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2mark
1.Define business forecasting
Business forecasting refers to the tools and techniques used to predict developments in
business, such as sales, expenditures, and profits. The purpose of business forecasting is to
develop better strategies based on these informed predictions.
2. What is predictive analysis
Predictive analytics is a branch of advanced analytics that makes predictions about future
outcomes using historical data combined with statistical modeling, data mining techniques
and machine learning. Companies employ predictive analytics to find patterns in this data to
identify risks and opportunities.
3. Define data mining
Data mining is a Knowledge Discovery in Databases, the process of searching and analyzing
a large batch of raw data in order to identify patterns and extract useful information. It helps
in developing more effective marketing strategies, increase sales, and decrease costs.

4. Explain how machine learning support predictive analysis

Organizations and technology companies are employing machine learning-based predictive
analytics to gain an edge over the rest of the market. It can discover hidden patterns in
unstructured data sets and uncover new information that help to identify new opportunities and
understand their customer needs.
5. What is data driven modelling
Data-Driven Modelling delves into the cutting-edge ideas, methodologies, and tools for
constructing data-driven models. Models are the key to understanding reality and making
informed decisions. They transform raw data into information and produce actionable insights.

. 6. Define data mart

A data mart is a subset of a data warehouse focused on a particular line of business, department,
or subject area. Data marts make specific data available to a defined group of users, which
allows those users to quickly access critical insights without wasting time searching through
an entire data warehouse

7. Explain supply chain analytics

Supply chain analytics refers to the tools and processes used to combine and analyze data from
multiple systems to gain insights into the procurement, processing and distribution of goods. It
gives you a comprehensive view of your logistics network and broader insights which help you
to predict and improve performance.
8. Define demand planning
Demand planning is a supply chain management process of forecasting, or predicting, the
demand for products to ensure they can be delivered and satisfy customers. The goal is to strike

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a balance between having sufficient inventory levels to meet customer needs without having a
surplus.
9. List out any two analytics application in HR
Collect and analyze past data on turnover to identify trends and patterns indicating why
employees quit. Collect data on employee behavior, such as productivity and engagement, to
better understand the status of current employees.
10. Differentiate between training and development
Training Development
It is a process of increasing the knowledge it is a process of learning and growth
and skill of employee
It is job-oriented process It is career oriented process
It has narrow scope It has wider scope
It focus on technical skill It focus on conceptual and human ideas

What Is Business Forecasting

Business forecasting involves making informed guesses about certain business metrics,
regardless of whether they reflect the specifics of a business, such as sales growth, or
predictions for the economy as a whole. Financial and operational decisions are made based
on economic conditions and how the future looks, albeit uncertain.

• Forecasting is valuable to businesses so that they can make informed business

decisions.
• Financial forecasts are fundamentally informed guesses, and there are risks involved
in relying on past data and methods that cannot include certain variables.
• Forecasting approaches include qualitative models and quantitative models.

Understanding Business Forecasting

Companies use forecasting to help them develop business strategies. Past data is collected and
analyzed so that patterns can be found. Today, big data and artificial intelligence has
transformed business forecasting methods. There are several different methods by which a
business forecast is made. All the methods fall into one of two overarching
approaches: qualitative and quantitative.

While there might be large variations on a practical level when it comes to business
forecasting, on a conceptual level, most forecasts follow the same process:

1. A problem or data point is chosen. This can be something like "will people buy a
high-end coffee maker?" or "what will our sales be in March next year?"
2. Theoretical variables and an ideal data set are chosen. This is where the forecaster
identifies the relevant variables that need to be considered and decides how to collect
the data.
3. Assumption time. To cut down the time and data needed to make a forecast, the
forecaster makes some explicit assumptions to simplify the process.

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4. A model is chosen. The forecaster picks the model that fits the dataset, selected
variables, and assumptions.
5. Analysis. Using the model, the data is analyzed, and a forecast is made from the
analysis.
6. Verification. The forecast is compared to what actually happens to identify problems,
tweak some variables, or, in the rare case of an accurate forecast, pat themselves on
the back.

Once the analysis has been verified, it must be condensed into an appropriate format to easily
convey the results to stakeholders or decision-makers. Data visualization and presentation
skills are helpful here.

Types of Business Forecasting

There are two key types of models used in business forecasting—qualitative and quantitative
models.

Qualitative Models

Qualitative models have typically been successful with short-term predictions, where the
scope of the forecast was limited. Qualitative forecasts can be thought of as expert-driven, in
that they depend on market mavens or the market as a whole to weigh in with an informed
consensus.

Qualitative models can be useful in predicting the short-term success of companies, products,
and services, but they have limitations due to their reliance on opinion over measurable data.
Qualitative models include:1

1. Market research: Polling a large number of people on a specific product or service to

predict how many people will buy or use it once launched.
2. Delphi method: Asking field experts for general opinions and then compiling them
into a forecast.

Quantitative Models

Quantitative models discount the expert factor and try to remove the human element from the
analysis. These approaches are concerned solely with data and avoid the fickleness of the
people underlying the numbers. These approaches also try to predict where variables such as
sales, gross domestic product, housing prices, and so on, will be in the long term, measured
in months or years. Quantitative models include:1

1. The indicator approach: The indicator approach depends on the relationship between
certain indicators, for example, GDP and the unemployment rate remaining
relatively unchanged over time. By following the relationships and then following
leading indicators, you can estimate the performance of the lagging indicators by using
the leading indicator data.
2. Econometric modeling: This is a more mathematically rigorous version of the
indicator approach. Instead of assuming that relationships stay the same, econometric
modeling tests the internal consistency of datasets over time and the significance or
strength of the relationship between datasets. Econometric modeling is applied to

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create custom indicators for a more targeted approach. However, econometric models
are more often used in academic fields to evaluate economic policies.
3. Time series methods: Time series use past data to predict future events. The
difference between the time series methodologies lies in the fine details, for example,
giving more recent data more weight or discounting certain outlier points. By tracking
what happened in the past, the forecaster hopes to get at least a better than average
view of the future. This is one of the most common types of business
forecasting because it is inexpensive and no better or worse than other methods.

What is the Importance of Forecasting in Business?

The use of forecasts in business management is indispensable for nearly every decision in every
industry. The use of business forecasting provides information that helps business managers
identify and understand weaknesses in their planning, adapt to changing circumstances, and
achieve effective control of business operations.

Some business forecasting examples include: determining the feasibility of facing existing
competition, measuring the possibility of creating demand for a product, estimating the costs
of recurring monthly bills, predicting future sales volumes based on past sales information,
efficient allocation of resources, forecasting earnings and budgeting, and scrutinizing the
appropriateness of management decisions.

Business forecasting software can help business managers and forecasters not only generate
forecast reports easily, but also better understand predictions and how to make strategic
decisions based off of these predictions. A quality business forecast system should provide
clear, real-time visualization of business performance, which facilitates fast analysis and
streamlined business planning.

