.
AUSinessAnalytics
4- 29
HR and Suppty Chain
Demand variability : Analytics
2. Demand planning considers the variability in customer
demand. Customer demand can be
promotions, economic influenced by various factors,such as seasonality.
demandvariabilityhelpsconditions
and changing customer preferences. Understanding
organizationsprepare for fluctuationsin demand and adopt
strategies to adjust inventory levels,.
accordingly. By addressing demand production schedules and resource allocation
of variability, organizationscan mitigate the risks
stockouts and excess inventory, leading to cost savings and improved customer
service.
2 Collaboration and communication: Effective demand planning requires
collaboration and communication among different departments and stakeholders
within the organization.Sales, marketing,finance. operationsand supply chain teams
need to work together to share information, insights and data related to customer
demand. Cross-functional collaborationensures that the demand planning process
considers inputs from various perspectives, resulting in more accurate and
comprehensive demand forecasts. Collaborative demand planning also facilitates
enabling the
alignment between sales projections and supply chain capabilities,
schedules.
organizationto optimize inventorylevels and production
s
6'

4.2.2 Inventoryand Supply components

F1

supply chain network, "inventory"and "supply" are crucial

Inthe context of a efficientflow of goodsand services.
Let's define
ensuring a smooth and
Uia play vital roles in
each of these terms : materials that an organization
goods or
refers to the stock of to finished products.
It
Inventory : Inventory from raw materials
supply chain, sa
holds at various stages of the and not yet consumed or sold. Inventory serves
items that are stored are produced or procuredand the
includes allthe time when goods
the gap between the different types of inventorIes in a
buffer to bridge by customers.
There are
(WIP) inventoryand
demanded work-i-progress
time when they are materialsinventory,
raw
Supply chain, including operalionslo balance the
Tinished goods inventory. supply chain
managementis
criticalin carrying costs) with the risk
Effective inventory storage, handlng and opimize their inveniory
as to
costs of holding
inventory (such Organizationsstrive such as Just-
-n- Tne
sales. lechuiques,
of stockouts and
potentiallost management stock levels, o cnsure a
inventory safety
employing various Quantity (EOQ) and
levels by Econonic Order minimizingexcess
stock.
(JIT) inventory. products while
sufficient supply of knowiedge
up-thrustfor
TIONS- an
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Business Analytics 4- 30 HR and Supply Chein

Supply : Supply in a supply chain network refers to the availabilityand Analylea

goods or services from the point of origin to the point of consumption
or
encompassesthe entire process of producing. procuring and delivering productss use,
delivery
of

customer demand. The supply chain network involves multiple stages, from to mee
and manufacturersto distributors,retailers and
end consumers.
Supply chain management focuses on ensuring asmooth and efficient flow
suppliex,
products andinformationthroughoutthe supply chain. Itinvolves of
coordinating materials,
such as sourcing raw materials,
warehousing and distribution. Effectiveproduction
or manufacturing,
transportationactivities
costs, reduce lead times, enhance delivery supply chain managemnt aims to optimiza
meet customer needs in a performance and align supply with demand to
timely manner.
" In summary,
inventoryand supply are fundamentalelements in a
" Inventory
represents the stock of goods held at different stagessupply chain network.
of the supply chain,
while supply refers to the process of
customer demand. producing, procuring anddeliveringgoods tomeet
Effective management of inventory and supply is
optimal inventory levels, minimize costs and essential for organizationsto maintain
service. provide timely and efficient customer
s
6'

4.2.3 Logistics
F1

Logistics in supply chain management refers to the

of the efficient movement and storage of goods, planning, implementationand control
origin(raw materialsor services and information from the point ol
suppliers)to the point of
function within the supply chain that consumption(end customers). It is a critiea
and materialsthrough ensures the timely and cost-effectiveflow of
various stages of the supply chain produc
Key aspects of logistics in network.
supply chain management include :
Transportation : Logistics
such as road, rail, air, or involves selecting the most suitable
sea, to move goods
from one transportation
mou
another. It also
encompassesoptimizing transportationroutes, location to
movement of goods to ensure timely delivery. coordinatingshipments and track1ng
Warehousing
store and
: Logistics includes
managing warehouses and distribution centes
manage inventory. Warehousing
packing and shiPPing goods as per customeractivities
picking,
demand.include
Efficientreceiving,
warehousing ensuresthat
storing.
the right products are available at the
right time and place.

TECHNICAL PUBLICATIONS an up-thrustfor knowledge

AAsineSS
Analytics 4-31 HR and Supply Chain Analytics

Inventory mmanagement : lLogistics plays a crucial role in inventory management by

optimizinginventorylevelsto meet customer demand while minimizing carrying costs.
coordinating with inventory planners and demand forecasting teams. logistics
By
ensuresthat there is neither excess inventorynor stockouts.
fulfillment : Logistics is responsible for order fulfillment. which involves
Order
from the warehouse. packingthem.
products
processing customer orders, picking the
shipping them to customers. This process requires coordinationbetween inventory.
ond
transportationand order processingteams.
logistics is the process of managing the return of products.
Reverse logistics : Reverse excess inventory, back to the
manufacturer
defective items, or
Such as customer returns, the
Logistics handles the reverse logistics process, ensuring
or distribution center. returnedproducts.
repair, or recycling of
properdisposal,
logistics
Main objective of
objectivesare :
The three main logistics objectives of logistics is to achieve cost
Cost efficiency : One of the primary optimizing the use of resources.
1. chain. This involves efficiencyis
efficiency in the supply
s
logisticscosts. Cost
reducingoverall
6'

minimizingoperating
expensesand
organizationswhile deliveringproducts and
profitabilityfor achieve cost efficiency
in
F1

