What is Predictive Analytics and How is it Used in Supply Chain Operations?
You may be familiar with the term predictive analytics – but have you ever stopped to ask yourself what it really means for your supply chain? Analytics help companies streamline process efficiencies and make sure important trends aren’t overlooked. Regardless of the industry your company is operating in, predictive analytics can help your company interpret their current performance to help them better understand and predict their future.
Breaking it Down – Defining Predictive Analytics
Predictive analytics is formally defined as “the use of data, statistical algorithms and machine learning techniques to identify the likelihood of future outcomes based on historical data.” It extends beyond analysis of current operations and provides the best possible projection of what a company’s performance will look like in the future. Businesses who utilize predictive analytics can uncover patterns and relationships in their structured and unstructured data.
Predictive analytics is especially useful because it automates the process of forecasting. Companies who utilize predictive analytics can then place their focus on critical daily tasks instead of going through a manual forecasting process. The biggest challenge associated with predictive analytics is that it requires a substantial amount of historical data. If the software doesn’t have enough data, it will have a hard time finding and visually displaying patterns and trends.
The MHI Industry report revealed that the number of supply chain professionals using predictive analytics has grown 76% from 2017 to 2019. Earlier implementations of predictive analytics focused on inventory management to help reduce cycle times and improve customer service. Over the past couple of years, the concept of predictive analytics has evolved and can now be applied across industries including healthcare and transportation planning.
Companies utilizing the Internet of Things (IoT) are already taking steps towards collecting the data needed for predictive analytics. Whether they realize it or not, the data they’re collecting can fuel their efforts towards projecting and improving the future of their supply chains. For example, a company utilizing predictive analytics in their supply chain can view historical data about on time delivery (OTD) to make better decisions about who they book with in the future.
Harnessing the Power of Predictive Analytics in Supply Chains
If you’re like many shippers, this type of advanced technology might seem outside of your grasp. With the help of a transportation management system with built-in predictive analytics functionality, however, any shipper can leverage this futuristic tech. TMSs can provide predictive analytics to give you the immediate intelligence you need to make better logistics decisions every day.
Whether it’s holding your carriers accountable through carrier scorecards, managing your yards and docks more efficiently, or simply ensuring that you are paying the lowest rates for the best service, predictive analytics gives you the information you need to make decisions that will be real game-changers for your business.