A Primer on Predictive Analytics and Supply Chain Management

For years, the application of predictive analytics in supply chain management has been described as “transformative,” a “big opportunity,” the “new business intelligence,” and even “the holy grail.” However, in conversations, there is often confusion on where and how predictive analytics can be applied.

The basic premise of supply chain management is to control the manufacture, storage, transportation and sales of goods and services to meet customer demand. Have it when they want it, keep nothing else. Predictive analytics is about using a large amount of data to gain insight into possible future scenarios and their potential outcomes. I will focus on two major areas where predictive analytics can be applied to supply chain management—customer demand forecasting and inventory optimization.