crucial in maintaining Strategiesto

competitive prices to customers. consolidating shipments,
services at
streamlining transportation routes, economiesof scale.
logistics include techniquesand leveraging
inventory management
logistics objectiveis to ensure
mplementing service : AnotherkeyMeetingdelivery deadlines is
delivery and customer
é Timely and services to customers. aims to minimize
lead
goods Logistics
timely delivery of satisfaction and retention. productsreach customnerswhen
customer
essential for delivery delays, ensuring that through efticient logistics
and service
umes, transit
tinmes
Providing excellent customer brand pereeptionand drives
them. fosters positive
iey expect customer loyalty,
maintaining
operations enhances tocuses on
logistics also
repeat business.
management :
Effective The objectiveis to strike a
inventory the supply chain. customer demand without
Optimal throughout
levels inventory to nneet carrying costs. Optimizing
optimalinventory having enough incurs
balance between up capital and efticient warehousing and
forecasting,
overstocking that ties demand materials. Proper
inventory
excessive requires accurate steady tlow
of enhances overall
levels ensure a stockouts and
inventory
coordination with
Suppliers tofulfillment, reduces
mproves order
management knowledge
Supply chain efficiency. up-thrustfor
JBLICATIONS.an
 Business Analytics 4 -32
HR and Supply Chain
Whilethese three
objectives representthe primary goals of
logistics,
it's Analyticat,
note that logistics
characteristics of
strategies may vary based on the unique
industries and supply chains.
i m por t
requirements anda nt
different
management requires continuOus monitoring, data-driven decision- Effective logistics
proactive adaptationto changing market conditions and customer - m
expect
achieving cost efficiency, timely delivery and optimal inventory
aki
a tnig,
o
and
ns. By
logistics contributes and
significantly to the overall success
management.
competitiveness
ousinessesintoday's dynamicand interconnected globalmarketplace. of
Types of logistics in supply chain
In supply chain
management,
on the specific functions
logistics can be broadly categorizedinto
and activities they encompass. Each type of various types based
role in facilitatingthe efficient flow of goods and logistics plays a critical
main types of logisticsin the supply chain services throughout the supply chain Th
1.
include :
Inbound logistics : Inbound logistics involves the
raw materials, components and other movement and management of
goods from suppliers to the production or
manufacturing facility.The objective of inbound logistics is to ensure that the
materials are available at the right time and place for right
inbound logistics include transportation, production. Activities in
s
incoming materials. warehousing and inventory managementof
6'

2.
F1

Outbound logistics : Outbound logistics focuses on the

of finished products from the movement and distribution
production
type of logistics aims to deliver facility customersor retail locations.This
to
products to customers in a timely and
manner. Outbound logistics involves efficient
packing, transportationand distribution. activities such as order processing, picking
3. Distribution logistics : Distribution logistics involves the
finished products to various locations. such as efficient distribution of
customers. It includes activities like inventory wholesalers, retailers. or end
fulfillmentand transportationto ensure that productsmanagement, warehousing. orue
promptly. reach the intended destinatiots
4.
Reverse logistics : Reverse logistics deals with the
management of product retu
recycling,repairs and disposal. It includes activities
returns, managing defective or damaged related to handling custous
intothe supply chain for possible products and re-integratingreturned gO0ds
5. Third-Party Logistics (3PL) and refurbishment or resale.
logistics (3PL) and Fourth-Party Logistics (4PL) : provided
Third-party
fourth-partylogistics (4PL) are logistics services by
TECHNICAL PUBLICATIONS an up-thrustfor knowledge
AUsiNOSS
Analyics 4-33 HR and Supply Chain Analytics

external providers to handle various aspects of the supply chain. 3PL companies
specializein transportation, warehousing and distribution services, while 4PL
companies act as logisticsintegrators, managing multiple logistics providers and
coordinatingthe entire supply chain on behalf of the client organization.
E-commereelogisties : E-commercelogistics specifically caters to the uniqu
requirements of online retail operations.It involves managing inventory, order
processing. last-mile delivery and reverse logistics for e-commerce companies.
F-commerce logistics plays a crucial role in meeting customer expectations for fast
and efficientdelivery.
. Global logistics: Globallogistics deals with managing the novement of goods and
services across international borders. It involves navigating customsregulations.
international trade laws and coordinating with freight forwarders and customs
brokers to facilitate smooth cross-border transactions.
8. Green logistics : Green logisties, also known as sustainable logistics or eco-friendly
logistics, focuses on minimizing the environmentalimpact of logistics operations. It
includes measures to reduce carbon emissions, optimize transportation routes, use
eco-friendlypackagingand adopt energy-efficientpractices.
s

Each type of logistics contributes to the overall efficiencyand effectiveness of the supply
6'

chain, ensuring that products are delivered timely, cost-effectivelyand with the highest level
F1

of customer satisfaction.Organizations often adopt a combination of these logistics types to

reate awell-integratedand optimized supply chain network.
Importanceof logisticsin supply chain :
Logistics plays a crucial role in supply chain management and its importance cannot be
Overstated. It serves as the backbone of the supply chain, ensuringthat goods and services are
and cost-effectively delivered from suppliers to customers. The key importance of
eflogistics
icientlyin the supply chainincludes :
" Customer satisfaction : Logistics ensures that products are delivered to customers on
time and in the right condition. Meeting customer expectationsfor timely and accurate
business and
delpositive
ivery word-of
enhancescustomer satisfaction and loyalty, leading to repeat
mouth recommendations.
levels
Efficient inventory management: Logistics helps optimize inventoryavailable
ensuringthat the right amount of inventory is
throughout the supply chain. By
at the right time and place, logistics reduces carrying costs, minimizes stockouts and

Improves overall supply chain efficiency.

for knowledge
TECHNICAL PUBLICA TIONS®-an up-thrust
Business Analytics HR and Supply Chain
4 -34
Anna
Costoptimization : Effective logistics managementcontributest0 cost optimizationi
l y t i c s
the supply chain. By streamlining transportation, warehousing and
processes, logistics reduces transportation costs, inventory carrying costsdiand
stributothe.ion
logistics-relatedexpenses.
Supply chain integration: Logistics integrates various supply chain components,such
as sourcing. production and distribution.It ensures that allstages of the supply chain
work cohesivelyand collaboratively,leading to bettercoordination,smootheroperations
and reduced lead times.
Time-to-market:Logistics plays a critical role in reducing time-to-marketfor new
products. Efficient transportationand distributionenable products to reach the market
quickly, allowing organizationsto respond to changing customer demands and market
trends swiftly.
" Risk management : Logistics professionalsaddress potential risks and disruptionsin
the supply chain. They plan for contingencies,implement risk mitigationstrategiesand
ensure business continuity in the face of unforeseen events such as natural disasters.
supplierdisruptions,or transportationdelays.
s
" Global reach: In today's globalized economy, logistics enables businesses to expand
6'

their reach to internationalmarkets. Logisticsmanages the complexitiesof global supply

