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Contents vii

Bar Charts and Column Charts 90

A Note on Pie Charts and 3-D Charts 93
Bubble Charts 93
Heat Maps 95
Additional Charts for Multiple Variables 97
PivotCharts in Excel 101
3.4 Advanced Data Visualization 102
Advanced Charts 103
Geographic Information Systems Charts 104
3.5 Data Dashboards 105
Principles of Effective Data Dashboards 106
Applications of Data Dashboards 106
Summary 108
Glossary 109
Problems 110
Case Problem: All-Time Movie Box Office Data 118
Appendix: Creating a Scatter Chart Matrix and a Parallel Coordinates
Plot with XLMiner 119

Chapter 4 Linear Regression 123

Analytics in Action: Alliance Data Systems 124
4.1 The Simple Linear Regression Model 125
Regression Model and Regression Equation 125
Estimated Regression Equation 126
4.2 Least Squares Method 127
Least Squares Estimates of the Regression Parameters 129
Using Excel’s Chart Tools to Compute the Estimated Regression
Equation 132
4.3 Assessing the Fit of the Simple Linear Regression Model 133
The Sums of Squares 134
The Coefficient of Determination 136
Using Excel’s Chart Tools to Compute the Coefficient of
Determination 137
4.4 The Multiple Regression Model 138
Regression Model and Regression Equation 138
Estimated Multiple Regression Equation 138
Least Squares Method and Multiple Regression 139
Butler Trucking Company and Multiple Regression 140
Using Excel’s Regression Tool to Develop the Estimated Multiple
Regression Equation 140
4.5 Inference and Regression 143
Conditions Necessary for Valid Inference in the Least Squares
Regression Model 144
viii Contents

Testing Individual Regression Parameters 150

Addressing Nonsignificant Independent Variables 153
Multicollinearity 154
Inference and Very Large Samples 156
4.6 Categorical Independent Variables 161
Butler Trucking Company and Rush Hour 161
Interpreting the Parameters 162
More Complex Categorical Variables 164
4.7 Modeling Nonlinear Relationships 165
Quadratic Regression Models 167
Piecewise Linear Regression Models 170
Interaction Between Independent Variables 173
4.8 Model Fitting 177
Variable Selection Procedures 177
Overfitting 179
Summary 180
Glossary 180
Problems 182
Case Problem: Alumni Giving 197
Appendix: Using XLMiner for Regression 198

Chapter 5 Time Series Analysis and Forecasting 202

Analytics in Action: Forecasting Demand for a Broad Line
of Office Products 203
5.1 Time Series Patterns 205
Horizontal Pattern 205
Trend Pattern 207
Seasonal Pattern 209
Trend and Seasonal Pattern 209
Cyclical Pattern 211
Identifying Time Series Patterns 212
5.2 Forecast Accuracy 212
5.3 Moving Averages and Exponential Smoothing 217
Moving Averages 217
Forecast Accuracy 221
Exponential Smoothing 221
Forecast Accuracy 224
5.4 Using Regression Analysis for Forecasting 226
Linear Trend Projection 226
Seasonality 228
Seasonality Without Trend 228
Seasonality with Trend 230
Using Regression Analysis as a Causal Forecasting Method 231
Contents ix

Combining Causal Variables with Trend and Seasonality

Effects 235
Considerations in Using Regression in Forecasting 235
5.5 Determining the Best Forecasting Model to Use 236
Summary 237
Glossary 237
Problems 238
Case Problem: Forecasting Food and Beverage Sales 246
Appendix: Using XLMiner for Forecasting 247

Chapter 6 Data Mining 251

Analytics in Action: Online Retailers Using Predictive Analytics
to Cater to Customers 252
6.1 Data Sampling 253
6.2 Data Preparation 254
Treatment of Missing Data 254
Identification of Outliers and Erroneous Data 254
Variable Representation 254
6.3 Unsupervised Learning 255
Cluster Analysis 256
Association Rules 265
6.4 Supervised Learning 269
Partitioning Data 269
Classification Accuracy 273
Prediction Accuracy 277
k-Nearest Neighbors 277
Classification and Regression Trees 283
Logistic Regression 299
Summary 308
Glossary 309
Problems 311
Case Problem: Grey Code Corporation 319

Chapter 7 Spreadsheet Models 320

Analytics in Action: Procter and Gamble Sets Inventory Targets Using
Spreadsheet Models 321
7.1 Building Good Spreadsheet Models 322
Influence Diagrams 322
Building a Mathematical Model 322
Spreadsheet Design and Implementing the Model
in a Spreadsheet 324
x Contents

7.2 What-If Analysis 327

Data Tables 327
Goal Seek 331
7.3 Some Useful Excel Functions for Modeling 332
SUM and SUMPRODUCT 332
IF and COUNTIF 333
VLOOKUP 337
7.4 Auditing Spreadsheet Models 339
Trace Precedents and Dependents 339
Show Formulas 340
Evaluate Formulas 340
Error Checking 341
Watch Window 342
Summary 343
Glossary 343
Problems 344
Case Problem: Retirement Plan 350

Chapter 8 Linear Optimization Models 352

Analytics in Action: Timber Harvesting Model at MeadWestvaco
Corporation 353
8.1 A Simple Maximization Problem 354
Problem Formulation 355
Mathematical Model for the Par, Inc. Problem 357
8.2 Solving the Par, Inc. Problem 358
The Geometry of the Par, Inc. Problem 358
Solving Linear Programs with Excel Solver 360
8.3 A Simple Minimization Problem 364
Problem Formulation 364
Solution for the M&D Chemicals Problem 365
8.4 Special Cases of Linear Program Outcomes 367
Alternative Optimal Solutions 367
Infeasibility 368
Unbounded 370
8.5 Sensitivity Analysis 372
Interpreting Excel Solver Sensitivity Report 372
8.6 General Linear Programming Notation and More Examples 374
Investment Portfolio Selection 375
Transportation Planning 378
Advertising Campaign Planning 381
8.7 Generating an Alternative Optimal Solution for a Linear Program 386
Summary 388
Glossary 389
Contents xi

Problems 390
Case Problem: Investment Strategy 398
Appendix: Solving Linear Optimization Models Using Analytic Solver
Platform 399