The application of forecasting in business is an art and a science, the combination of business
intelligence and data science, and the challenges of business forecasting often stem from poor
judgments and inexperience. Assumptions combined with unexpected events can be dangerous
and result in completely inaccurate predictions. Despite the limitations of business forecasting,
gaining any amount of insight into probable future trends will put an organization at a
significant advanta

What Is Predictive Analytics

The term predictive analytics refers to the use of statistics and modeling techniques to make
predictions about future outcomes and performance. Predictive analytics looks at current and
historical data patterns to determine if those patterns are likely to emerge again. This allows
businesses and investors to adjust where they use their resources to take advantage of possible
future events. Predictive analysis can also be used to improve operational efficiencies and
reduce risk.

• Predictive analytics uses statistics and modeling techniques to determine future

performance.
• Industries and disciplines, such as insurance and marketing, use predictive techniques
to make important decisions.
• Predictive models help make weather forecasts, develop video games, translate voice-
to-text messages, customer service decisions, and develop investment portfolios.

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• People often confuse predictive analytics with machine learning even though the two
are different disciplines.
• Types of predictive models include decision trees, regression, and neural networks.

Understanding Predictive Analytics

Predictive analytics is a form of technology that makes predictions about certain unknowns in
the future. It draws on a series of techniques to make these determinations, including artificial
intelligence (AI), data mining, machine learning, modeling, and statistics.1 For instance, data
mining involves the analysis of large sets of data to detect patterns from it. Text analysis does
the same, except for large blocks of text.

Predictive models are used for all kinds of applications, including weather forecasts, creating
video games, translating voice to text, customer service, and investment portfolio strategies.
All of these applications use descriptive statistical models of existing data to make predictions
about future data.

Predictive analytics is also useful for businesses to help them manage inventory,
develop marketing strategies, and forecast sales.2 It also helps businesses survive, especially
those in highly competitive industries such as health care and retail.3 Investors and financial
professionals can draw on this technology to help craft investment portfolios and reduce the
potential for risk.4

These models determine relationships, patterns, and structures in data that can be used to draw
conclusions about how changes in the underlying processes that generate the data will change
the results. Predictive models build on these descriptive models and look at past data to
determine the likelihood of certain future outcomes, given current conditions or a set of
expected future conditions.

Uses of Predictive Analytics

Predictive analytics is a decision-making tool in a variety of industries.

Forecasting

Forecasting is essential in manufacturing because it ensures the optimal utilization of

resources in a supply chain. Critical spokes of the supply chain wheel, whether it is inventory
management or the shop floor, require accurate forecasts for functioning.

Predictive modeling is often used to clean and optimize the quality of data used for such
forecasts. Modeling ensures that more data can be ingested by the system, including from
customer-facing operations, to ensure a more accurate forecast.

Credit

Credit scoring makes extensive use of predictive analytics. When a consumer or business
applies for credit, data on the applicant's credit history and the credit record of borrowers with
similar characteristics are used to predict the risk that the applicant might fail to perform on
any credit extended.

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Underwriting

Data and predictive analytics play an important role in underwriting. Insurance companies
examine policy applicants to determine the likelihood of having to pay out for a
future claim based on the current risk pool of similar policyholders, as well as past events that
have resulted in payouts. Predictive models that consider characteristics in comparison to data
about past policyholders and claims are routinely used by actuaries.

Marketing

Individuals who work in this field look at how consumers have reacted to the overall economy
when planning on a new campaign. They can use these shifts in demographics to determine if
the current mix of products will entice consumers to make a purchase.

Active traders, meanwhile, look at a variety of metrics based on past events when deciding
whether to buy or sell a security. Moving averages, bands, and breakpoints are based on
historical data and are used to forecast future price movements.

Fraud Detection

Financial services can use predictive analytics to examine transactions, trends, and patterns.
If any of this activity appears irregular, an institution can investigate it for fraudulent activity.
This may be done by analyzing activity between bank accounts or analyzing when certain
transactions occur.

Supply Chain

Supply chain analytics is used to predict and manage inventory levels and pricing strategies.
Supply chain predictive analytics use historical data and statistical models to forecast future
supply chain performance, demand, and potential disruptions. This helps businesses
proactively identify and address risks, optimize resources and processes, and improve
decision-making. These steps allow companies to forecast what materials will be on hand at
any given moment and whether there will be any shortages.

Human Resources

Human resources uses predictive analytics to improve various processes, such as forecasting
future workforce needs and skills requirements or analyzing employee data to identify factors
that contribute to high turnover rates. Predictive analytics can also analyze an employee's
performance, skills, and preferences to predict their career progression and help with career
development planning in addition to forecasting diversity or inclusion initiatives.

LOGIC DRIVEN MODEL

It leverages statistics to predict outcomes. Most often the event one wants to predict is in the
future, but predictive modeling can be applied to any type of unknown event, regardless of
when it occurred. For example, predictive models are often used to detect crimes and identify
suspects, after the crime has taken place.

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In many cases the model is chosen on the basis of detection theory to try to guess the probability
of an outcome given a set amount of input data, for example given an email determining how
likely that it is spam.

Models can use one or more classifiers in trying to determine the probability of a set of data
belonging to another set, say spam or ‘ham’.

Depending on definitional boundaries, predictive modeling is synonymous with, or largely

overlapping with, the field of machine learning, as it is more commonly referred to in academic
or research and development contexts. When deployed commercially, predictive modeling is
often referred to as predictive analytics.

Usage

Predictive models can either be used directly to estimate a response (output) given a defined
set of characteristics (input), or indirectly to drive the choice of decision rules.

Depending on the methodology employed for the prediction, it is often possible to derive a
formula that may be used in a spreadsheet software. This has some advantages for end users or
decision makers, the main one being familiarity with the software itself, hence a lower barrier
to adoption.

Nomograms are useful graphical representation of a predictive model. As in spreadsheet

software, their use depends on the methodology chosen. The advantage of nomograms is the
immediacy of computing predictions without the aid of a computer.

Point estimates tables are one of the simplest form to represent a predictive tool. Here
combination of characteristics of interests can either be represented via a table or a graph and
the associated prediction read off the y-axis or the table itself.

Tree based methods (e.g. CART, survival trees) provide one of the most graphically intuitive
ways to present predictions. However, their usage is limited to those methods that use this type
of modelling approach which can have several drawbacks. Trees can also be employed to
represent decision rules graphically.

Score charts are graphical tabular or graphical tools to represent either predictions or decision
rules.

A statistical model embodies a set of assumptions concerning the generation of the observed
data, and similar data from a larger population. A model represents, often in considerably
idealized form, the data-generating process. The model assumptions describe a set of
probability distributions, some of which are assumed to adequately approximate the
distribution from which a particular data set is sampled.