F1

chains, including cross-bordertransportation,customs clearance and compliance with

internationaltrade regulations.
Competitive advantage : An efficient logistics network can become a source of
competitive advantage for organizations. Effective logistics allows companies to
differentiatethemselves by offering faster delivery, better service and more responsive
supply chain operationsthan their competitors.
" Environmental sustainability : Green logistics practices focus on reducing he
environmental impact of supply chain operations. By adopting eco-triendy
transportation,packaging and distribution methods, logistics contributes to corporalt
social responsibilityand sustainabilityinitiatives.
In summary, logistics is a critical function that underpins the success of the supply chan.
Its effective managementensures customer satisfaction,cost optimization,efficient invento
management and a competitive advantagefor organizations.Logistics professionalsemple?
various strategies,technologiesand best practices to enhance supply chain performance a
drive businesssuccess in today's dynamic and interconnectedmarketplace.
 35
vtics HR and Supply Chain Analytics

Questions
chain neworkin detail. AU: Marks 6
Eyplainsppy
1
Whatare
Ihe, different key aspects of planing demmdinsupplychain management.
AU: Marks 7
Defnethefollowingternns : ) Invemory2) Supply 3) Logistics. AU: Marks 6

Analytics Applicationsin HR and Supply Chain

13
MR
analytics

analytics, also known as people analytics or talent analytics,is a powerful tool that
HR resources professionalsto leverage data and insights to make informed
nables human
their workforce. The common applicationsof HR analyticsinclude:
sabout
keisIons
Recruitmentand talent acquisition : HR analytics is used to optimize the recruitment
candidate data, sourcing channels and recruitment metrics. It helps
processby analyzing
effective recruitment sources and strategies, assess the quality of hires,
identifythe most
needs.
and predictfuture hiring
Employee performance and productivity : HR analytics assesses employee
, reviews, KPls and other
productivity using data from performance
nerformance and
managers to identify high-performing
metrics. It enables HR professionals and
s

provide targeted training and

6'

areas for improvement and

employees, recognize
F1

developmentopportunities.
employee
engagement and satisfaction : HR analytics measures
Employee
satisfaction through surveys and sentiment analysis. It helps HR
engagement and job
identify factors that impact engagement and satisfaction,leading to the
professionals retention.
implementationof strategiesto improveemployeemorale and
training : HR analytics identifies skill gaps and training
Talent developmentand employee competencies and career
By analyzing
needs within the organization. targeted training and developmentprograms to
dspirations, HR can design and deliver
enhance employee skills and performance. analyticssupports strategic
succession management : HR
Workforce planning and workforce demographics,turnover rates and
talent
ee planning by analyzing roles and developing successionplans
Supply and demand. It aids in identifying critical
Oensure a strong talent pipeline.
: HR analytics is used to analyze
management and
Compensation and benefits performanceto ensure fair
employee make data-driven
Compensation data, market benchmarksItandhelps HR professionals
competitive
decisions
compensation packages. benefits.
bonuses and
about salary structures,
knowledge
TIONS- an up-thrustfor
TECHNICALPUBLICA
 HR and Supply Chain
BusinessAnalytics 4- 36
Diversity and inclusion: HR analytics measures diversityand inclusion metrics within Analytics
the organization, such as representation across different demographic groups and
promotion rates. It helps track progress toward diversity goals and guides efforts to
foster an inclusive workplaceculture.
Employee retention andturnover : HR analytics helps identifyfactors contributingto
employee turnover and retention rates. It enables HR professionals to implement
retentionstrategiesand interventionsto address potentialturnover risks.
Employee health and well-being : HR analytics assesses employee health and well
being metrics, such as absenteeism rates and health insurance utilization. It helps
Identify patterns related to employee well-beingand enables HR to implement wellness
programs and support initiatives.
HR operationalefficiency : HR analytics optimizes HR processes and workflows by
analyzingdata related to HR operations,such as recruitmenttime, onboardingefficiency
and HR service delivery. It enables HR to streamlineprocessesand enhance overall HR
operationalefticiency.
By applying HR analytics,organizationscan gain deeper insights into their workforce.
enhancedecision-makingand align HR strategieswith broader businessgoals. The data-driven
s

approach offered by HR analytics empowers HR professionalsto make more strategicand

6'

impactfulcontributionsto the organization'ssuccess.

F1

Levels of HRanalytics
HR analyticscan be categorizedinto different levels based on the complexityand depth of
data analysis and the insights they provide. The levels of HR analytics are as follows :
" Deseriptiveanalytics : Deseriptiveanalytics is the foundational level of HR analytics
It involves the examination and analysis of historical HR data to describe pastevents.
trends and pattens. Descriptiveanalytics provides basic insights into HR metrics such
as employee headcount,turnover rates,time-to-fill vacancies and training completion
rates. These analyses help HR professionalsunderstand what has happened in the pas
and gain insights into the current state of the workforce.
Diagnostic analytics : Diagnostic analytics moves beyond deseriptive analytics 0)
delving deeper into the reasons behind HR trends and patterns. It aims to identity u
root causes of specific HR outcomes and answer the "why" questions. By applying
diagnostic analytics, HR professionals can analyze relationships between dittercu
variables and understand the factors influencing employee performance,turnovet,
and
engagement. This level of analytics helps HR to make informed decisions
implementtargeted interventions.