Chapter 9 Integer Linear Optimization Models 405

Analytics in Action: Optimizing the Transport of Oil Rig Crews 406
9.1 Types of Integer Linear Optimization Models 406
9.2 Eastborne Realty, An Example of Integer Optimization 407
The Geometry of Linear All-Integer Optimization 408
9.3 Solving Integer Optimization Problems with Excel Solver 410
A Cautionary Note About Sensitivity Analysis 414
9.4 Applications Involving Binary Variables 415
Capital Budgeting 415
Fixed Cost 416
Bank Location 420
Product Design and Market Share Optimization 424
9.5 Modeling Flexibility Provided by Binary Variables 426
Multiple-Choice and Mutually Exclusive Constraints 427
k out of n Alternatives Constraint 427
Conditional and Corequisite Constraints 427
9.6 Generating Alternatives in Binary Optimization 428
Summary 430
Glossary 430
Problems 431
Case Problem: Applecore Children’s Clothing 441
Appendix: Solving Integer Linear Optimization Problems Using Analytic
Solver Platform 442

Chapter 10 Nonlinear Optimization Models 448

Analytics in Action: Intercontinental Hotels Optimizes Retail Pricing 449
10.1 A Production Application: Par, Inc. Revisited 449
An Unconstrained Problem 450
A Constrained Problem 450
Solving Nonlinear Optimization Models Using Excel Solver 453
Sensitivity Analysis and Shadow Prices in Nonlinear Models 454
10.2 Local and Global Optima 455
Overcoming Local Optima with Excel Solver 457
10.3 A Location Problem 459
10.4 Markowitz Portfolio Model 461
10.5 Forecasting Adoption of a New Product 465
xii Contents

Summary 469
Glossary 470
Problems 470
Case Problem: Portfolio Optimization with Transaction Costs 477
Appendix: Solving Nonlinear Optimization Problems with Analytic
Solver Platform 480

Chapter 11 Monte Carlo Simulation 485

Analytics in Action: Reducing Patient Infections in the ICU 486
11.1 What-If Analysis 487
The Sanotronics Problem 487
Base-Case Scenario 487
Worst-Case Scenario 488
Best-Case Scenario 488
11.2 Simulation Modeling with Native Excel Functions 488
Use of Probability Distributions to Represent
Random Variables 489
Generating Values for Random Variables with Excel 491
Executing Simulation Trials with Excel 495
Measuring and Analyzing Simulation Output 495
11.3 Simulation Modeling with Analytic Solver Platform 498
The Land Shark Problem 499
Spreadsheet Model for Land Shark 499
Generating Values for Land Shark’s Random Variables 500
Tracking Output Measures for Land Shark 503
Executing Simulation Trials and Analyzing Output for Land Shark 504
The Zappos Problem 506
Spreadsheet Model for Zappos 507
Modeling Random Variables for Zappos 510
Tracking Output Measures for Zappos 515
Executing Simulation Trials and Analyzing Output for Zappos 517
11.4 Simulation Optimization 518
11.5 Simulation Considerations 524
Verification and Validation 524
Advantages and Disadvantages of Using Simulation 524
Summary 525
Glossary 526
Problems 527
Case Problem: Four Corners 536
Appendix 11.1: Incorporating Dependence Between
Random Variables 537
Appendix 11.2: Probability Distributions for Random Variables 545
Contents xiii

Chapter 12 Decision Analysis 550

Analytics in Action: Phytopharm’s New Product Research and
Development 551
12.1 Problem Formulation 552
Payoff Tables 553
Decision Trees 553
12.2 Decision Analysis Without Probabilities 554
Optimistic Approach 554
Conservative Approach 555
Minimax Regret Approach 555
12.3 Decision Analysis with Probabilities 557
Expected Value Approach 557
Risk Analysis 559
Sensitivity Analysis 560
12.4 Decision Analysis with Sample Information 561
Expected Value of Sample Information 566
Expected Value of Perfect Information 567
12.5 Computing Branch Probabilities with Bayes’ Theorem 568
12.6 Utility Theory 571
Utility and Decision Analysis 573
Utility Functions 577
Exponential Utility Function 580
Summary 581
Glossary 582
Problems 584
Case Problem: Property Purchase Strategy 595
Appendix: Using Analytic Solver Platform to Create Decision Trees 596

Appendix A Basics of Excel 609

Appendix B Data Management and Microsoft Access 621

Appendix C Answers to Even-Numbered Exercises (online)

References 659
Index 661
About the Authors

Jeffrey D. Camm Jeffrey D. Camm is Professor of Quantitative Analysis, Head of the

Department of Operations, Business Analytics, and Information Systems and College of
Business Research Fellow in the Carl H. Lindner College of Business at the University of
Cincinnati. Born in Cincinnati, Ohio, he holds a B.S. from Xavier University and a Ph.D.
from Clemson University. He has been at the University of Cincinnati since 1984, and has
been a visiting scholar at Stanford University and a visiting professor of business adminis-
tration at the Tuck School of Business at Dartmouth College.
Dr. Camm has published over 30 papers in the general area of optimization applied
to problems in operations management. He has published his research in Science, Man-
agement Science, Operations Research, Interfaces and other professional journals. At the
University of Cincinnati, he was named the Dornoff Fellow of Teaching Excellence and
he was the 2006 recipient of the INFORMS Prize for the Teaching of Operations Research
Practice. A firm believer in practicing what he preaches, he has served as an operations
research consultant to numerous companies and government agencies. From 2005 to
2010 he served as editor-in-chief of Interfaces, and is currently on the editorial board of
INFORMS Transactions on Education.
James J. Cochran James J. Cochran is the Bank of Ruston Barnes, Thompson, & Thurmon
Endowed Research Professor of Quantitative Analysis at Louisiana Tech University. Born
in Dayton, Ohio, he holds a B.S., an M.S., and an M.B.A. from Wright State University
and a Ph.D. from the University of Cincinnati. He has been at Louisiana Tech University
since 2000, and has been a visiting scholar at Stanford University, Universidad de Talca,
and the University of South Africa.
Professor Cochran has published over two dozen papers in the development and ap-
plication of operations research and statistical methods. He has published his research in
Management Science, The American Statistician, Communications in Statistics—Theory
and Methods, European Journal of Operational Research, Journal of Combinatorial
Optimization, and other professional journals. He was the 2008 recipient of the INFORMS
Prize for the Teaching of Operations Research Practice and the 2010 recipient of the Mu
Sigma Rho Statistical Education Award. Professor Cochran was elected to the International
Statistics Institute in 2005 and named a Fellow of the American Statistical Association
in 2011. A strong advocate for effective operations research and statistics education as a
means of improving the quality of applications to real problems, Professor Cochran has
organized and chaired teaching effectiveness workshops in Montevideo, Uruguay; Cape
Town, South Africa; Cartagena, Colombia; Jaipur, India; Buenos Aires, Argentina; and
Nairobi, Kenya. He has served as an operations research consultant to numerous compa-
nies and not-for-profit organizations. He currently serves as editor-in-chief of INFORMS
Transactions on Education and is on the editorial board of Interfaces, the Journal of the
Chilean Institute of Operations Research, and ORiON.
Michael J. Fry Michael J. Fry is Associate Professor of Operations, Business Analyt-
ics, and Information Systems in the Carl H. Lindner College of Business at the University
of Cincinnati. Born in Killeen, Texas, he earned a B.S. from Texas A&M University, and
M.S.E. and Ph.D. degrees from the University of Michigan. He has been at the University of
Cincinnati since 2002, and he has been a visiting professor at The Johnson School at Cornell
University and the Sauder School of Business at the University of British Columbia.
About the Authors xv

