ACCA Strategic Professional · Strategic Business Leader · Big data and data analytics
Orbis Logistics has a model that forecasts demand for each depot. It now adds a system that evaluates constraints such as driver hours, fuel costs and delivery deadlines, and recommends the vehicle allocation and routes that minimise cost. Which statement best characterises this addition and its implication for the board?
It is prescriptive analytics. The system recommends the best vehicle allocation and routes given constraints, building on the demand forecasts. Because it guides decisions, the board must consider delegation, accountability and oversight of the model's assumptions and outputs.
- AIt is descriptive analytics, so the board only needs historical summaries
- BIt is diagnostic analytics, so it explains why past routes were costly
- CIt is predictive analytics, so it supersedes the need for forecasts
- DIt is prescriptive analytics, so the board must consider how far decisions are delegated to the system and the oversight neededCorrect
Explanation
Recommending the best action given constraints is prescriptive analytics, often through optimisation. Because it suggests or drives decisions, governance issues such as accountability, oversight and the quality of assumptions become important. The forecasting model remains an input, not replaced.
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