TECHNICAL PUBLICATIONS-an up-thrust for knowledge

AusinOSS
Ananics 4-37
HR and Supply Chain Analytics
Predictiveanalytics : Predictive analytics uses statistical algorithms and
techniquesto forecast future HR trends and
modeling
outcomes. By analyzing historical data. it
can identify patterns and predict potential future events or behaviors. Predictive
analytics is used to forecast turnover rates, predict
high-potential employees and
anticipatefuture talent needs. It helps HR professionals proactively address workforce
challengesandI plan for the future.
Prescriptive analytics : Prescriptiveanalytics is the highest level of HR analytics.
building upon the insights provided by descriptive,diagnostic and predictiveanalytics.
This level of analytics goes beyond predicting future outcomes and recommends the
best cOurse of action to achieve desired HR outcomes. Prescriptive analytics uses
advanced algorithms to analyze multiple scenarios and identifythe most effective
strategiesto address HR challenges and achieve organizationalgoals. It empowers HR
professionalsto make data-driven decisions and optimize HR processesand strategies.

The progression from descriptive to prescriptive analytics represents a joumey of

invest in their data
ooregsing analytical maturity for HR functions. As organizations
and descriptive insights
anabilities and analytical tools, they can move from basic reporting
optimize their
sophisticated predictive and prescriptiveanalytics, enabling them to
s
t0 more
6'

workforceand HR practices.
F1

chain
Analyticsapplications in HR and supply
applications play a transformative role in both Human Resources (HR) and
Analytics
management. These applicationsleveragedata and advancedanalyticstechniques
Supply chain processes.Let's expiore the
Ogain valuable insights, make informed decisionsand optimize
pecific analyticsapplicationsin each domain :
Analytics Applications in Human Resources (HR) :
recruitment analytics: HR analytics can help optimize the
t acquisition and candidate sourcing, applicant profilesand
to
Tecruitment process by analyzing data related recruitmentchannels, HR professionalscan
hiring outcomes. By Identifyingthe most effective Additionally, predictiveanalyticscan be
allocate resources efficiently and attract top talent. data and business growth projections.
Used to historical
forecast future hiring needs based on analyticscan assess employee performance
Employee performance analytics : HR productivity metrics and key performance
using data from performance reviews, high-pertorming employees, pinpoint
indicators (KPls). These insights help identifydevelopmentresourceseftectively.
areas for improvement and allocate training and

for knowledge
BLICATIONS®.an up-thrust
 Business Analytics 4- 38 HR and Supply Chain

Employee engagement and satisfactionanalytics : Through employee surveys ax

Analytics
sentiment analysis, HR analytics can gauge employee engagementand job
levels. Identifying factors that influence employee engagement enables HR. satisfaction
implementtargetedstrategiesto improve workplacemorale and reduce turnover.
Workforce planning and succession analytics : HR analytics aids in
workforce planning and succession management. By analyzingemployee strategic
demographics,
skills and career aspirations, HR professionals can identity potential skill gaps anA
develop successionplans to ensure astrong talent pipeline.
Compensationand benefits analyties : Analytics can help organizationsdetermi
competitivesalary structuresand benefits packages based on industry benchmarksani
employee performance data. This ensures that compensation and benefits align wit
market trends and employee contributions.
Analyticsapplicationsin supply chainmanagement:
Demand forecasting and inventory analytics : Supply chain analytics assists in
demand forecasting by analyzing historical sales data, market trends and external
s
factors. Accurate demand forecasting helps optimize inventory levels, reducing holding
6'

costs and stockouts.

F1

Supplier performance analytics : Supply chain analytics evaluates supplier

performance based on criteria such as on-time delivery, quality and responsivenes.
ldentifying high performing suppliers facilitates strategic sourcing decisions and
strengthenssupplierrelationships.
Transportationand route optimizationanalytics : Supply chain analytics optimizs
transportationroutes, leading to cost savings and reduced carbon emissions.It consider
variables such as delivery locations, shipment volumes and traffic patterns to creas
efficientdelivery schedules.
Inventory management and stock optimizationanalytics : Supply chain analyie
improves inventory management by optimizing reorder points, safety stock levelsright
an
order quantities. It ensures that the right amount of inventoryis available at the
time to meet customer demand.
such
Risk and resilienceanalytics : Supply chain analytics assesses supply chain risks,
potential
as disruptions due to natural disasters or geopoliticalevents. By analyzing resiliene
risks, supply chain professionals can implement contingencyplans and build
into the supplychain.
 4 39
ALsineSSAnavtic HR and Supply Chain Anatytics

leveraginganalvtics applicationsin HR and supply chain management. organizations

data-driven decision-making,enhance efficiency and gain a competitive advantage
respective industries. These insights lead to improved processes, hetter resource
their improvedoverall performanceand business outcomes.
ultimately,
s/lcationand
n

applicationsin HR:
analytics
Advantagesof at
Improved decision-making : HR analytics provides
data-driven insights that enable
professionalsto make informed and objective decisions about talent acquisition.
HR performance, training and other HR processes. This leads to more effective
employee
decision-making,contributingto organizationalsuccess.
strategic
assess
: HR analytics helps identify high-potentialemployees,
and
optimization
Talent
and match individuals to the right roles. By optimizing talent
workforce skills satisfaction while
organizations can improve productivity and employee
placemernt,
reducingturnover.
applicationsin HR enable organizationsto identify
Analytics to better candidate
Enhanced recruitment : channels and sources, leading
recruitment
the most effective
reduced time-to-fillvacancies. engagement
s
targetingand
HR analytics measuresemployee
retention :
6'

Employee engagement and helps develop targeted retention

influencing engagement and
F1

factors
levels. identifies
employeesatisfaction and reduceturnover.
strategiesto improve performance data, HR analyticsassists in
development : By analyzing organization. This enables HR to
Trainingand training needs within the skills and
gaps and enhance employee
Identifying skill training programs to
targeted
design and deliver talent needs based
on
future
performance.
HR analytics forecasts planning ensuresthat
planning : workforce
Strategic workforcebusiness projections. Strategic demands.
historical data and future
talent in place to meet
costs, such as recruitment
organizations have the right helps optimize HR-related
Organizationscan
allocate
Cost optimization: HR analytics employeeturnover costs.
investments and expenditures. compliance
expenses, training reduce unnecessary monitoring HR
and issues. This
resources more efficientlymanagement : HR analyticsaids in
practices or legal
and risk
Compliance potential risks related to employee penalties.
avoids potential
and identifying compliancerisksand
proactive approach mitigates