Professor Fry has published over a dozen research papers in journals such as Op-
erations Research, M&SOM, Transportation Science, Naval Research Logistics, and In-
terfaces. His research interests are in applying quantitative management methods to the
areas of supply chain analytics, sports analytics, and public-policy operations. He has
worked with many different organizations for his research, including Dell, Inc., Copeland
Corporation, Starbucks Coffee Company, the Cincinnati Fire Department, the State of Ohio
Election Commission, the Cincinnati Bengals, and the Cincinnati Zoo. In 2008, he was
named a finalist for the Daniel H. Wagner Prize for Excellence in Operations Research
Practice, and he has been recognized for both his research and teaching excellence at the
University of Cincinnati.

Jeffrey W. Ohlmann Jeffrey W. Ohlmann is Associate Professor of Management

Sciences in the Tippie College of Business at the University of Iowa. Born in Valentine,
Nebraska, he earned a B.S. from the University of Nebraska, and M.S. and Ph.D. degrees
from the University of Michigan. He has been at the University of Iowa since 2003.
Professor Ohlmann’s research on the modeling and solution of decision-making prob-
lems has produced over a dozen research papers in journals such as Mathematics of Opera-
tions Research, INFORMS Journal on Computing, Transportation Science, and Interfaces.
He has collaborated with companies such as Transfreight, LeanCor, Cargill, the Hamilton
County Board of Elections, and the Cincinnati Bengals. Due to the relevance of his work to
industry, he was bestowed the George B. Dantzig Dissertation Award and was recognized
as a finalist for the Daniel H. Wagner Prize for Excellence in Operations Research Practice.

David R. Anderson David R. Anderson is Professor Emeritus of Quantitative Analysis

in the Carl H. Lindner College of Business at the University of Cincinnati. Born in Grand
Forks, North Dakota, he earned his B.S., M.S., and Ph.D. degrees from Purdue University.
Professor Anderson has served as Head of the Department of Quantitative Analysis and
Operations Management and as Associate Dean of the College of Business Administration.
In addition, he was the coordinator of the College’s first Executive Program.
At the University of Cincinnati, Professor Anderson has taught introductory statistics
for business students as well as graduate-level courses in regression analysis, multivariate
analysis, and management science. He has also taught statistical courses at the Department
of Labor in Washington, D.C. He has been honored with nominations and awards for
excellence in teaching and excellence in service to student organizations.
Professor Anderson has coauthored 10 textbooks in the areas of statistics, management
science, linear programming, and production and operations management. He is an active
consultant in the field of sampling and statistical methods.

Dennis J. Sweeney Dennis J. Sweeney is Professor Emeritus of Quantitative Analysis

and Founder of the Center for Productivity Improvement at the University of Cincinnati.
Born in Des Moines, Iowa, he earned a B.S.B.A. degree from Drake University and his
M.B.A. and D.B.A. degrees from Indiana University, where he was an NDEA Fellow.
During 1978–1979, Professor Sweeney worked in the management science group at
Procter & Gamble; during 1981–1982, he was a visiting professor at Duke University.
Professor Sweeney served as Head of the Department of Quantitative Analysis and as
Associate Dean of the College of Business Administration at the University of Cincinnati.
Professor Sweeney has published more than 30 articles and monographs in the areas
of management science and statistics. The National Science Foundation, IBM, Procter &
Gamble, Federated Department Stores, Kroger, and Cincinnati Gas & Electric have funded
his research, which has been published in Management Science, Operations Research,
Mathematical Programming, Decision Sciences, and other journals.
Professor Sweeney has coauthored 10 textbooks in the areas of statistics, management
science, linear programming, and production and operations management.
xvi About the Authors

Thomas A. Williams Thomas A. Williams is Professor Emeritus of Management Science

in the College of Business at Rochester Institute of Technology. Born in Elmira, New York,
he earned his B.S. degree at Clarkson University. He did his graduate work at Rensselaer
Polytechnic Institute, where he received his M.S. and Ph.D. degrees.
Before joining the College of Business at RIT, Professor Williams served for seven
years as a faculty member in the College of Business Administration at the University of
Cincinnati, where he developed the undergraduate program in Information Systems and
then served as its coordinator. At RIT he was the first chairman of the Decision Sciences
Department. He teaches courses in management science and statistics, as well as graduate
courses in regression and decision analysis.
Professor Williams is the coauthor of 11 textbooks in the areas of management sci-
ence, statistics, production and operations management, and mathematics. He has been a
consultant for numerous Fortune 500 companies and has worked on projects ranging from
the use of data analysis to the development of large-scale regression models.
Preface

Essentials of Business Analytics is designed to introduce the concept of business analytics

to undergraduate and graduate students. This textbook contains one of the first collections
of materials that are essential to the growing field of business analytics. In Chapter 1 we
present an overview of business analytics and our approach to the material in this text-
book. In simple terms, business analytics helps business professionals make better deci-
sions based on data. We discuss models for summarizing, visualizing, and understanding
useful information from historical data in Chapters 2 through 6. Chapter 7 covers the use of
spreadsheets for examining data and building decision models. In Chapters 8 through 10 we
discuss optimization models to help decision makers choose the best decision based on the
available data. Chapter 10 presents material that some may consider more advanced forms
of optimization (nonlinear optimization models), although these models are extremely use-
ful and widely applicable to many business situations. In any case, some instructors may
choose to omit covering Chapter 10. In Chapter 11 we introduce the concept of simulation
models for understanding the effect of uncertainty on decisions. Chapter 12 is an overview
of decision analysis approaches for incorporating a decision maker’s views about risk into
decision making. In Appendix A we present optional material for students who need to
learn the basics of using Microsoft Excel. The use of databases and manipulating data in
Microsoft Access is discussed in Appendix B.
This textbook can be used by students who have previously taken a course on basic
statistical methods as well as students who have not had a prior course in statistics. This
textbook introduces basic statistical concepts in enough detail to support their use in busi-
ness analytics tools. For the student who has not had a prior statistics course, these concepts
are sufficient to prepare the student for more advanced business analytics methods. For
students who have had a previous statistics class, the material will provide a good review.
All statistical concepts contained in this textbook are presented from a business analytics
perspective using practical business examples. For those instructors who wish to skip the
introductory statistics material, Chapters 2 and 4 can be considered optional.