A logic-driven is based on experience, knowledge and logical relationships of variable and

constants connected to the desired performance outcome. To help conceptualize the
relationships inherent in a system, diagramming methods are useful.

Cause and effect diagram enables a user to hypothesize relationships between potential causes
and of an outcome.

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Influence diagram are another tool to conceptualize relationships with business performance
relationships.

DATA DRIVEN MODEL

Data Driven Modeling (DDM) is a technique using which the configurator model omponents
are dynamically injected into the model based on the data derived from external systems such
as catalog system, Customer Relationship Management (CRM), Watson, and so on.

The Omni-Configurator engine constructs the model components including option class and
option item during runtime based on the service request parameters, and populates associated
properties before executing business logic contained inside the configurator model.

Using the DDM technique, a modeler can define a configurator model by using the Sterling
Configurator Visual Modeler tool with DDM properties that defines the data source and
selection criteria for injecting the catalog items into the model. The data is retrieved from the
system or data source by using the data source adapters implemented for each system or data
source.

Based on the data source defined in the model, the corresponding data source adapters are
invoked to fetch the data. Model components are dynamically created in the configurator model
based on the data returned by the data source adapter.

The DDM technique provides the following benefits over the static modeling technique:

• It reduces the Total Cost of Ownership (TCO) by eliminating manual construction of

model components by the modeler that represents products within configurator models.
• It reduces the time to market since the model is dynamically updated with changes in
the catalog system.

Differences between Static and Dynamic (using DDM) modeling techniques

What is Data Mining

Data mining is the process of extracting knowledge or insights from large amounts of data
using various statistical and computational techniques. The data can be structured, semi-
structured or unstructured, and can be stored in various forms such as databases, data
warehouses, and data lakes.

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The primary goal of data mining is to discover hidden patterns and relationships in the data
that can be used to make informed decisions or predictions. This involves exploring the data
using various techniques such as clustering, classification, regression analysis, association
rule mining, and anomaly detection.
Data mining has a wide range of applications across various industries, including marketing,
finance, healthcare, and telecommunications. For example, in marketing, data mining can be
used to identify customer segments and target marketing campaigns, while in healthcare, it
can be used to identify risk factors for diseases and develop personalized treatment plans.

However, data mining also raises ethical and privacy concerns, particularly when it involves
personal or sensitive data. It’s important to ensure that data mining is conducted ethically and
with appropriate safeguards in place to protect the privacy of individuals and prevent misuse
of their data.

Data Mining refers to the detection and extraction of new patterns from the already
collected data. Data mining is the amalgamation of the field of statistics and computer science
aiming to discover patterns in incredibly large datasets and then transform them into a
comprehensible structure for later use.

The architecture of Data Mining:

Basic Working:
1. It all starts when the user puts up certain data mining requests, these requests are
then sent to data mining engines for pattern evaluation.
2. These applications try to find the solution to the query using the already present
database.
3. The metadata then extracted is sent for proper analysis to the data mining engine
which sometimes interacts with pattern evaluation modules to determine the
result.
4. This result is then sent to the front end in an easily understandable manner using
a suitable interface.

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A detailed description of parts of data mining architecture is shown:

1. Data Sources: Database, World Wide Web(WWW), and data warehouse are
parts of data sources. The data in these sources may be in the form of plain text,
spreadsheets, or other forms of media like photos or videos. WWW is one of the
biggest sources of data.
2. Database Server: The database server contains the actual data ready to be
processed. It performs the task of handling data retrieval as per the request of the
user.
3. Data Mining Engine: It is one of the core components of the data mining
architecture that performs all kinds of data mining techniques like association,
classification, characterization, clustering, prediction, etc.

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4. Pattern Evaluation Modules: They are responsible for finding interesting

patterns in the data and sometimes they also interact with the database servers for
producing the result of the user requests.
5. Graphic User Interface: Since the user cannot fully understand the complexity
of the data mining process so graphical user interface helps the user to
communicate effectively with the data mining system.
6. Knowledge Base: Knowledge Base is an important part of the data mining
engine that is quite beneficial in guiding the search for the result patterns. Data
mining engines may also sometimes get inputs from the knowledge base. This
knowledge base may contain data from user experiences. The objective of the
knowledge base is to make the result more accurate and reliable.

Data Mining is considered as an interdisciplinary field. It includes a set of various disciplines

such as statistics, database systems, machine learning, visualization and information
sciences.Classification of the data mining system helps users to understand the system and
match their requirements with such systems.
Data mining systems can be categorized according to various criteria, as follows:
1. Classification according to the application adapted:
This involves domain-specific application.For example, the data mining systems can
be tailored accordingly for telecommunications, finance, stock markets, e-mails and
so on.
2. Classification according to the type of techniques utilized:
This technique involves the degree of user interaction or the technique of data analysis
involved.For example, machine learning, visualization, pattern recognition, neural
networks, database-oriented or data-warehouse oriented techniques.
3. Classification according to the types of knowledge mined:
This is based on functionalities such as characterization, association, discrimination
and correlation, prediction etc.
4. Classification according to types of databases mined:
A database system can be classified as a ‘type of data’ or ‘use of data’ model or
‘application of data’.

Advantages of Data Mining:

• Assists in preventing future adversaries by accurately predicting future trends.
• Contributes to the making of important decisions.
• Compresses data into valuable information.
• Provides new trends and unexpected patterns.
• Helps to analyze huge data sets.
• Aids companies to find, attract and retain customers.
• Helps the company to improve its relationship with the customers.
• Assists Companies to optimize their production according to the likability of a
certain product thus saving costs to the company.

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Disadvantages of Data Mining:

• Excessive work intensity requires high-performance teams and staff training.
• The requirement of large investments can also be considered a problem as
sometimes data collection consumes many resources that suppose a high cost.
• Lack of security could also put the data at huge risk, as the data may contain
private customer details.
• Inaccurate data may lead to the wrong output.
• Huge databases are quite difficult to manage

MACHINE LANGUAGE FOR PREDICTIVE MODELING

Predictive modeling is a commonly used statistical technique to predict future behavior.

Predictive modeling solutions are a form of data-mining technology that works by analyzing
historical and currentdata and generating a model to help predict future outcomes. In predictive
modeling, data is collected, a statistical model is formulated, predictions are made, and the
model is validated (or revised) as additional data becomes available. For example, risk models
can be created to combine member information in complex ways with demographic and
lifestyle information from external sources to improve underwriting accuracy. Predictive
models analyze past performance to assess how likely a customer is to exhibit a specific
behavior in the future. This category also encompasses models that seek out subtle data patterns
to answer questions about customer performance, such as fraud detection models. Predictive
models often perform calculations during live transactions—for example, to evaluate the risk
or opportunity of a given customer or transaction to guide a decision. If health insurers could
accurately predict secular trends (for example, utilization), premiums would be set
appropriately, profit targets would be met with more consistency, and health insurers would be
more competitive in the marketplace.

