The Origin and Evolution

of Business Analytics
The Growing Use Of Business Analytics
• Business Analytics refers to a broad use of various quantitative and
qualitative techniques in assisting decision makers in making informed
decisions.
• Business Analytics is also used to predict future business activities
through analysis of historical patterns and the past business activities.
• Despite only recently gaining popularity among academics and
practitioners, the conceptual foundation for Business Analytics has
already existed for centuries and can be traced back to Ancient Egypt,
Babylon and Rome in the form of Statistics.
Fundamental Questions Critical For
Decision Making
1. What happened?
- What did the data tell us?
2. Why did a certain event take place?
- Why did it happen?
- What are the sources of problems?
3. Will the same event take place?
- Will the problem recur?
- Are there any noticeable patterns of the problem?
4. What will happen if we change what we used to do?
- How can we deal with the recurring problem?
- What is the value the change will bring?
5. How can we ensure that our changed practices actually work?
- Is there scientific evidence indicating the validity and usefulness of our changed practices?
Forecasting
Case Study
1. What happened?
What did the data tell us?
or simply,
What is/are the problems?
1. What happened?
“How can we deliver orders promptly?”

“Do we have adequate inventory in stock as well as vehicles and drivers

available to deliver orders promptly?”

“What is the forecast for the demand for deliveries next month and
how can we forecast it?”
 2. Why did a certain event take place?
Why did these problems come up?
Why do we need to know;

“how can we deliver orders promptly?”

- because its a big factor in getting new customers and maintaining old ones.

“if we have adequate inventory in stock as well as vehicles and drivers available to deliver orders
promptly?”
- to know if we have the necessary factors to fulfill a prompt delivery.

“what is the forecast for the demand for deliveries next month and how can we forecast it?”
- because learning what the forecast for demand and how to forecast demand helps in answering if
we have the necessary factors to fulfill a prompt delivery.
3. Will the same event take place?
- Will the problem recur?
We ask this question to know if the problem/s is a one off thing
or if it’s a persistent one.

And the problems of needing to know how we can deliver

promptly and knowing if we have the capability to deliver promptly
is a persistent problem that needs to be answered.
3. Will the same event take place?
orders within the past 10 months

- Are there any 140

noticeable patterns of 120

the problem?
100

Looking at the data, 80

yes there is. 60

40

20

0
Jan Feb Mar Apr May June Jul Aug Sep Oct
 *sample fiscal year starting from July and ending with Jun.
(Wikipedia, 2023)
4. What will happen if we change what we
used to do?
- How can we deal with the recurring problem/s?

Before we can answer the other problems, we need to first address this
one;

“What is the forecast for the demand for deliveries next month and
how can we forecast it?”
We tried multiple forcasting approach to identify which one best
forecast the demand, aka which one has the least Mean Absolute
Deviation.
 Naive Approach
Month Orders Forecast Error |Error|

Jan 120
Feb 90 120 (90-120) = -30 30
Mar 100 90 (100-90) = 10 10
Apr 75 100 (75-100) = -25 25
May 110 75 (110-75) = 35 35
Jun 50 110 (50-110) = -60 60
Jul 75 50 (75-50) = 25 25
Aug 130 75 (130-75) = 55 55
Sep 110 130 (110-130) = -20 20
Oct 90 110 (90-110) = -20 20
Nov 90
BIAS(ME) = -3.333 MAD = 31.111
 3 Month Moving Average (Apr-Nov)
Month Orders Forecast Error |Error|

Jan 120
Feb 90
Mar 100
Apr 75 (120+90+100)/3 = 103.333 (75-103.333) = -28.333 28.333
May 110 (90+100+75)/3 = 88.333 (110-88.333) = 21.667 21.667
Jun 50 (100+75+110)/3 = 95 (50-95) = -45 45
Jul 75 (75+110+50)/3 = 78.333 (75-78.333) = -3.333 3.333
Aug 130 (110+50+75)/3 = 78.333 (130-78.333) = 51.667 51.667
Sep 110 (50+75+130)/3 = 85 (110-85) = 25 25
Oct 90 (75+130+110)/3 = 105 (90-105) = -15 15
Nov (130+110+90)/3 = 110
BIAS(ME) = 0.952 MAD = 27.143
 5 Month Moving Average (June-Nov)
Month Orders Forecast Error |Error|