Features and Pedagogy

The style and format of this textbook is based on the other classic textbooks written by the
Anderson, Sweeney, and Williams (ASW) team. Some of the specific features that we use
in this textbook are listed below.
● Integration of Microsoft Excel: Excel has been thoroughly integrated throughout
this textbook. For many methodologies, we provide instructions for how to perform
calculations both by hand and with Excel. In other cases where realistic models
are practical only with the use of a spreadsheet, we focus on the use of Excel to
describe the methods to be used.
● Use of Excel 2013: The material presented for Excel in this textbook is fully com-
patible with Excel 2013. In most cases, Excel 2013 can be considered a relatively
minor update from previous Excel versions as it relates to business analytics.
However, the data visualization abilities of Excel have been greatly enhanced in
Excel 2013. It is much easier to create, modify and analyze charts in Excel 2013.
xviii Preface

Recognizing that many students and instructors may not have access to Excel 2013
at this time, we also provide instructions for using previous versions of Excel when-
ever possible.
● Use of Analytics Solver Platform and XLMiner: This textbook incorporates the
use of two very powerful Microsoft Excel Add-ins: Analytics Solver Platform and
XLMiner, both created by Frontline Systems. Analytics Solver Platform provides
additional optimization and simulation features for Excel. XLMiner incorporates
sophisticated data mining algorithms into Excel and allows for additional data vi-
sualization and data exploration. In most chapters we place the use of Analytics
Solver Platform and XLMiner in the chapter appendix so that the instructor can
choose whether or not to cover this material. However, because these tools are es-
sential to performing simulation and data mining methods, we integrate XLMiner
throughout Chapter 6 on data mining and we utilize Analytics Solver Platform in
Sections 11.3 and 11.4 for simulation.
● Notes and Comments: At the end of many sections, we provide Notes and Com-
ments to give the student additional insights about the methods presented in that
section. These insights include comments on the limitations of the presented meth-
ods, recommendations for applications, and other matters. Additionally, margin
notes are used throughout the textbook to provide additional insights and tips re-
lated to the specific material being discussed.
● Analytics in Action: Each chapter contains an Analytics in Action article. These
articles present interesting examples of the use of business analytics in practice.
The examples are drawn from many different organizations in a variety of areas
including healthcare, finance, manufacturing, marketing, and others.
● WEBfiles: All data sets used as examples and in student exercises are also provided
online as files available for download by the student. The names of the WEBfiles
are called out in margin notes throughout the textbook.
● Problems and Cases: With the exception of Chapter 1, each chapter contains more
than 20 problems to help the student master the material presented in that chapter.
The problems vary in difficulty and most relate to specific examples of the use of
business analytics in practice. Answers to even-numbered problems are provided
in an online supplement for student access. With the exception of Chapter 1, each
chapter also includes an in-depth case study that connects many of the different
methods introduced in the chapter. The case studies are designed to be more open-
ended than the chapter problems, but enough detail is provided to give the student
some direction in solving the cases.

Acknowledgements
We would like to acknowledge the work of our reviewers, who provided comments and
suggestions for improvement of this text. Thanks to:

Matthew D. Bailey Q B. Chung

Bucknell University Villanova University
Phillip Beaver Elizabeth A. Denny
Daniels College of Business University of Kentucky
University of Denver
Mike Taein Eom
M. Khurrum S. Bhutta University of Portland
Ohio University
Preface xix

Yvette Njan Essounga Marco Lam

Fayetteville State University York College of Pennsylvania
Lawrence V. Fulton Ram Pakath
Texas State University University of Kentucky
James F. Hoelscher Susan Palocsay
Lincoln Memorial University James Madison University
Eric Huggins Dothan Truong
Fort Lewis College Embry-Riddle Aeronautical University
Faizul Huq Kai Wang
Ohio University Wake Technical Community College

We are indebted to our product director Joe Sabatino and our product manager,
Aaron Arnsparger; our marketing director, Natalie King, our marketing manager, Heather
Mooney, and our associate marketing development manager, Roy Rosa; our content de-
veloper, Maggie Kubale; our senior content project manager, Cliff Kallemeyn; our media
developer, Chris Valentine; and others at Cengage Learning for their counsel and support
during the preparation of this text.
Jeffrey D. Camm
James J. Cochran
Michael J. Fry
Jeffrey W. Ohlmann
David R. Anderson
Dennis J. Sweeney
Thomas A. Williams
 CHAPTER 1
Introduction
CONTENTS 1.5 BUSINESS ANALYTICS
IN PRACTICE
1.1 DECISION MAKING Financial Analytics
1.2 BUSINESS ANALYTICS Human Resource (HR) Analytics
DEFINED Marketing Analytics
Health Care Analytics
1.3 A CATEGORIZATION OF
Supply Chain Analytics
ANALYTICAL METHODS
Analytics for Government and
AND MODELS
Nonprofits
Descriptive Analytics
Sports Analytics
Predictive Analytics
Web Analytics
Prescriptive Analytics
1.4 BIG DATA
2 Chapter 1 Introduction

You apply for a loan for the first time. How does the bank assess the riskiness of the loan
it might make to you? How does Amazon.com know which books and other products to
recommend to you when you log in to their Web site? How do airlines determine what price
to quote to you when you are shopping for a plane ticket? How can doctors better diagnose
and treat you when you are ill or injured?
Even though you are applying for a loan for the first time, millions of people around the
world have applied for loans. Many of these loan recipients have paid back their loans in
full and on time, but some of them have not. The bank wants to know whether you are more
like those who have paid back their loans or more like those who defaulted. By comparing
your credit history, financial situation, and other factors to the vast database of previous
loan recipients, the bank can effectively assess how likely you are to default on a loan.
Similarly, Amazon.com has access to millions of previous purchases made by custom-
ers on its Web site. Amazon.com examines your previous purchases, the products you have
viewed, and any product recommendations you have provided. Amazon.com then searches
through its huge database for customers who are similar to you in terms of product pur-
chases, recommendations, and interests. Once similar customers have been identified, their
purchases form the basis of the recommendations given to you.
Prices for airline tickets are frequently updated. The price quoted to you for a flight
between New York and San Francisco today could be very different from the price quoted
tomorrow. These changes happen because airlines use a pricing strategy known as revenue
management. Revenue management works by examining vast amounts of data on past air-
line customer purchases and using these data to forecast future purchases. These forecasts
are then fed into sophisticated optimization algorithms that determine the optimal price
to charge for a particular flight and when to change that price. Revenue management has
resulted in substantial increases in airline revenues.
Finally, consider the case of being evaluated by a doctor for a potentially serious
medical issue. Hundreds of medical papers may describe research studies done on patients
facing similar diagnoses and thousands of data points exist on their outcomes. However,
it is extremely unlikely that your doctor has read every one of these research papers or is
aware of all previous patient outcomes. Instead of relying only on her medical training and
knowledge gained from her limited set of previous patients, wouldn’t it be better for your
doctor to have access to the expertise and patient history of thousands of doctors around
the world?
In 2007, a group of IBM computer scientists initiated a project to develop a new deci-
sion technology to help in answering these types of questions. That technology is called
Watson, named after the founder of IBM, Thomas J. Watson. The team at IBM focused on
one aim: how the vast amounts of data now available on the Internet can be used to make
more data-driven, smarter decisions.
Watson became a household name in 2011, when it famously won the television game
show, Jeopardy! Since that proof of concept in 2011, IBM has reached agreements with
the health insurance provider WellPoint, the financial services company Citibank, and
Memorial Sloan-Kettering Cancer Center to apply Watson to the decision problems that
they face.
Watson is a system of computing hardware, high-speed data processing, and analytical
algorithms that are combined to make data-based recommendations. As more and more
data are collected, Watson has the capability to learn over time. In simple terms, accord-
ing to IBM, Watson gathers hundreds of thousands of possible solutions from a huge data
bank, evaluates them using analytical techniques, and proposes only the best solutions for
consideration. Watson provides not just a single solution, but a range of good solutions with
a confidence level for each.
For example, at WellPoint’s Virginia data center, to the delight of doctors and patients,
Watson is already being used to speed up the approval of medical procedures. Citibank is
 Chapter 1 Introduction 3