Predictive modeling is a method of predicting future outcomes by using data modeling.

It’s one of the premier ways a business can see its path forward and make plans
accordingly. While not foolproof, this method tends to have high accuracy rates, which
is why it is so commonly used.

Predictive modelling uses statistics to predict outcomes. Most often the event one wants
to predict is in the future, but predictive modelling can be applied to any type of unknown
event, regardless ofwhen it occurred. For example, predictive models are often used to
detect crimes and identify suspects, after the crime has taken place.
In many cases the model is chosen on the basis of detection theory totry to guess the
probability of an outcome given a set amount of input data, for example given an
determining how likely that it
is spam.
Models can use one or more classifiers in trying to determine the probability of a set of
data belonging to another set. For example, a model might be used to determine whether
an email is spam or "ham"(non-spam).

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Depending on definitional boundaries, predictive modelling is synonymous with, or

largely overlapping with, the field of machine learning, as it is more commonly referred
to in academic or research and development contexts. When deployed commercially,
predictivemodelling is often referred to as predictive analytics.
Predictive modelling is often contrasted with causal modelling/analysis. In the former,
one may be entirely satisfied to make use of indicators of, or proxies for, the
outcome of interest. In the latter, one seeks to determine true cause-and-effect
relationships.This distinction has given rise to a burgeoning literature in the fields
of research methods and statistics and to the common statement that"correlation
does not imply causation".
What Is Predictive Modeling
In short, predictive modeling is a statistical technique using machine learning and data
mining to predict and forecast likely future outcomes with the aid of historical and
existing data. It works by analyzing current and historical data and projecting what
it learns on amodel generated to forecast likely outcomes. Predictive modeling can
be used to predict just about anything, from TV ratings and a customer’s next
purchase to credit risks and corporate earnings.

A predictive model is not fixed; it is validated or revised regularly to incorporate

changes in the underlying data. In other words, it’s not a one-and-done prediction.
Predictive models make assumptions basedon what has happened in the past and
what is happening now. If incoming, new data shows changes in what is
happening now, the impact on the likely future outcome must be recalculated, too.
For example, a software company could model historical sales data against
marketing expenditures across multiple regions to create a model for future
revenue based on the impact of the marketing spend.

Most predictive models work fast and often complete their calculations in real time.
That’s why banks and retailers can, for example, calculate the risk of an online
mortgage or credit card application and accept or decline the request almost
instantly based onthat prediction.

Some predictive models are more complex, such as those used in computational
biology and quantum computing; the resulting
outputs take longer to compute than a credit card application but aredone much more
quickly than was possible in the past thanks to advances in technological
capabilities, including computing power.

Top 5 Types of Predictive Models

Fortunately, predictive models don’t have to be created from scratch for every
application. Predictive analytics tools use a variety of vettedmodels and algorithms
that can be applied to a wide spread of use cases.

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Predictive modeling techniques have been perfected over time. As weadd more
data, more muscular computing, AI and machine learning and see overall
advancements in analytics, we’re able to do more withthese models.
The top five predictive analytics models are:
1. Classification model: Considered the simplest model, it categorizes
data for simple and direct query response. An example use case
would be to answer the question “Is this afraudulent transaction?”
2. Clustering model: This model nests data together by commonattributes.
It works by grouping things or people with shared characteristics or
behaviors and plans strategies for each group at a larger scale. An
example is in determining credit risk for aloan applicant based on what
other people in the same or a similar situation did in the past.
3. Forecast model: This is a very popular model, and it works on anything
with a numerical value based on learning from historical data. For example,
in answering how much lettuce a restaurant should order next week or how
many calls a customersupport agent should be able to handle per day or
week, the system looks back to historical data.
4. Outliers model: This model works by analyzing abnormal oroutlying
data points. For example, a bank might use an outliermodel to identify
fraud by asking whether a transaction is outside of the customer’s
normal buying habits or whether an expense in a given category is
normal or not. For example, a
$1,000 credit card charge for a washer and dryer in the
cardholder’s preferred big box store would not be alarming, but
$1,000 spent on designer clothing in a location where the customer has
never charged other items might be indicative of abreached account.
5. Time series model: This model evaluates a sequence of data points based
on time. For example, the number of stroke patientsadmitted to the hospital
in the last four months is used to predicthow many patients the hospital
might expect to admit next week, next month or the rest of the year. A single
metric measured and compared over time is thus more meaningful than a
simple average.

Common Predictive Algorithms

Predictive algorithms use one of two things: machine learning or deep learning.
Both are subsets of artificial intelligence (AI). Machine learning (ML) involves
structured data, such as spreadsheet or machine data. Deep learning (DL) deals with
unstructured data such as video, audio, text, social media posts and images—
essentially the stuff that humans communicate with that are not numbers or metric
reads Some of the more common predictive algorithms are:

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1. Random Forest: This algorithm is derived from a combinationof decision

trees, none of which are related, and can use both classification and
regression to classify vast amounts of data.
2. Generalized Linear Model (GLM) for Two Values: This algorithm
narrows down the list of variables to find “best fit.” Itcan work out tipping
points and change data capture and other influences, such as categorical
predictors, to determine the “best fit” outcome, thereby overcoming
drawbacks in other models, such as a regular linear regression.
3. Gradient Boosted Model: This algorithm also uses several combined
decision trees, but unlike Random Forest, the trees arerelated. It builds out
one tree at a time, thus enabling the next tree to correct flaws in the previous
tree. It’s often used in rankings, such as on search engine outputs.
4. K-Means: A popular and fast algorithm, K-Means groups data points by
similarities and so is often used for the clustering model. It can quickly
render things like personalized retail offers to individuals within a huge
group, such as a million or more customers with a similar liking of lined red
wool coats.
5. Prophet: This algorithm is used in time-series or forecast models for
capacity planning, such as for inventory needs, salesquotas and resource
allocations. It is highly flexible and can easily accommodate heuristics and
an array of useful assumptions.

Neural Networks
The neural network is a system of hardware and software mimicked after the central nervous
system of humans, to estimate functions that depend on vast amounts of unknown
inputs. Neural networks are specified by three things – architecture, activity rule, and learning
rule.
According to Kaz Sato, Staff Developer Advocate at Google Cloud Platform, “A neural
network is a function that learns the expected output for a given input from training datasets”.
A neural network is an interconnected group of nodes. Each processing node has its small
sphere of knowledge, including what it has seen and any rules it was initially programmed with
or developed for itself.

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In short neural networks are adaptive and modify themselves as they learn from subsequent
inputs. For example, below is a representation of a neural network that performs image
recognition for ‘humans’. The system has been trained with a lot of samples of human and non-
human images. The resulting network works as a function that takes an image as input and
outputs label human or non-human.