Jan 120
Feb 90
Mar 100
Apr 75
May 110
Jun 50 (120+90+100+75+110)/5 = 99 (50-99) = -49 49
Jul 75 (90+100+75+110+50)/5 = 85 (75-85) = -10 10
Aug 130 (100+75+110+50+75)/5 = 82 (130-82) = 48 48
Sep 110 (75+110+50+75+130)/5 = 88 (110-88) = 22 22
Oct 90 (110+50+75+130+110)/5 = 95 (90-95) = -5 5
Nov (50+75+130+110+90)/5 = 91
BIAS(ME) = 1.2 MAD = 26.8
 3 Month Weighted Moving Average (Apr-
Nov)
Month Orders Forecast Error |Error|

Jan 120
Feb 90
Mar 100
Apr 75 [(100x.5)+(90x.33)+(120x.17)]/1=100.1 (75-100.1)=-25.1 25.1
May 110 [(75x.5)+(100x.33)+(90x.17)]/1=85.8 (110-85.8)=24.2 24.2
Jun 50 [(110x.5)+(75x.33)+(100x.17)]/1=96.75 (50-96.75)=-46.75 46.75
Jul 75 [(50x.5)+(110x.33)+(75x.17)]/1=74.05 (75-74.05)=0.95 0.95
Aug 130 [(75x.5)+(50x.33)+(110x.17)]/1=72.7 (130-72.7)=57.3 57.3
Sep 110 [(130x.5)+(75x.33)+(50x.17)]/1=98.25 (110-98.25)=11.75 11.75
Oct 90 [(110x.5)+(130x.33)+(75x.17)]/1=110.65 (90-110.65)=-20.65 20.65
Nov [(90x.5)+(110x.33)+(130x.17)]/1=103.4
BIAS(ME) = 0.243 MAD =
26.671
Here are the results;
Methods Mean Absolute Deviation
Naive 31.111 It clear that the 3 Month Weighted Moving
3MMA 27.143 Average is the best method of forecasting
5MMA 26.8 the demand but the 5 Month Moving
3MWMA 26.671 Average comes very close.

Methods Forecast for November

Here are also the forecasted demands for
Naive 90
November by each method.
3MMA 110
5MMA 91
And since we chose 3MWMA, our expected
3MWMA 103.4
forecast for November will be 103.4
By using the forecasted demand we can now answer if;
“we have adequate inventory in stock as well as vehicles and drivers
available to deliver orders promptly?”
This can be done by comparing our current inventory in stock, vehicles
and available drivers to what we will need, to meet the forecasted
demand the next month and preparing accordingly.

We also now solved one of the facets of our first problem;

“How can we deliver orders promptly?”
Since we have now made sure that we will not have any lacking stock,
vehicles or drivers that would have delayed our ability to deliver orders
promptly, we can now focus on other solutions to this problem.
We can divide the plausible solutions into;
- Company Side Change
- Customer Side Change

For the Company side, one proposal is the change of handling of

delivery drivers to better make sure that the company will always not
lack delivery drivers. The solution is a consignment system where the
company hires an outside hand on a case to case basis.
This solution can be further enhanced by outsourcing the delivery job
entirely to a company specialized in it. A real world example would be
Lazada and Shopee entrusting the delivery of parcels to J&T Express,
JRMT, Ninja Van etc.
As for the Customer side, one suggestion is to coerce customers to buy
at certain dates. This can be done by incentivizing customers to buy
using discounts in either the product cost or the shipping cost or even
both. By doing this you can now better predict and forecast the
demand not only by month but even by day and thus prepare
accordingly.

This solution also offers a better PR for the company because

customers loves discounts and sales, allowing the company to maintain
it’s customer base and even getting new ones.
Another plausible solution for the customer’s side is to change their
mentality of buying on demand and making it better for them to do
booking in advance instead. This can be done in the same way as the last
solution, by the use of discounts for people booking 1 week in advance
or 1 month in advance. By doing this, we can now prepare in advance
their desired order before they need it and have it ready to be delivered.

Another advantage of this solution is the opportunity to make exclusive

contracts between the company and our customers. For example, we
could offer a contract to our regular customer stating that our company
will become the exclusive supplier for them in exchange for discounted
prices. In the contract we can set up a schedule for delivery, making it
easier to prepare the orders in advance and thus making it faster to
deliver said order.
5. How can we ensure that our changed practices actually work?

A simple way to know if these changes works and solves the problems
as intended is to do a test and compare the results when we applied
the solutions vs when we didn’t.
Another way is to back our proposed solutions with analytic evidence
or by comparing it to a real life scenario.