beginning to explore how to use Watson to better serve its customers, and Sloan-Kettering
is launching a pilot study to assess the effectiveness of Watson in assisting with the diag-
nosis and treatment of patients.1
This book is concerned with data-driven decision making and the use of analytical
approaches in the decision-making process. Three developments spurred recent explo-
sive growth in the use of analytical methods in business applications. First, technological
advances, such as improved point-of-sale scanner technology and the collection of data
through e-commerce, Internet social networks, and data generated from personal electronic
devices, produce incredible amounts of data for businesses. Naturally, businesses want to
use these data to improve the efficiency and profitability of their operations, better under-
stand their customers, price their products more effectively, and gain a competitive advan-
tage. Second, ongoing research has resulted in numerous methodological developments,
including advances in computational approaches to effectively handle and explore massive
amounts of data, faster algorithms for optimization and simulation, and more effective
approaches for visualizing data. Third, these methodological developments were paired
with an explosion in computing power and storage capability. Better computing hardware,
parallel computing, and, more recently, cloud computing (the remote use of hardware and
software over the Internet) have enabled businesses to solve big problems faster and more
accurately than ever before.
In summary, the availability of massive amounts of data, improvements in analytic
methodologies, and substantial increases in computing power have all come together to
result in a dramatic upsurge in the use of analytical methods in business and a reliance on
the discipline that is the focus of this text: business analytics. Figure 1.1, a graph generated
by Google Trends, displays the search volume for the word analytics from 2004 to 2013
(projected) on a percentage basis from the peak. The figure clearly illustrates the recent
increase in interest in analytics.
Business analytics is a crucial area of study for students looking to enhance their em-
ployment prospects. By 2018, it is predicted that there will be a shortage of more than
1.5 million business managers with adequate training in analytics in the United States

FIGURE 1.1 GOOGLE TRENDS GRAPH OF SEARCHES ON THE TERM AnAlytics

Interest over time

The number 100 represents the peak search volume

110

88

66

44

22

2005 2007 2009 2011 2013

1
“IBM’s Watson Is Learning Its Way to Saving Lives,” Fastcompany Web site, December 8, 2012.
4 Chapter 1
1.1
if i were given one hour
to save the planet, i would
spend 59 minutes defining
the problem and one minute
resolving it.
—Albert Einstein
Introduction
alone.2 As stated in the Preface, the purpose of this text is to provide students with a sound
conceptual understanding of the role that business analytics plays in the decision-making
process. To reinforce the applications orientation of the text and to provide a better under-
standing of the variety of applications in which analytical methods have been used suc-
cessfully, Analytics in Action articles are presented throughout the book. Each Analytics
in Action article summarizes an application of analytical methods in practice. For example,
the first Analytics in Action, Procter & Gamble Uses Business Analytics to Redesign its
supply chain (later in this chapter) describes how analytics was used to drive efficiency in
Procter & Gamble’s North American supply chain.
Decision Making
It is the responsibility of managers to plan, coordinate, organize, and lead their organiza-
tions to better performance. Ultimately, managers’ responsibilities require that they make
strategic, tactical, or operational decisions. Strategic decisions involve higher-level issues
concerned with the overall direction of the organization; these decisions define the orga-
nization’s overall goals and aspirations for the future. Strategic decisions are usually the
domain of higher-level executives and have a time horizon of three to five years. Tactical
decisions concern how the organization should achieve the goals and objectives set by its
strategy, and they are usually the responsibility of midlevel management. Tactical decisions
usually span a year and thus are revisited annually or even every six months. Operational
decisions affect how the firm is run from day to day; they are the domain of operations
managers, who are the closest to the customer.
Consider the case of the Thoroughbred Running Company (TRC). Historically, TRC
had been a catalog-based retail seller of running shoes and apparel. TRC sales revenue
grew quickly as it changed its emphasis from catalog-based sales to Internet-based sales.
Recently, TRC decided that it should also establish retail stores in the malls and downtown
areas of major cities. This is a strategic decision that will take the firm in a new direc-
tion that it hopes will complement its Internet-based strategy. TRC middle managers will
therefore have to make a variety of tactical decisions in support of this strategic decision,
including how many new stores to open this year, where to open these new stores, how
many distribution centers will be needed to support the new stores, and where to locate
these distribution centers. Operations managers in the stores will need to make day-to-day
decisions regarding, for instance, how many pairs of each model and size of shoes to order
from the distribution centers and how to schedule their sales personnel.
Regardless of the level within the firm, decision making can be defined as the follow-
ing process:
1. Identify and define the problem
2. Determine the criteria that will be used to evaluate alternative solutions
3. Determine the set of alternative solutions
4. Evaluate the alternatives
5. Choose an alternative
Step 1 of decision making, identifying and defining the problem, is the most critical. Only
if the problem is well-defined, with clear metrics of success or failure (step 2), can a proper
approach for solving the problem (steps 3 and 4) be devised. Decision making concludes
with the choice of an alternative (step 5).
2
J. Manyika et al., “Big Data: The Next Frontier for Innovation, Competition and Productivity,” McKinsey Global Institute
Report, 2011.