Predictive modeling is a technique that uses mathematical and computational

methods to predict an event or outcome. A mathematical approach uses an
equation-based model that describesthe phenomenon under consideration. The
model is used to forecastan outcome at some future state or time based upon
changes to the model inputs. The model parameters help explain how model
inputsinfluence the outcome. Examples include time-series
regression models for predicting airline traffic volume or predicting fuel
efficiency based on a linear regression model of engine speed versus load.

The computational predictive modeling approach differs from the mathematical

approach because it relies on models that are not easy toexplain in equation form
and often require simulation techniques to create a prediction. This approach is
often called “black box” predictive modeling because the model structure does not
provide insight into the factors that map model input to outcome. Examples include
using neural networks to predict which winery a glass of wineoriginated from or
bagged decision trees for predicting the credit rating of a borrower.

Predictive modeling is often performed using curve and surface fitting, time
series regression, or machine learning approaches. Regardless of the approach
used, the process of creating a predictivemodel is the same across methods.
The steps are:
1. Clean the data by removing outliers and treating missing data
2. Identify a parametric or nonparametric predictive modelingapproach
to use
3. Preprocess the data into a form suitable for the chosen
modeling algorithm

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4. Specify a subset of the data to be used for training the model

5. Train, or estimate, model parameters from the training dataset
6. Conduct model performance or goodness-of-fit tests to check model
adequacy
7. Validate predictive modeling accuracy on data not used for
calibrating the model
8. Use the model for prediction if satisfied with its performance

Predictive Modeling and Data Analytics

Predictive modeling is also known as predictive analytics. Generally, the term
“predictive modeling” is favored in academic settings, while“predictive analytics”
is the preferred term for commercial applications of predictive modeling.

Successful use of predictive analytics depends heavily on unfettered access to

sufficient volumes of accurate, clean and relevant data.
While predictive models can be extraordinarily complex, such as those using
decision trees and k-means clustering, the most complex part is always the neural
network; that is, the model by which computers are trained to predict outcomes.
Machine learning uses a neural network to find correlations in exceptionally large
data sets and“to learn” and identify patterns within the data.

Benefits of Predictive Modeling

In a nutshell, predictive analytics reduce time, effort and costs in forecasting
business outcomes. Variables such as environmental factors, competitive
intelligence, regulation changes and market conditions can be factored into the
mathematical calculation to rendermore complete views at relatively low costs.

Examples of specific types of forecasting that can benefit businesses include

demand forecasting, headcount planning, churn analysis, external factors,
competitive analysis, fleet and IT hardware maintenance and financial risks.

Challenges of Predictive Modeling

It’s essential to keep predictive analytics focused on producing useful business
insights because not everything this technology digs up is useful. Some mined
information is of value only in satisfying a curious mind and has few or no business
implications. Getting side-tracked is a distraction few businesses can afford.

Also, being able to use more data in predictive modeling is an advantage only to a
point. Too much data can skew the calculation and lead to a meaningless or an
erroneous outcome. For example, more coats are sold as the outside temperature
drops. But only to a point. People do not buy more coats when it’s -20 degrees
Fahrenheitoutside than they do when it’s -5 degrees below freezing. At a certain

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point, cold is cold enough to spur the purchase of coats and more frigid temps no
longer appreciably change that pattern.

And with the massive volumes of data involved in predictive modeling,

maintaining security and privacy will also be a challenge.Further challenges rest in
machine learning’s limitations.

Limitations of Predictive Modeling

According to a McKinsey report, common limitations and their “bestfixes” include:
1. Errors in data labeling: These can be overcome
with reinforcement learning or generative adversarial networks(GANs).
2. Shortage of massive data sets needed to train machine learning: Apossible fix is
“one-shot learning,” wherein a machine learns from a small number of
demonstrations ratherthan on a massive data set.
3. The machine’s inability to explain what and why it did whatit did: Machines do
not “think” or “learn” like humans. Likewise, their computations can be so
exceptionally complex that humans have trouble finding, let alone following, the
logic.All this makes it difficult for a machine to explain its work, or for humans to do
so. Yet model transparency is necessary for a number of reasons, with human safety
chief among them.Promising potential fixes: local-interpretable-model-agnostic
explanations (LIME) and attention techniques.
4. Generalizability of learning, or rather lack thereof: Unlike humans, machines have
difficulty carrying what they’ve learnedforward. In other words, they have trouble
applying what they’ve learned to a new set of circumstances. Whatever it has learned
is applicable to one use case only. This is largely why we need not worry about the
rise of AI overlords anytime soon. For predictive modeling using machine learning to
be reusable—that is, useful in more than one use case—a possible fix is transfer
learning.
5. Bias in data and algorithms: Non-representation can skew outcomes and lead to
mistreatment of large groups of humans.Further, baked-in biases are difficult to find
and purge later. Inother words, biases tend to self-perpetuate. This is a moving target,
and no clear fix has yet been identified.

The Future of Predictive Modeling

Predictive modeling, also known as predictive analytics, and machine learning are still young and
developing technologies, meaning there is much more to come. As techniques, methods,tools and
technologies improve, so will the benefits to businesses and societies.
However, these are not technologies that businesses can afford to adopt later, after the tech reaches
maturity and all the kinks are worked out. The near-term advantages are simply too strongfor a
late adopter to overcome and remain competitive.
Our advice: Understand and deploy the technology now and then grow the business benefits
alongside subsequent advancesin the technologies.

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UNIT IV

Human resource planning and recruitment

Human resource management is a function of an organization that encompasses all aspects of the
human resource or work force in a specific organization. Human resource planning, recruitment,
and selection processes are critical because they influence an organization's performance to a large
extent; they must be handled carefully to ensure success. The human resource of an organization is
a valuable asset that decides the organization's success or failure via their efforts to utilize other
assets in the firm. However, only through competent management can they reach optimum
efficiency, effectiveness, and profitability.

Human resource planning entails making appropriate decisions about which positions an
organization should fill and how ideally to fill them. It also comprises determining an organization's
human resource requirements in relation to the specified strategic plan. Human resource planning is
important in determining labor demand and supply issues, as well as the problems involved with
resolving these factors. Human resource planning is influenced by an organization's short and long-
term operating and development requirements. Human resource recruiting, on the other hand, refers
to the process of attracting and motivating qualified individuals to apply for various roles inside a
company. It entails creating a pool of suitable and competent candidates for open positions in a
business. It is a procedure that starts with the search of new recruits and concludes with the
submission of applications from these prospects. The selection process is another critical human
resource management function. The main difficulty here is matching a candidate to the position in
question in order to obtain the optimal performance. In the selection process, various methods, such
as interviews and referrals, are used. The selection procedure is critical because it ensures that
qualified and experienced people are deployed. To be effective, the selection process must create a
perfect match between organization objectives and candidates' qualifications and interests. Effective
selection guarantees that an employee performs well from the beginning.