USt for knowledge

 HR and Supply Chain
Business Analytics 4 - 40
Analytics
Advantagesof analyticsapplicationsin supply chain :
Demand forecasting and inventory ontimization : Supply chain analytics assists :
accurate demand forecasting. enabling orrganizationsto optimizeinventory levels and
reduce holding costs while meeting customerdemand efficiently.
Transportation and route optimization : By analyzing transportation data and
logistics processes, supply chain analytics optimizes transportation routes, reducing
transportationcosts and improvingdeliveryefficiency.
Supplier performance management : Supply chain analytics evaluates supplier
performancebased on metrics such as on-time delivery and quality. This helps identify
high-performingsuppliersand strengthenssupplierrelationships.
Risk management: Supply chain analyticsassesses potential risks and disruptionsin the
supply chain, allowing organizationsto develop contingency plans and build supply
chain resilience.
Efficient resource allocation : Supply chain analytics helps organizations allocate
resources effectivelyby analyzingsupply chain processes, inventory levels and demand
patterns. This ensures resourcesare utilizedoptimallyto meet customerneeds.
Real-time visibility : Analytics applications provide real-time data and insights into
s

supply chain operations.This visibility enables organizationsto make quick decisions

6'

and respond rapidly to changes in demand or supply.

F1

Sustainabilityand greeninitiatives: Supply chain analytics aids in optimizingsupply

chain operationsto reduce carbon footprintand support sustainabilityefforts.
Customer service improvement: By analyzing supply chain data and customer
feedback, analytics applications can identify opportunities for improving customer
service and delivery performance.
In both HR and supply chain management,analyticsapplicationsprovide valuable insights
that contributeto better decision-making,improved efficiency,cost optimizationand enhanced
overallperformance.By leveragingdata and analytics, organizationscan gain a competitive
advantage andachieve their businessgoals more effectively.
4.3.1Applying HR Analyticsto Make a Predictionof the Demand
for Hourly Employeesfor a Year
To make a prediction of the demand for hourly employees for a year using HR analytic
youcan followthesesteps:
Data collection : Gather historicaldata on hourly employee demand for the past ie
years, preferably on a monthly or quarterly basis. Include variables such asthat
seasomay
fluctuations, business growth, economic indicators and any other factors
impact the demand for hourly employees.
TECHNICALPUBLICATIONS-an up-thrustfor knowledge
assiNOSS
Anatie 4 - 41
HR and Supply Chain Analytics
Data preprocessing:Clean and preprocess the data to ensure its
accuracy
consistency. Handle missing data and outliers appropriately. Transform the and
datainto a
suitablefor analysis.
format
ExploratoryData Analysis (EDA) : Perform exploratory data analysisto gain insights

into
the historicalhourly employee demand patterns. Visualizethe data using plots and
identify any seasonal trends, growth trends, or any other patterns that may be
chartsto
relevant.
series forecasting : Since you are predictinghourlyemployee demand for a year.
Time
series forecasting methods are suitable for this task. Apply techniques such as
time
ARIMA (Autoregressive
Integrated Moving Average), Exponential Smoothing or
Decomposition of Time Series (STL)to model the historicaldemand data and
Seasonal
forecastfuture values.
appropriateforecasting model based
selection and validation : Choosethe most
Model
in predictingthe historical data. Use techniques like
accuracy
an its performance and and adjust model parameters if
the model's performance
ROSR Validation to assess
hourtv
that might influence
s
necessary. factors
: Consider external
Incorporate external factors marketing campaigns, industry
6'

business expansion plans,

employee demand, such as includethese factors inthe
F1

data is available,
economic indicators. If relevant
trends and
accuracy. identifiedexternal
forecastingmodel to improve forecasting model and the
demand: Use the selected upcomingyear. Generate
Predictfuture employeesfor the trends
predict the demand for hourly granular insightsintothe demand
factors to more
quarterly forecasts to provide
monthlyor how changes in
understand
throughoutthe year.
Perform sensitivityanalysis to analysis can help HR
analysis: predictions. This accordingly.
Sensitivity the demand
their strategies
external factors might impact scenariosand adapt performanceand retine
model's
professionals planfor different review the forecasting model
parameters or update
the
" Review and refine : Regularly becomes
available. Adjust
strategies,
the predictions as new data predictions. planning
ensure
accurate workforce insights
external factors as needed to predictions to develop
allocation.
lncorporatethe
: Use the resource
Actionable insights schedules and processes.
such as hiring plans, training and
budgeting
into the organization'sHR planning

knowledge
up-thrust for
CATIONS- an
 BusinessAnalytics HR and Supply Chain
4 - 42

By applying HR analyticsand time series forecastingtechniques,you can make

Analytics
predictions of hourlyemployee demand for a year. These predictionsenable HR data-driveN
professional
to anticipate workforce needs, allocate resources effectivelyand proactively address
challenges,resulting in a more agile andoptimizedworkforce. staf ing
Review Questions
1. Discuss various levels of HRanalytics ? AU: Marks 6
2. Define analyticsapplicationsin HR and supply chain. List down ay five advantages
of analyticsapplicationsin HR and in supply chain ? AU: Marks 7
3. Discuss the case study on applying HR analytics to make a prediction ofthe demand
for hourly employeesfor a year. AU: Marks 6
|4.4 Two Marks Questions with Answers
Q.1 In brief explain human resources ?
Ans. : Human resources,often referred to as HR, is adepartmentor function within a company
that focuses on managing and supporting the employees. Its main goal is to ensure that the
organizationhas the right people with the necessaryskills and abilitiesto achieve its objectives.
Insimplerterms, human resources is like the "people department" of a company.
s

Define human resource planning ?

6'

Q.2
F1

Ans. : In human resources,planning refers to the process of forecasting and aligning an

organization'sworkforce needs with its strategic goals and objectives. It involves assessingthe
current and future workforce requirementsto ensure that the right people with the right skills
are available at the right time.
Q.3 What is the role of trainer in HR ?
Ans. : The role of a trainer in HR (Human Resources) is critical in designing, delivering and
evaluating training programs to enhance the skills, knowledge and capabilitiesof employees.
The trainer's responsibilitiesextend to various aspects of the training process such as trainii
analysis, training program design, delivery of trainingand subject matter expertise.
Q.4 Define developmentin human resources ?
Ans. : Development in Human Resources (HR) refers to the continuous improvement a
evolution of HR practices,strategies and methodologies to meet the changing needs o
workforceand the organization.
Q.5 Define classroomtraining ?
Such
Ans. : In-classroomtraining sessions involveparticipantsgatheringin a physical setting,
method
This
as a training room or conference hall, where an instructor leads the training.
allowsfor face-to-faceinteractions,group discussionsand immediatefeedback.