1.2
some firms and industries
use the simpler term,
analytics. Analytics is often
thought of as a broader
category than business
analytics, encompassing
the use of analytical
techniques in the sciences
and engineering as well.
in this text, we use business
analytics and analytics
synonymously.
1.3
1.3 A Categorization of Analytical Methods and Models 5
There are a number of approaches to making decisions: tradition (“We’ve always
done it this way”), intuition (“gut feeling”), and rules of thumb (“As the restaurant owner,
I schedule twice the number of waiters and cooks on holidays”). The power of each of
these approaches should not be underestimated. Managerial experience and intuition are
valuable inputs to making decisions, but what if relevant data were available to help us
make more informed decisions? With the vast amounts of data now generated and stored
electronically, it is estimated that the amount of data stored by businesses more than
doubles every two years. How can managers convert these data into knowledge that they
can use to be more efficient and effective in managing their businesses?
Business Analytics Defined
What makes decision making difficult and challenging? Uncertainty is probably the number
one challenge. If we knew how much the demand will be for our product, we could do a
much better job of planning and scheduling production. If we knew exactly how long each
step in a project will take to be completed, we could better predict the project’s cost and
completion date. If we knew how stocks will perform, investing would be a lot easier.
Another factor that makes decision making difficult is that we often face such an enor-
mous number of alternatives that we cannot evaluate them all. What is the best combina-
tion of stocks to help me meet my financial objectives? What is the best product line for a
company that wants to maximize its market share? How should an airline price its tickets
so as to maximize revenue?
Business analytics is the scientific process of transforming data into insight for making
better decisions.3 Business analytics is used for data-driven or fact-based decision making,
which is often seen as more objective than other alternatives for decision making.
As we shall see, the tools of business analytics can aid decision making by creating
insights from data, by improving our ability to more accurately forecast for planning, by
helping us quantify risk, and by yielding better alternatives through analysis and opti-
mization. Indeed, a recent study based on a large sample of firms that was conducted by
researchers at MIT’s Sloan School of Management and the University of Pennsylvania,
concluded that firms guided by data-driven decision making have higher productivity and
market value and increased output and profitability.4
A Categorization of Analytical Methods
and Models
Business analytics can involve anything from simple reports to the most advanced optimi-
zation techniques (methods for finding the best course of action). Analytics is generally
thought to comprise three broad categories of techniques: descriptive analytics, predictive
analytics, and prescriptive analytics.
Descriptive Analytics
Descriptive analytics encompasses the set of techniques that describes what has happened
in the past. Examples are data queries, reports, descriptive statistics, data visualization
3
We adopt the definition of analytics developed by the Institute for Operations Research and the Management Sciences
(INFORMS).
4
E. Brynjolfsson, L. M. Hitt, and H. H. Kim, “Strength in Numbers: How Does Data-Driven Decisionmaking Affect Firm Perfor-
mance?” (April 18, 2013). Available at SSRN http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1819486.
Another random document with
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"I'm glad I met you. Look here; I'm going to give you this sixpence. I
can do without it, and I find that mother gave you no money. It's not
respectable not to have a penny in your pocket. Here; don't buy
sweeties with it."

"Thank you, Ned. I'll pay it back when I get wages. You know I'm to
get none till I'm here three months."

"I know. That's why I give you that sixpence. I think mother's much
mistaken," added this wise youth, aged twelve, "making little of you
like that. I say! I shall be late; good-bye."

Hetty put the sixpence in her pocket, and walked on very slowly; for
she was wondering what she would buy with that handsome sum of
money. She found her mistress on the steps, looking out rather
anxiously for her.

"Oh, here you are, Hetty. I began to be afraid that you had lost your
way."

"I met our Ned, ma'am, and stopped to talk with him."

"Your brother? Well, there was no harm in that, but when I send you
with a message, you must always come back as quickly as possible.
You'll remember this, Hetty."

"Yes, ma'am," replied Hetty; and Mrs. Eyre rejoiced to see that she
could "take a word" without looking sulky. Perhaps she would have
been less pleased had she known that Hetty forgot all about the
word in two minutes, or less, being still mentally engaged in
spending that sixpence.

"I have dressed the children; help me down the step with the
perambulator. But before we go out, bring your box up here to the
nursery. That is your bed; put the box beside it. That is right. Now
come along, for I want to get out as soon as possible. It is good for
the children to be out in the air."
They entered the parlour. Little Flora was ready to go out; she had
on a shady hat, and was wrapped up in a soft woollen shawl.

"Now, Hetty, lift her up; do not move too fast, nor jerk her in any way.
She is very easily hurt, and still more easily frightened. That is well
done; you are stronger than I am."

"She took me up just as papa does," Flora said, highly pleased.

"Nice, strong Hetty." And she patted Hetty's round cheek with her
little thin hand.

Hetty carried her out, and down the step, as tenderly and carefully as
if she had been made of eggs; indeed, more carefully by far than if
she had been a basket of eggs, for Mrs. Hardy had been heard to
say that Hetty seemed to think that eggs were pebbles. Mrs. Eyre
put the two little boys into their carriage, and then they all set out.

There was a common not far-off, which had been a large one when
Little Hayes was a village, but which had been very much
encroached upon by builders. Still, a pretty strip of wild land
remained, and the air was very sweet and pleasant. They found out
a cozy, sheltered nook, and there Mrs. Eyre took the two boys out of
the little carriage and put them down on the grass. Edgar trotted
about, or lay on his back, just as he liked, and baby rolled after him
as best he could. Mrs. Eyre sat down and took some knitting out of
her pocket.

"Are you tired, Hetty?" asked little Flora.

"Not a bit tired, Miss Flo."

"Then don't sit down yet," whispered the child; "I like moving about
so much. You know I have to lie quiet all day."

"Do not go out of sight, Hetty," said Mrs. Eyre.

Hetty walked up and down, Flora prattling away in her quiet, distinct
voice; but there was no danger that Hetty would not attend, for Flo
had an inquiring mind, and asked lots of questions.

"Are you very sorry to come and live with us, Hetty?"

"No, miss; very glad. It's time I was of use."

"You are of use. You carry me quite beautiful. I do not ache so much
while you carry me. But—don't you love your own mamma?"

"That I do, Miss Flo. I love them all."

"Tell me about them. How many brothers and sisters have you?"
Hetty told her, making a long story of it, such as children love. In her
pleasure at finding that she could amuse the child, she wandered on
and on, until she heard Mrs. Eyre calling her.

"Do not go out of sight," said she again.

"No, ma'am," replied Hetty. But when next Mrs. Eyre looked for her,
she was out of sight again. However, she was back very soon, and
Mrs. Eyre did not like to be always finding fault. At one o'clock they
set off for home, calling for Lina on their way.