The changes within the practices concerned in these 3 practices and others in the human resource
management docket has been fueled by the understanding of the importance that's related to the
human resources and thus the requirement for correct selection, hiring and retention. the
popularity that staff are the drive towards success of a
corporation has additionally contributed completely to the method of human resource management.

Method for Recruitment

METHODS OF RECRUITMENT
The methods of recruitment is broadly classified as Internal & External
Internal
a. Present Permanent Employees
Organizations consider the present employees for high level jobs dueto availability of most suitable
candidates for jobs or equally to the external source, to meet the trade union demands and to
motivate theexisting employees.

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b. Present Temporary/ Casual Employees

Organizations consider temporary or casual employees for low level jobs or trade union pressures
or in order to motivate them on the present job.
c. Retrenched/ Retired Employees
The organization retrenches the employees due to lack of work. The organization takes the
candidates back due to lack of obligation and trade union pressure. The organizations prefer to re-
employ their retired employees as token of loyalty to the organization.
d. Dependents of Deceased, Disabled, Retired /employees Organizations provide
employment to the dependents/ family members of deceased, disabled to build brand image &
developcommitment.

e. Employee Referral
Present employees are aware of qualifications, attitude, experience and emotions of their friends
and relatives. They are aware of job requirements and organizational culture of their company.
Hence the HR Managers of the company depend on present employees for reference of the
candidates for various jobs. This reduces time and cost required for recruitment.

External sources:
a. Advertisement: It is the best method of recruiting personsfor higher and experimental
jobs. The advertisement are given in local or national press, trade or professional journals. The
prospective candidates evaluate themselves against the requirements of job before sending their
applications.
b. Employment exchanges: employment exchanges run by government are also good source
of recruitment. Unemployed persons get themselves registered with these exchanges. Exchanges are
suitable source of recruitment forfilling unskilled, semi-skilled and operative posts.
c. Unsolicited applicants: persons in search of employmentmay contact employers through
telephone, by post or in person. Generally, employers with good reputation get unsolicited
applications. If an opening is there then, thesepersons are considered for this job.
d. Professional organizations: professional organizations maintains complete bio-data of
their members and supply it to companies on demand. These organization also act as exchange
between members and recruiting firm. This sourceof recruitment is found reliable for recruiting
person at middle and upper levels of organization.
e. Data banks: The recruiting firms can prepare a data bankabout various persons in different
fields. They can collect information from educational institutions, employment exchanges,
professional organizations etc.
f. Labor contracts: It is quite common to engage contractors for the supply of labor. When
workers are required for shortperiods and are hired without going through the full procedures
of selection etc. .,. The persons hired under this system are generally unskilled workers.
g. Gate recruitment: unskilled workers may be recruited at the factory gate. In some industries
like jute. A large numberof workers work as substitute whenever a permanent employee is
absent.
A notice on notice board of the company specifying the details of the job vacancies can be put. Such
recruitment iscalled direct recruitment.
h. Campus recruitment: colleges, universities, research laboratories are fertile ground for

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recruiters. In some companies recruiters are bound to recruit a large no of candidates from these
constitutes every year. It is often anexpensive process.

RECRUITMENT PROCESS

Steps in selection process:-

1) Job Analysis:- Job analysis is needed to know allthese functions and to
perform various functions of HRM
2) Development of bases for selection - The company has to select the
appropriate candidates from the applicant pool. The company develops
the appropriate bases for screening the candidates in order toselect the
appropriate candidates for the job.
3) Application form:- It is also known as applicationblank. The
technique of application blank is traditional & widely accepted for securing
information from the prospective candidates. It can also be used as a device
toscreen the candidates at preliminary level. Many companies formulated
their own style of application forms depending upon the requirement of
information. Information is generally required on the following itemsin the
application forms:-
4. Written Examination
The organizations have to conduct written examinations for the qualified

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candidates after they are screened on thebasis of application blanks so as to

measure the candidate’s ability in arithmetical calculations, to measure the
candidate’s aptitude and reasoning, general knowledge and English language.
5.Preliminary Interview
It is to solicit necessary information from the prospectiveapplicants & to assess
the applicants suitability to the job.This may be conducted by an assistant in the
personnel departments. Thus, preliminary interview is useful as a process of
eliminating the undesirable & unsuitable candidates.
6). Business games: They are widely used as a selection techniquefor selecting
management trainees, executive trainees, and managerial personnel at junior,
middle & top management positions. Personality based integrity test assess an
individual’spredisposition towards deviant & disruptive behavior.
7. Final interview:
Types of interview are:

I) Informal interview: this is the interview which can be

conducted at any place by any person to secure thebasic &
non-job related information.
II) Unstructured interview: In this interview the candidate is
given the freedom to tell about himself by revealing his
knowledge on various items/areas, his background,
expectations, interest.
8. Reference Checks:- After completion of finalinterview & medical examination ,
the personnel department will engage in checking references. These references
may be from the individuals who are familiar with the candidate’s academic
achievement or from the applicant’s previous employees.
9. Final Decision by line Managers:-
The line manager concerned has to make final decision whether to
select or reject the candidate. A true understanding between line
managers & personnel manager should be established to take proper
decisions.
10. Job Offer:-
The candidate after receiving job offer communicates his acceptance to
the offer or requests the company modify the terms & conditions of
employment or rejectsthe offer.
11. Employment:-
The company employs those candidates who accept the job offer with or
without modification of the terms & conditions of employment of
employment & place themon the job.

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The Importance of Planning, Recruitment, and Selection in Human Resource

Management
From the above description of the three processes of human resource management, planning,
recruitment and selection; it is evident that they contribute greatly to better performance of the
employees and the organization as a whole. They are all equally important, and we cannot
determine which is more crucial.The processes are also interdependent, and they rely on each
other. An effective planning process is likely to lead to effective recruitment practices, leading
to an effective selection process. The reverse is also true, and a fault in one of the processes is
likely to bring about failures in the others. Hence, the outcome results will be poor hiring,
where the hired employees’ qualifications do not match the organizational needs. This leads to
poor performance of the employees and that of an organization at large.

HUMAN RESOURCE TRAINING AND DEVELOPMENT

Training and development in human resource management has become one of the constants in
any industry for updating the skills and knowledge of its employees.
Training and human resource development is a well-designed program with various methods
designed for professionals in a particular job. Training and development in human resource
management have become constants and must-haves in any industry for updating the skills and
knowledge of its employees. Therefore, training and human resource development have
become essential in bringing about cost-effectiveness in an industry. Moreover, if the human
resource is skilled and updated, it helps the organisation improve its efficiency and
productivity. One of the ways to provide training to the upcoming talent in the industry is with
the help of the current and experienced employees of the company.