TECHNICAL PUBLICATIONSs-an up-thrustfor knowledge

 4- 43 HR and Supply Chain Analytics
aeinOSS
Analics

On-the-Job Training(0JT) ?
Define
training involves new employees learning while performingtheir joh tasks.
a6
On-the-job
alongside experienced colleagues who provide guidance, hands-oninstruetion and
(
Ans.
work
They
metorship.
transitional model of training?
Define
transitional model of training focuses on preparing employeesfor a planned
The
Ans.:
oganizational change or transition. It recognizes that organizational changes. such as
estructuring. technology
implementation, or process changes, can significantly impact
and responsibilities.
employeeroles
planning demand ?
n8 Define demandin supply chain managementrefers to the process of forecasting and
Ans. :
Planning or services within the supply chain. The goal of
future demand for products
astimatingthe customer demand patterns accurately to facilitate effective
is to predict production schedulingand resource
demand planning such as inventory managemnent,
decision-makingin areas
allocation.
s
Defineinventory? organizationholds at various
6'

that an
Q.9
goods or materials
Inventory refers to the stock of products.
F1

Ans.: materialsto finished

from raw
stages of thesupplychain,
demand planning ? customer
Q10 What is forecasting in
planning.It involvespredictingfuture
acrucial aspect of demand trends andother relevant
Ans. : Forecastingis
based on historical data, market
services
Gemand for products or
iactors.
implementation,and
Q11 Definelogistics? planning,
management refers to the intormationtromthe
Ans.: Logistics in supply chain and
storage of goods,services, customers).
control of the efficient movement and consumption(end
to
suppliers) the point of
point of origin (raw materials or components
materials,
2 What is inbound logistics? managementof raw
movementand
Ans. : Inbound logisticsinvolvesthe manufacturingtacility.
or
and other goods from suppliersto the production
a powertultoolthat
0.13 In short explain HR analytics ? talent
analytics,is informed
analytics or to make
Ans, : HR analytics, also known as people leverage data and insights
hables professionals to
human their
resources
decisions about workforce.
 HR and Supply Chain
BusinessAnalytics 4- 44 Analytics
Q.14 What is prescriptiveanalytics ? analytics,building upon the insights
of HR
Ans. : Prescriptive analyticsis the highest level
analytics.
providedby descriptive, diagnosticand predictive
Q.15 What is the use of predictiveanalytics in HR ?
turnover rates, predict high-potential
employees,
Ans. : Predictive analyticsis used to forecast address
professionals proactively workforce
and anticipate future talent needs. It helps HR
challengesand plan for the future.

s
6'
F1
 UNIT V

Marketingand Sales
5 Analytics
Sylabus
Marketing Mix, Customer Behaviour - selling Process - Sales Planning
Marketing Strategy,
applicationsin Marketing and Sales - predictive analytics for customers' behaviorin
Analvticsandsales.
marketing

Contents
Analytics
51 Marketingand Sales
52 MarketingMix
s
53 Customer Behavior
6'

54 SellingProcess
F1

55 Sales Planning
and Sales
5.6 Analyticsapplications in Marketing
PredictiveAnalyticsfor Customers' Behaviourin Marketingand Sales
37
58 Two Marks Questions with Answers

(5-1)
BusinessAnalytics Marketingg and Saless
5-2
Analytica
5.1 Marketingand Sales Analytics
Marketing and sales analytics refers to the process of collecting. analyzing and
interpretingdata related to marketing and sales activitiesto gain insights and make
informed business decisions. By leveraging data analytics, businessescan optimize their
marketing and sales strategies,improvecustomeracquisitionand retention and
overallbusiness performance. enhance
Key componentsof marketing andsales analytics:
1. Datacollection:The first step in marketing and sales analytics is to gather releva
data from various sources. This data may include customer information,sales data
website traftic. social media interactions,emailcampaigns, advertising metrics and
Imore.
2. Data integration : Once the data is collected, it needs to be integrated into a
centralizeddatabase or system for efficient analysis. Integratingdata from multipe
sources allowsbusinessesto have a comprehensiveview of their marketingand sales
performance.
3. Data analysis : This involves applying various statisticaland analytical techniques
s
6'

to extract meaningfulinsights from the data. Common techniques include data

F1

mining, segmentationanalysis.regressionanalysisand predictivemodeling.

4. Customer segmentation: Customer segmentationis a critical aspect of marketing
and sales analytics. It involves dividing the customer base into distinct groups basei
on common characteristicssuch as demographics,behaviors, interests,or purchasng
patterns. This helps tailor marketing efforts to specific customer segments n
improve targeting.
5. Marketing attribution : Marketing attribution helps identify the channels
touchpoints that contribute most to conversions and sales. It allows businesses
understand the effectiveness of different marketing efforts and allocate resou
accordingly.
6. Sales forecasting : Sales forecasting involves using historical sales data and ma
trends to predict future sales. This enables businesses to plan their invent
resourcesand marketingcampaignsmore effectively.
attributed
1. Customer Lifetime Value (CLV): CLV is the prediction of the net profit prioritize
to the entirefuture relationship with a customer. Understanding CLV helps
high - value customersand design retention strategiesaccordingly.
TECHNICAL PUBLICATIONs-an up-thrust for knowledge
 5-3
AnalyticS
Marketing and Sales Analytics
Investment (ROI) analysis : ROl analysis assesses the profitabilityof
RetuIrn on
8. marketingand sales initiatives.By comparing the cost of marketingcampaignsto the
generated, businesses can evaluatethe success of their investments.
revenue
B Testing :
A /B testing involves experimenting with different marketing
/
9. A
strategies and
measuringtheirimpact on customer behavior. It helps identify the
approachesand optimize marketingcampaigns.
most effective