Mrs. Eyre and the children had their dinner in the parlour, and Mrs.
Goodenough and Hetty had theirs in the kitchen. Then Mrs.
Goodenough, having washed up everything and made up the kitchen
fire, put on her bonnet and went away.

Hetty sat alone in the neat little kitchen, wondering what she was to
do next. From this subject of meditation she passed to that of her
solitary sixpence, which, little as it may seem, was the largest sum of
money Hetty had ever had at one time. And Mrs. Hardy had been
wise in not giving her any, even though Mr. Ned, in his great wisdom,
did not think so; for she knew of old that even a halfpenny would
burn in Hetty's pocket till she could get out to spend it. Now to do
that she must get out by herself, and that was just what her mother
and Matty did not wish for her.

Meantime Mrs. Eyre had been well pleased to hear, from little Flo,
that Hetty had carried her most comfortably, and had amused her
with plenty of innocent chatter. She came down to the kitchen
presently, and began collecting such things as she required for some
cookery she meant to get done.

Hetty asked to be allowed to carry the tray, which she did very
successfully; but she set it down half on and half off the table, and
there would soon have been a fine crash if Mrs. Eyre had not
perceived this in time.
"You must always see that your tray is quite on the table, Hetty. That
would have fallen the moment I touched it. Go up to Miss Flo now.
Baby is asleep in the cradle, and Lina and Edgar will go and play in
the garden. I must do some cooking—your master dines at the shop,
but very early, and of course he needs a good supper. Try to amuse
the poor little thing, for this is rather a restless time with her. Keep
her lying quiet, flat on her back, if possible. Her walk did her good—
she ate quite a good dinner, for her."

Hetty ran upstairs, and found Flora alone. She was crying—not
noisily, like a healthy child, but quite silently, great round tears
dropping on her white pillow.

"Oh, Miss Flo, what's the matter with you?"

"Oh, Hetty, is this you? I thought you were going to stay and help
mamma, and then I was ashamed of being vexed, because mamma
has so much to do; and Lina is no help—she's so giddy. Besides, I
am afraid I am cross."

"Oh, no, not cross, my poor little dear! Come, shall I sing you some
of the songs I learned at school?"

"I—don't—know. Yes, please sing one—only one, Hetty."

Hetty sang, "Pussy sitting by the fire," and Flo laughed.

"Sing more, do, Hetty; your voice is pleasant. Now Lina learns songs
at her school, but she has a squeak in her voice that hurts my head.
I was afraid you might squeak, but you don't. Sing me another song!"

Hetty sang, and sang, until she saw that the child was in a sweet
sleep.
 CHAPTER III.

FLO'S KITTEN.

MRS. EYRE was busy in the kitchen for an hour or more. Then she
came gently into the parlour, and found Flo sleeping and Hetty
crying. She beckoned the girl out into the hall.

"What is wrong, Hetty?"

"Nothing, ma'am. I didn't mean to cry, but I'm that sorry for little Miss
Flo. 'Tis so hard on her, the little creature! Oh, ma'am, will she ever
be well?"

"I cannot tell you that, Hetty. God knows, and you know He loves her.
The great London doctor thought she would recover—Dr. Haddon,
our doctor here, was not so hopeful."

"And what is it, ma'am? Was she hurt in any way? I seem to
remember mother saying it was a fall, but I did not heed it."

"Yes; two years ago she had a fall. She fell down the kitchen stairs.
She did not seem so much hurt at first, but she must have got some
terrible twist or strain, for not one day's health has she had since
then, and as to growing, if I did not know it was impossible, I would
say she has grown smaller. If we even knew exactly what was
wrong,—but no one can find out. Come, Hetty, I have a lot of
mending to do. Can you work nicely?"

"Not like Matty, ma'am. She's fond of it."

"And you are not?"

"Not I, ma'am. I'd rather scrub floors any day."

"Ah, well, we can't do only what we like, you know. Try to mend this
for me. Miss Flo will not sleep long."

She might have slept a little longer, though, if Lina had not bounced
into the room, clattering in her thick boots, to get something that she
and Edgar wanted. Flora started, and probably hurt herself, for she
began to cry piteously.

This occupied Mrs. Eyre, and Lina made off, for she knew very well
that she had done wrong. However, she did not escape, for when Flo
was quieted, Mrs. Eyre went out into the tiny strip of ground at the
back of the house, which she called the garden, and brought in both
the children. Edgar was supplied with a box of wooden bricks, with
which he made himself happy in a quiet corner, and Lina was placed
on a chair with her face to the wall, and kept there for some time.

"I have spoken to you for your heedless, noisy ways very often, Lina.
You know that Flo is never to be startled, yet you rush in, making as
much noise as a big rough boy."

"I forgot," said Lina; and she cried a little as she sat in punishment.

Foolish Hetty thought that Mrs. Eyre was hard upon the child, but it
had been well for her if her mother had taught her to think of what
she was doing when she was Lina's age.

Mr. Eyre came home very tired at seven o'clock. He was accountant
and book-keeper at Messrs. Miller & Cartwright's great
establishment, in the city of which the place where he lived was now
a suburb, though it retained its old name of Little Hayes, given when
it was a village three or four miles from B—. Tram lines now came to
the end of the trim new road, with its red brick terraces, crescents,
and villas; but the straggling village street in which the Hardys lived
was as yet unchanged. Every year, to Mrs. Eyre's great grief, a new
villa or a row of small 'genteel' houses appeared like magic on the
pretty bit of common; she feared that before her children were grown
up there would be no common left for them to play on.
Mr. Eyre came out of town on the tram-car, and Mrs. Eyre had tea
ready in five minutes after he arrived. She had made a little meat pie,
and had prepared a green salad that Mr. Eyre said would have made
a man eat even if he were not hungry: which, he added, was not his
case. Hetty had her tea all by herself in the kitchen, and was young
enough to feel quite grand at having her own little teapot. Indeed,
she could not feel lonely while she had that sixpence in her pocket.

The remaining days of that week passed uneventfully, until Saturday

came. Mrs. Eyre was watchful, and Hetty had no great opportunity of
distinguishing herself. She felt very well satisfied with herself, for, as
she said, "The first week was nearly over, and she had only broken
one plate, and sat down on Mrs. Goodenough's bonnet, which
seemed none the worse."

But the week was not quite over.

"Celia," said Mr. Eyre, "this is Saturday, you know, and I shall be
home by four o'clock. Now that you have that good-natured girl to
see after Flo, don't you think you and the others might come out for a
walk? It seems ages since we had a walk together, and these long
evenings are delightful."

Mrs. Eyre, poor thing, felt nervous at leaving Flo even for a short
time, knowing as she did that Hetty was rather giddy. Still, it was very
hard upon her John to have to take his weekly walk alone, when all
he cared for was to have his wife and children with him. She thought
it would be unreasonable to refuse. So it was arranged that they
were to be ready to set forth when he came home.

