The Importance of Statistics in Management Decision Making
Business owners face many situations with outcomes that seem unpredictable. For example, your main supplier of a key batch of parts could have a lower cost, but more uncertainty in delivery time. Data and statistics can be used to concretely define and measure this uncertainty and predict when the next shipment is coming. Managerial decision-making with this statistical insight can avoid steering production, costs and customer service into bad avenues.
Many businesses rely on their Information Technology (IT) systems to manage data, facilitate payments and run operations. Unforeseen bottlenecks can occur when IT runs a necessary system upgrade, if the implementation stalls and temporarily keeps your business from running smoothly. To combat this, some IT systems have statistical algorithms that find the likely cause for the blockage before your business hits a dead end. Other operational benefits of statistics are accurate demand forecasting and sufficient inventory planning.
In steering the direction of your business, statistics can be used to guide long-term forecasts for strategic planning. Analytical methods like statistics support the understanding of the holistic impact that strategic initiatives can have on your business. For example, a statistical model can provide a baseline forecast of your revenues and expenses for years to come, which your team can adjust depending on new product introductions, new markets and competitor activities.
Instead of repeatedly reacting to lost sales from insufficient inventory, you can use statistics to learn about your customer’s behavior like how they react to promotions and when and what they buy. These research studies allow businesses to be proactive through predicting customer behavior and creating better marketing plans. Moreover, statistics can be used in the development and pricing of new products via survey analysis and regression models.
Data is abundant for many types of businesses. Whether you seek demographic, attitudinal, or psychographic data, statistics can be used to discover insights from mining the data. For example, the accessibility of statistical tools in low-cost spreadsheet software makes discovering important insights within reach for any business, no matter the size.