Data
visualization: Effective data visualizationtools and techniques help present
10. data
d in a visually appealing and easy - to - understand format, aiding
complex
insights quickly.
decision- makersin grasping
andsales analytics:
Benefitsof marketing and sales analytics enable data-driven
decision making : Marketing
- Driven
1. Data intuition and guesswork.
decision-making,reducing reliance on efforts
targeting : Businesses can better target their marketing
Improved customer
2. customer preferencesand behaviors.
by understanding identifying sales trends and patterns,
performance : By
3. Enhanced sales improveoverallperformance.
s
processes and
can optimize their sales more efficiently,
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organizations allocate resources

Analytics helps businesses
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optimization :
4. Cost
on investment. for personalized
ensuringa higher return customer segments allows
Personalization : Understanding customer satisfactionand
5. approaches, leading to improved
marketing and sales
businesses a competitiveedge
loyalty. Leveraging analyticsgives competitors might
advantage : improvement that
0. Competitive opportunities and areas for
by identifying modern businesses,enabling
overlook. crucialrole in environment.
analytics play a data - driven
" Overall. marketingand sales customer - focusedin
a
and
them to stay agile, competitive
to developeffective
Marketing Strategy insights and analysisobjectives. Business
leveraging data - driven businessgoals and market trends and
involves
Marketing align with
and targeted marketing plansthatunderstanding customer
behavior,
decisions and optimize
role in make informed
analytics plays a pivotal businesses to investment.
eenabling return on
campaign performance,
their marketing efforts for maximum
impact and
 BusinessAnalytics Marketing and Saies
5-4

Here are some key componentsof using businessanalyticsin marketing strategy:

Aralyti
1. Market segmentation: Businessanalvticshelps identify distinct customer
based on demographics. behavior. preferencesand buying patterns. By segmenn
undermarstakndietimngy
the unique needs of difterent customer groups. businesses can tailor their
messagesand offeringsto resonate with each segment effectively.
2. Customerprofiling: Analvticsallows businessesto create detailed profilesof th
target customers, including their interests. pain points and preferences. T
information helps in crafting personalizedmarketing campaignsthat addressspecifk
customer needs.
3. Marketingattribution: Attributionmodeling in businessanalytics helps detemi
which marketingchannelsand touch points contributemost to conversionsand sale
By understandingthe effectivenessof each channel. businesses can allocate the
marketingbudget optimallyand invest in high - perfomingchannels.
4. Predictive analytics : Predictive analytics uses historical data to forecast fun
trends and outcomes. In marketing. it can be used to predict customer behavir
identify potential churm and anticipate market demands. aiding in practhe
marketingdecision - making.
s

5. Campaign optimization : Through A / Btesting and experimentation,busines

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analytics helps optimize marketing campaigns by comparingdifferent strategiesand

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tactics.This iterative approach allows marketers to fine - tune their campaigns fr

betterperformance.
6. Social media analytics : Analyzingsocial media data provides valuable insights int
customer sentiment, brandperception, and competitoranalysis. Businessescan ux
this informationto engage with their audience more eftectively and improve brand
positioning.
7. Customer Lifetime Value (CLV) : By analyzing customer behavior and purch
history, businesses can determine the lifetime value of each customer. This etk
helps in prioritizing high - value customers and developing strategies to ineN
customer retention.

8. Competitiveanalysis : Business analyticsallows businessesto monitorand anal)*

their competitors' marketing activities and performance. This analysis helrs
identifyingopportunitiesand difterentiatingthe brand from competitors. th'
9. Real - time monitoring: With real - time analytics, businesses can monitragik
enables
performance of marketing campaigns as they unfold. This ita camn
decision- making,allowing marketersto make adjustments promptly
is not performingas expected.

TECHNICAL PUBLICATIONS-an up-thrustfor knowiedge

 5-5
sNOSS
Anaics Marketing and Sales Analytics
visualization : Data visualizationtools help present complex marketing data in
Data
10. visually appealingand understandable manner. This aids in conveying insightsto
stakeholders
a and facilitates better decision - making.
integrating business analytics into their marketing strategy, businesses can move
B
ondintuition
- based approaches and develop data - driven marketing plans that
bey measurable results. It allows marketers to be more strategic, efficient and
deliver
customer-centric,resulting in improved customer satisfaction,increased brand loyalty
sustainable business growth.
and
Importance of Marketing Strategy
s12 crítical role in
importanceof marketing strategy cannot be overstated as it plays a
The of a business. A well - defined and effectively executed
success and growth
the essential for several reasons :
marketingstrategy is
differentiation : In a competitive marketplace, a strongmarketingstrategy
1. Market identifying and highlighting
halns a business stand out from its competitors. By products or
selling points, businesses can effectively differentiate their
unique
and buildingbrand loyalty.
services,attracting morecustomers
businessesto identifytheir target
s

marketing strategy enables

2. Targeted approach : A
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messages and offerings to specific customersegments. This

audience and tailor their
reach the right people. leading to
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that marketing efforts

approach ensures
targeted
increased sales.
higherconversion rates and businessescan allocatetheir
clear marketing strategy,
With a
3. Resource allocation : more efficientlyand
effectively.It
time, budget, and manpower,
resources, including
initiatives that align with businessgoals and have the most
helps prioritizemarketing
Significantimpact on the bottom line. involves setting long - term goals
and
strategy
4. Long-term vision : Marketing a vision for the future, businessescan align
By having
Objectives for the business, success.
achieve sustainable growth and allows
their marketing efforts to out marketing strategy
:A well - thought - and evolving
customer
S. Adaptability and agility changes
and responsive to market maintain
comnpetitiveness
businesses to be agile
and strategies
quickly to
needs. It helpsin adjusting taactics
and nurturinga
In adynamic environment. building
crucialrole in experiences
6. strategy plays apositioning and customer
Brand building: Marketing messaging. increased market share
brand's reputation. Consistent whichcan lead to
Contributeto brand loyalty and advocacy,
and customer retention.
knowledge
up-thrust for
AL PUBLICATIONS an
 Business Analytics Marketing and Sales
7.
5-6