Objectives of training and development

What is human resource training and development? It is a rudimentary question that needs to
be answered before understanding the objectives of training and human resource development.
The training and development of the human resource is a function of the human resource
management department that helps them polish the skills and performance of an employee.
Therefore, the department is known by many names, such as training and development in
human resource management, employee development, etc. The prime objective of the training
and human resource development department in a company is as follows:

• Individual objectives
The human resource department has the responsibility to ensure that the employees are driven
towards achieving their personal goals, as this can help them immensely contribute to the
company’s growth.
• Organisational objectives
One of the important responsibilities for the training and human resource
development department in an organisation is to make sure that the employees are motivated
enough to achieve both their organisational and personal goals.
• Functional objectives
Another responsibility of the human resource development department of the company is to
make sure that the employees work at a level that is suitable to the organisation’s needs.

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• Societal objectives
Whether directly or indirectly, one of the objectives of an organisation established is towards
the betterment of society. Therefore, it is the responsibility of the human resource development
department in the company to make sure that the employees are ethically and socially
responsible for the needs of society.
Crucial human resource skills to train for:
Every training and human resource development department will be structured differently
based on the needs of a particular business. Thus, as a result, it can be difficult for a company
to follow a set pattern for human resource development.
Apart from providing general training to the employees, it becomes essential for the human
resource department to provide specific training. Therefore, the HR teams in the industry must
have the right set of HR training courses that can help the individuals improve their skill set.

Some of the essential skills that a human resource department in a company should focus on
teaching are as follows:

• Employee relations
HR is not only about being a people person. Employee relations are an important aspect of
being a good HR. The HR is responsible for providing knowledge on simple benefits-related
questions to complex culture-related questions. Moreover, HR is also responsible for the
smooth functioning of the company and creating a safe workplace.
• Onboarding of employees
One of the penalties experienced by a company is the cost of a bad hire. The bad hire is
generally linked to the recruitment process; however, onboarding plays an important role. An
HR professional who can create winning onboarding processes and can get new hires who are
productive will be highly valued by the company.
• Workplace collaboration
Teamwork plays an important part in the success of a company. The training and human
resource development department is not only responsible for the collective working of the
employee, but it is also responsible for making sure that the employees get an environment that
ensures that they work collectively.
• Project/Time management
For training and development in human resource management to be efficient, time
management is an important parameter. The HR department in any industry is responsible for
creating projects which are innovative and efficient for the workplace. These projects
formulated by the HR department should focus on employee relations, onboarding, recruiting,
etc.
• Human resource software
Technology has found its influence in every sector of the industry, and the human resource
field is not far from adopting it. The effectiveness of human resources is also dependent on
tech integration. Thus, expertise in the usage of these tools comes with experience.
Different pieces of training that an HR department can provide:

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There are several types of training that can be provided by the training and human resource
development department in the industry. Some kinds of training that the HR department
provides are as follows:
• Technical or technology training
Technical training is meant to equip the employees with knowledge and understanding of the
technological aspects of the job. In the retail field, this sort of training might include teaching
an employee about how to use the computer system, which can help them contact a customer.
Meanwhile, if the trainee is a salesperson, the training might include the use of CRM software
for addressing the target audience.
• Quality training
Quality training addresses familiarising employees with the means to prevent, detect, and
eliminate non-quality items involved in the production of a service. This type of training is
extremely valuable in an environment where product quality plays an important role in putting
the company ahead of the competition in the market.
• Skills training
The third type of training provided by the HR department in the company is related to skills.
Skills training is one of the most important training programs organised by the HR department.
Because the world of technology is continuously changing, it becomes necessary for a person
to have the latest skills for being highly productive.
Conclusion
An HR department in a company can provide employees with several types of training and
development programs. However, the structure and the content of the programs depend on the
work an employee will do when they join a particular job. To become a good HR personnel, it
is important for a person to have a clear idea about what human resource training and
development is. Moreover, they should also be well aware of the objectives of human resource
training and development. Because if they have clarity about the objectives, they can create a
plan for teaching the important skills accordingly. Thus, HR needs to be creative and flexible
in its approach.

SUPPLY CHAIN NETWORK

The network design in supply chain determines its physical arrangement,
design, structural layout and infrastructure of the supply chain. Here the major
decisions to be made are on the number, locations and size of manufacturing plants
and warehouses and the assignment of retail outlets to warehouses, etc. This stage
witnesses some other major sourcing decisions as well. The basic time duration for
planning horizon is few years.

Many major decisions involving the long-term location, capacity, technology and
supplier selection have to be made by considering the probable uncertainties present
in the market development accompanied by changing economic and legal
conditions.

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The network design in supply chain concentrates mainly on the development of

multi-stage stochastic optimization methods required for decision support under
demand, freight rate and exchange rate uncertainty. Here, we will discuss the various
strategies to study the uncertainty and scenario modeling.

• Warehouse location − When companies expand their branches into various

new locations, they need new storage places as well. Here the company faces
a warehouse location problem. Within the set of probable choices in locations,
the one that has minimal fixed costs and operational costs by fulfilling the
required demand is chosen.
• Traffic network design − With the growing population, the traffic in cities
is increasing. Because of the higher transportation demand, the traffic
networks have also to be widened. Since the budget allotted is usually limited,
the major issue is to determine which projects should be constructed to
develop the flow inside a traffic network.
• Reshoring − This phenomenon has emerged recently because of the rising
cost and other circumstances. It is the exercise of bringing outsourced
products and services back to the source point from which they were
originally shipped. It outlines the process of moving some or all producing
back to its original source.

Networks Models
Supply chain networks present different types of models that help us understand the
various optimization methods used for studying the uncertainty and scenario
modeling. There are six distinct supply chain network models, as given below.
• Producer storage with direct shipping
• Producer storage with direct shipping and in-transit merge (cross docking)
• Distributor storage with package carrier delivery
• Distributor storage with last mile delivery
• Producer or distributor storage with costumer pickup
• Retail storage with customer pickup

The supply chain network basically deals with three major entities: Producer,
Distributor and Merchant. Two different options are available, i.e., customer pickup
or door delivery. For example, if the door delivery option is opted for, there is
transport between producer and distributor, distributor and merchant and producer
and merchant.

The distribution system decision is made on the basis of the choice of the customers.
This in turn results in the demand for the product or products and cost of the
distribution arrangement.

New companies may come to a halt through the application of a single type of
distribution network. Mostly, companies go for merging of different types for
distinct products, different customers and different usage situations, coming back to

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the different optimization models mentioned above. Now we will discuss each model
in brief.

Producer storage with direct shipping

In this model, goods are moved directly from the manufacturer’s location as the
starting point to the end customer’s location as the destination point bypassing the
retailer. The retailer is the person who takes the order and initiates the delivery
request. This option is also called drop-shipping, with product delivered directly
from the manufacturer’s location to the customer’s destination.

Producer storage with direct shipping and in-transit merge

It is somewhat congruent to pure drop-shipping or moving, but the difference is that
pieces of the order come from different locations and they are merged into one so
that the customer gets a single delivery.

