There has been a lot of discussion about the many benefits of predictive software and predictive analytics. Hundreds and hundreds of blog posts have been put up regarding the impacts it has on all businesses. In this post, however, we will only be discussing the numerous perks predictive analytics can provide to you as a distribution business owner.
In order to have a detailed look on these benefits, it is first important that we understand the meaning of predictive analytics.
What Is Predictive Analytics?
Predicative analytics is a more refined form of Big Data. Huge chunks of data are collected and used along with statistical algorithms and machine learning techniques to predict the future of your business based on past events. Basically, this system is used to predict what the future holds based on present data for a particular scope of business.
Predictive analytics doesn’t directly influence distribution business. With that being mentioned, the scope of predictive analytics is getting bigger day by day. Similar to many technologies, the tool is widely being used in many big enterprises with the trickling effect to mid-sized businesses. However, since they are a wide variety of tools available in the market, a novice on the subject, may get lost into the features of different options and which one suits his business the best. Therefore, it is very important to be clear as to what predictive analytics has not in store for your business:
- More Than Reports: Though many businesses consider it an utmost necessity that their software provides them with a detailed report based on the data gathered from the transactions that place within the business; however, it is important to bear in mind that predictive analytics is not about providing you updated reports. Rather predictive analytics utilizes the statistical information in a way to build predictions that cannot be obtained via other sources.
- Beyond Online Analytical Processing, Data-cubes Or In-memory Databases: There is no denying that data is the current gold mine for any business, whether it is non-relational. But despite the huge scope of this information for the business, it doesn’t fall in the realm of predictive analytics. This doesn’t mean that OLAP and in-memory databases fail to give you valuable insight; however, summing up facts based on history will not enable you to forecast what the future holds for your business.
- Not Confined To Spreadsheets: Though traditional spreadsheet comes with the ability to formulate regression and other statistical formulas that can help you in overseeing certain trends in your industry, they have a lot of limitations when it comes to dealing with something as comprehensive as predictive analytics. They have limited capacity while dealing with data and lack an impressive speed and predictive tools.
So what basically predictive analytics is about?
Though the basic definition of predictive analytics remains the same, its scope varies from business to business. Translating it for distribution business, predictive analytics is a process that collects meaningful information and using statistical processes transforms it into important insights. The way the insights are generated can be different; however, for a distributor it should be information that can be acted upon easily to derive favorable outcomes from business or it should be in a format that can be incorporated within the applications in the form of codes so that it is automatically transferred into the Enterprise Resource Planning (ERP) business model.
Is Predictive Analytics Useful For Your Distribution Business?
Predictive analytics is extremely useful since it helps streamline hordes of data from order records, customer relationship data and details about buying and inventory, transferring it all into the ERP systems with a steady flow.
This data is then turned into reports that are passed on to your employees so that they can review them occasionally. Data based on historical occurrences might be used to infer useful information. However, it can’t be used to predict the future of your business, nor does it provide tips to secure your business practices so that it has a brighter future.
This is where predictive analytics steps in.
Benefits Of Predictive Analytics For Your Distribution Business
Distribution businesses generate a huge chunk of data including products, customer preferences, prices, inventory etc. When this data is processed through predictive analytics, it becomes extremely beneficial to provide valuable insights related to that specific dimension of business. Following are the biggest benefits that you can obtain from predictive analytics for your distribution business.
Highlighting Customer Profitability
An important move for distributors is to group existing customers on basis of profitability. By highlighting customers who bring higher profits to your business and those who ruin your income stream, you will be able to focus more on customers who bring in greater returns. This will make it easier for you to introduce initiatives for your profitable customers to make more purchases from your business. Also you can work on solutions that would help you encourage your less contributing customers to make purchases and increase profitability for the business.
In addition to this, predictive analytics can analyze the future orders from clients who bring in greater profitability to your business. The tool would also alarm you when a customer gets so bigger that he transits into a competitor.
Enhanced Results From Marketing Campaigns
With the help of predictive analytics, you can provide your sales reps with the products each of the customer is most likely to buy. Since this tool is capable of detecting human bias, it is extremely useful to limit the list of your business products to 2 or 3 items – only what your customer would be interested to purchase. This would also save your sales reps from a lot of worry since they are only capable of narrating the features of only 3 products in a session that typically lasts for 20 minutes.
This process in turn leads to extremely successful marketing campaigns. You can work dedicatedly in launching the products that are highly desirable by majority of your clients, leading to higher customer satisfaction. Given that your sales reps are highly skillful, this could be the recipe for sky-rocketing success.
Prediction About Future Business Scenarios
In case your existing clients are undergoing Merger & Acquisition (M&A), it is probably going to impact their business transactions as well as they conduct businesses with you. A distributor with predictive analytics would be at leverage to keep his business operations safe from negative impacts of M&A, as it enables you to predict how it would affect your relationship with your clients and which business operations would not bring in revenue.
Your predictive analytics tool would be able to provide you with insights about possible risk factors and potential changes in the distribution networks. Such useful prediction would safeguard your business from falling into pit holes which may have occurred as a result of new business model.
Catering For Potential Demands
The biggest solution right now for distributors is providing a combination of weather forecast along with a past sales records so that they can predict the demand in the coming future.
If you have the prediction that the next 30 days the weather would be cold, you would focus on selling items such as hot chocolate and coffee to your clients. You can increase your sales by letting them know that there would be higher demand due to cold weather.
Predictive analytics also plays its part in distribution business by taking out information from Big Data and utilizing it to create opportunities and increase existing revenue. Since distributors need to record every customer transaction, this provides the business owners with a lot of data to work on to create useful scenarios to increase overall business efficiency.