Customer acquisitionand retention: A well-executed marketing strategy

Analytics
on customer acquisition and retention, By understandingcustomer preferencesand
pain points, businesses can attract new customers while keeping
focuses
engaged and loyal. existing Ones
8. Maximizing ROT : Marketing require investments and robust
efforts a
strategy helps in maximizing the return on these investments. By marketing
tracking nd
analyzing the performance of marketing campaigns, businesses can optimize the.
efforts for better results.
9. Market opportunities and challenges : Marketing strategy involves
market research and analysis, which helps businesses identity opportunitiesand conducting
challenges in the market. This knowledge allows businesses to capitalize on
emergingtrends and tackle potentialthreats effectively.
10. Integrationwith business goals : A strong marketing strategy aligns with overall
business objectives. It ensures that marketing efforts contribute directly to the
achievement of broader organizationalgoals, such as revenue growth, market
expansion,or new product launches.
11. Decision making : Marketing strategy provides a framework for decision - making.
s

helping businesses make informed choices about product development, pricing

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distributionchannels and promotionalactivities.

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A well- crafted marketing strategy is fundamental to a business'ssuccess, as it

provides
direction, focus and a competitiveadvantage. It enables businessesto connect with their
target audience, deliver value and build lasting relationships, leading to increased
market share and sustainedgrowth in the long run.
Review Question

1. Explain importance of marketingstrategy.

5.2 Marketing Mix

The marketing mix, also known as the 4Ps of marketing, is a foundational frameo
used by businesses to design and implement effective marketing strategies. lt wasfirst
introduced by marketer E. Jerome McCarthy in 1960 and has since become a W
adopted concept in the field of marketing. The marketing mix consists of four
interrelated elementsthat serve as the building blocks for a comprehensive marketing
plan :
services that a
1. Product : This element pertains to the tangiblegoods or intangible design,
company offers to its target customers. It involves definingthe features,
TECHNICAL PUBLICATIONS®-an up-thrustfor knowledge
 5-7
Analytics
Marketingand Sales Analytics
quality, packaging
and branding of the product. Understanding
preferencesis essential in developing a product that meets customer needs and
provides value.
their expectationsand
2. Price: Pricerefers to the amount of money customers are willing to pay for the
Pricing decisions should
product or service. consider factors such as production
Costs, competitorpricing. customer perception of value and pricing strategies (e g.
penetration pricing. skimming pricing, value - based pricing). The right
pricing
strategy can intluence demand, profitabilityand market positioning.
Place: Also known as distribution,this element deals with how the product or
3. service reaches the customers. It involves decisions about the distribution channels

(e.g.. direct
sales, retailers, online platforms),logistics, inventory management and
geographic coverage. An efficient distribution strategy ensures that the productis
readilyavailableto
consumers at the right place and time.
activities used to
Promotion : Promotion encompasses all the communication
the product or service. This includes
inform. persuade and remind customers about
sellingand digitalmarketing
advertising,public relations,sales promotions,personal interest and drive sales by
awareness, generate
efforts. The aim is to create brand
s

effectivelyreachingthe target audience.

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and
additional Ps, such as People, Process
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evolved to include
The marketing mix has based industries.Additionally,some
relevant in service -
physical evidence,particularly include the 7Cs or other variations.However, the
concept to
marketershave adapted the comprehensivemarketing strategy that
fundamental in developing a
core 4Ps remain and promotional effortsto meetthe
distribution
addresses product development, pricing,
businessobjectives.
achieve
needs of thetarget market and
521 Key Takeaways of Marketing Mix
(4Ps) are: mix provides a
" The key takeaways of the marketing mix The marketing
marketing framework
:
and implement eftective
Comprehensive businesses to design(Product, Price, Place and
framework for elements various
comprehensive considering all four rounded plan that addresses
marketing strategies. By a well -
can create understandingand
Promotion), companies
aspects of marketing. mix
emphasizes
can develop
marketing businesses
2. - centric approach
: The audience,
choosethe right
Customercustomer needs. By focusing set appropriate customers.
onthe target
prices,
meeting requirenments, potential
products that satisty theircommunicate effectivelywith
distribution channels and up-thrust for
knowledge
TIONS®- an
 Marketing and Sales
Business Analytics 5-8
3. Balancingelements : The marketing mix highlightsthe importance of balancing theAnalytics
four elements. Asuccessful marketing strategyrequires harmonizing product
featurandes
with the right pricing, ensuring the product's availabilityin suitable locations
promoting iteffectivelyto reach the target market.
t. Flexibilityand adaptability : While the original marketing mix consists of f.
elements, businesses can adapt it to their specific industry and market dynamics,
They can add additional elements,such as people, process and physical evidence,to
address the unique challengesof service -based industries.
5. Market differentiation: The marketing mix helps businesses differentiatethejr
offerings from competitors.By carefully crafting their product. pricing, distribution
and promotionalstrategies,businessescan create aunique value propositionthat sets
them apart inthe market.
6. Maximizing market potential : By optimizingthe marketing mix, businessescan
maximize their market potential and achieve business objectives. This includes
increasingmarket share, boostingsales, improvingprofitability,and enhancingbrand
visibility.
s

7. Strategicdecision making : The marketing mix provides a structuredapproach to

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decision - making. Businesses can use it to analyze market opportunities,identify

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potentialchallengesand develop informed strategiesto achieve long - term success.

8. Holistic view : By considering all four elements together, the marketing mix
encourages a holistic view of marketing. Instead of focusing on isolated aspects,
businesses can integrate their efforts to create unified and cohesive marketing
strategy.
9. Feedback and evaluation : The marketing mix enables businesses to assess the
effectiveness of their marketing efforts. By monitoring the performance of cach
element, businessescan gather valuable feedback and make data -driven adjustments
to improve results.
10. Continual improvement : The marketing mix supports continuous improveme
and learning. As market conditions change and customer preferences evo
businessescan adapt their strategiesto stay relevantand successful.
The marketingmix isa fundamental concept in marketingthat highlightsthe importa
marketing
of considering multiple interconnected elements to develop successful
their differentiate
strategies. It empowers businesses to better understand customers,
effectively.
their offeringsand achieve their marketingand businessobjectives

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