Distributor storage with package carrier delivery

This comes into action when the inventory is not owned by the manufacturers at the
plants; instead it is owned by the merchants/retailers in intermediate warehouses and
package carriers are used for shipment of goods from the intermediate location to
the final customer.

Distributor storage with last mile delivery

This type results when the merchant/retailer delivers the goods ordered by the
customer to the customer’s home instead of using a package carrier.

Producer/distributor storage with customer pickup

In this type, the inventory is stored at the warehouse owned by the manufacturer or
producer but the customers place their orders online or through phone and then come
to pick up points allotted for collecting their orders.

Retail storage with customer pickup

This is mostly applied on situations when inventory is locally stored at retail stores;
customers walk into the retail shop or order something online or on the phone and
pick it up at the retail store.

Benefits of Supply Network

Supply chain network design or SCM network design helps enterprises simulate and visualize
their supply chains to optimize them. Optimization of supply chains reduces overall costs and
enhances service, speed-to-market, flexibility and risk mitigation.
Here are the key benefits:
• Discerning parts for streamlining and potential cost savings
• Reduction in purchase costs and inventory
• Working capital reduction
• Reduction in freight costs

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• Route optimization for reducing transit time and fuel costs

• Reduction in network fixed costs (facilities, equipment) and supply chain variable costs (labor,
handling, 3PL costs)
• Optimization of service levels and delivery dates for customer satisfaction
• Process and cost visibility across the supply chain network
• Providing performance visibility of the complete supply chain network by comparing its
capabilities/costs against set benchmarks

DEMAND PLANNING

Demand planning is a supply chain management process that enables a company to

project future demand and successfully customize company output — be it products or services
— according to those projections.

Demand planning seeks to achieve and maintain an effectively lean supply equilibrium, one in
which store inventories contain just as many products as demand dictates, but no more. Finding
that perfect balance that exists between sufficiency and surplus can prove especially tricky.
And although maintaining that balance is a major concern of demand planning, so is the
constant effort to help shape demand through an effective use of promotions.

Effective demand planning typically requires the use of demand forecasting techniques to
accurately predict demand trends, and carries added benefits, such as heightened company
efficiency and increased customer satisfaction.

Demand planning is the linchpin of an effective supply chain, serving two essential functions
— which makes it doubly important to business.

First, there always exists the fundamental drive to protect the sale and ensure that expected
revenues are generated. But retailers can’t sell what they don’t have in stock. And it doesn’t
take long for today’s consumers to develop a lasting impression of a company, and whether it
can meet supply demand. Demand planning works to see that retailers have exactly the right
amount of inventory at the right place to avoid stock-outs and remain prepared for that next
sale.

But protecting sales isn’t enough anymore. It’s also about running businesses more efficiently.
Demand planning assists with efficiency, by helping manage inventory space smarter. Why
should companies invest in more physical space than they need? Demand planning can help
businesses avoid the perils of overstocking — such as increased inventory carrying costs and
financial situations that require the use of product discounts or other temporary measures to
alleviate overstocking by selling inventory as quickly as possible.

Demand planning and forecasting is more crucial than ever, especially since so many outside
forces — such as weather events, economic trends and global emergencies — can end up
shaping and reshaping demand.

Product portfolio management

Effective demand management requires a comprehensive understanding of products and their
respective lifecycles. Product portfolio management offers this, detailing a product’s complete
lifecycle, from its origins until its eventual phase-out. And since many product lines are

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interdependent, product portfolio management shows you how shifting demand can affect
“neighboring” products.
Statistical forecasting
Working from the traditional concept that past history is usually the best predictor of future
performance, statistical forecasting uses complex algorithms to analyze historical data and
develop supply chain forecasts. The mathematics of statistical forecasting methods is advanced
and the exacting process demands accurate data (including from outliers, exclusions or
assumptions).
Demand sensing
Demand sensing uses a combination of new sources of data, such as weather, infectious disease
trends, government data and more, with historical trend data and applies AI to detect
disruptions and demand influences in near real-time.
Trade promotion management
Survival in the retail jungle depends on sparking the interest of potential customers. Trade
promotions and other marketing strategies use special events (such as discount prices or in-
store giveaways) to spike consumer demand. Trade promotion management works to ensure
that such opportunities are properly executed and deliver all expected benefits.

Steps in Demand Planning

How does demand planning work

Demand planning is a supply chain management process that enables a company to project
future demand and successfully customize company output — be it products or services —
according to those projections.

Demand planning seeks to achieve and maintain an effectively lean supply equilibrium, one in
which store inventories contain just as many products as demand dictates, but no more. Finding
that perfect balance that exists between sufficiency and surplus can prove especially tricky.
And although maintaining that balance is a major concern of demand planning, so is the
constant effort to help shape demand through an effective use of promotions.

Effective demand planning typically requires the use of demand forecasting techniques to
accurately predict demand trends, and carries added benefits, such as heightened company
efficiency and increased customer satisfaction.
Why is demand planning important?

Demand planning is the linchpin of an effective supply chain, serving two essential functions
— which makes it doubly important to business.

First, there always exists the fundamental drive to protect the sale and ensure that expected
revenues are generated. But retailers can’t sell what they don’t have in stock. And it doesn’t
take long for today’s consumers to develop a lasting impression of a company, and whether it
can meet supply demand. Demand planning works to see that retailers have exactly the right
amount of inventory at the right place to avoid stock-outs and remain prepared for that next
sale.

But protecting sales isn’t enough anymore. It’s also about running businesses more efficiently.
Demand planning assists with efficiency, by helping manage inventory space smarter. Why
should companies invest in more physical space than they need? Demand planning can help
businesses avoid the perils of overstocking — such as increased inventory carrying costs and

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financial situations that require the use of product discounts or other temporary measures to
alleviate overstocking by selling inventory as quickly as possible.

Demand planning and forecasting is more crucial than ever, especially since so many outside
forces — such as weather events, economic trends and global emergencies — can end up
shaping and reshaping demand.

Organizations vary widely in how they approach the demand planning process, but there is a
general set of steps that businesses typically follow. Those steps include:

• Organizing and preparing data

• Making a preliminary forecast
• Integrating market data
• Reconciling bottom-up and top-down forecasts
• Developing a final forecast
• Using analytics to monitor project performance

The future of demand planning

To be sure, the future is digital — and so is the outlook for demand planning. As demand
forecasting in supply chain management becomes increasingly sophisticated because of
advances in machine learning, companies will reap substantial benefits, such as being able to
receive precise, real-time inventory updates and forecasts.

These continuing advances are drawing companies closer to the ideal promoted through
demand planning. If an enterprise stocks just enough inventory to satisfy customer demand and
withstand temporary market fluctuations, it’s able to run more efficiently and profitably thanks
to its lean inventory strategy.
Related solutio

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