"Hetty, as I'm going to walk in the evening, I shall not go now. Will
you take Miss Flo, and walk up and down before these houses?
Now, Hetty, do not on any account leave the terrace."

"Mamma, why may not I go in the evening too?" asked Flo, in her
precise little voice. "Hetty could carry me. Oh, mamma, do please let
me go."
"No, my dearie; you know the doctor said you must not be out in the
evening. Now my little Flo must be good—not selfish, you know."

"May Hetty take me up to the common? I do not like being here in

the road."

"It is only for one day, dear. Now you know I want you to be good.
Here's your nice pretty shawl. Let me—"

"I want to wear a jacket, like Lina, mamma. I hate being wrapped up
in a shawl!"

"This is best for you, love. You know putting on a jacket hurts you."

"Come, Miss Flo," said Hetty. "I'll tell you stories all the time—new
ones."

"Don't be f'etful, Flo," remarked Lina, who did not go to school on

Saturday.

"You would be fr-r-r-etful if you were me," Flo answered, sounding

the r very finely. "Yes, and more, too."

Hetty carried her off, thus bringing these personal remarks to a

conclusion.

When Mr. Eyre came home, he found the party ready to set off.
Going into the parlour for a word with Flo, he found her apparently
asleep; so he stole out, and got the other children quietly out of the
house, shutting the door softly. Hetty, sitting darning socks, presently
saw a pair of tearful eyes opened.

"Hetty, it is wicked, I know, but I do feel that it is very hard on me."

"Miss Flo, dear, you know it is God's will, and He knows what is good
for us. Mother always says so. She tells us not to murmur, because
God sends what is good for us."

"Yes; but it's easy to say that," replied poor little Flo tearfully.
"Well, miss, when father died, quite sudden, and mother was left to
feed and clothe us all without any help, not one word of a grumble
did she ever say; but said it was God's doing, and He'd help her to
bear it."

"Your mother must be very good, Hetty."

"That she is, Miss Flo. Come now, shall we play cat's cradle, or
draughts? or shall I get Master Edgar's bricks, and we'll fix this tray
with one end on the back of the sofa, and the other on the back of
this chair; yes, it's quite steady. You were wishing only yesterday that
you could have a play with these bricks. Now we'll see if we can
build a tower, as Master Edgar does."

The bricks were a novelty, and as such they pleased the child for
about half an hour. But Flo could only begin the tower; she could not
stretch up her little arms to build it very high. Hetty was not very
expert, and altogether the tower was a failure. Then poor Flo began
to reflect again that it was very sad for her to be left at home when
the others went on the common with papa.

"But you were there only yesterday, Miss Flo."

"Oh, but when papa goes, it is quite different. They will walk on and
on, ever so far; they will get into a lane at the other side of the
common, where there are flowers, woodbine, and pink and white
roses, so pretty! They will stop at Mr. Gibson's, and see his lambs. I
saw them last year, for then I could go in the little carriage, you know.
They were so pretty; they skipped and jumped about so merry. I like
to see things jump and run about. But I never see anything now,
since papa brought the big doctor from London to see me. He was
here, you know, to see some rich lady, and papa went to him, and
told him about me, and he came. It was good of him, I know, but I
wish he had not been so good, for he said I must lie still, and never
be wheeled in the carriage. Oh, Hetty, take away the tray and the
bricks. I think I hate them; it can't be wrong to hate dead bricks—only
live things you know. What makes you cry, Hetty?"
"Because I am so sorry for you, Miss Flo, and I'd do anything to
make you happy. Oh, Miss Flora, I have the loveliest thought! Mrs.
Fenton, that lives not far from here, and is a friend of mother's, she
has a beautiful Persian cat that her mistress—I mean the lady in
London that was her mistress before she married—sent her for a
Christmas box. And Minnie—that's her name—has kittens, and I
know that last week they were not all given away, because she
offered mother one, but mother couldn't have a second cat. Now I'm
very sure that Mrs. Fenton would give me that kitten for you, and as
soon as ever your mamma comes home, we'll ask if you may have
it."

"Oh, Hetty, how lovely! What a very nice girl you are, Hetty! Mamma
will let me have it, I know; for she said lately that she wished I had a
kitten. What colour is it, Hetty?"

"Snow-white, with beautiful blue eyes; a real blue, not green, like
common cats. And its fur is long and soft, and its tail as thick as a fur
boa. They were the prettiest kittens I ever saw, and so merry! Mrs.
Fenton had a big cork tied by a cord to the back of a chair, and those
kittens were jumping at it and tumbling over each other; it was a
sight to see. I'm only afraid they may be all gone, every one admires
them so."

"This very moment," said Flo solemnly, "Mrs. Fenton may be going to
give away the last of the kittens—the very last. Hetty, I'm afraid I'm
going to cry. I should love that kitten so."

"Oh, don't cry, Miss Flo. Look, now; you promise me to lie quite quiet
until I come back, and I'll just run round to Mrs. Fenton's, and sec if
there's a kitten to be had."

"I will indeed; I'll lie here and never move. I always do when I
promise. Do go, Hetty. I am longing for the kitten."

Without stopping to think, Hetty ran off. It really was but a step; she
would have been back with Flo in ten minutes, but for one little
obstacle. It was raining now, though the evening had promised so
well. Hetty ran to Mrs. Fenton's, made her request, and got the
kitten, the very last. Mrs. Fenton had made up her mind to keep it for
herself, but gladly gave it when she heard for whom it was wanted.
Hetty flew back through the fast-increasing rain, and very soon
reached the door, when it suddenly dawned on her that having shut
the said door when she left the house, she had no means of
entering. If she knocked for ever, there was no one to let her in; and
what would be worse, Flo might get frightened—might even try to
reach the door. Clasping the kitten in her arms, Hetty sat down on
the wet step, and cried in utter desolation.

She would be sent home at once, that was quite certain. For had not
Mrs. Eyre told her not to leave Miss Flo, except to run down to the
kitchen and put the pudding, which she had prepared, into the oven?
—that pudding which was to form the great feature in the hungry
children's meal when the walkers came home.

Hetty knew that if she were that moment in the kitchen, putting the
pudding into the oven, instead of lamenting herself on the door-step,
and adding to the dampness of the evening by shedding floods of
tears, it would be too late, for she had quite forgotten to do it at the
right time. This reflection did not raise her spirits, and the kitten
began to wish itself back with its mother, so cold and damp and
alarmed did it feel.

Presently steps were heard; then a voice saying cheerfully, "There,

Lina; well done—you have run like a lamplighter. Are you very wet,
Celia? Here we are safe at home, and nobody a bit the worse. Hilloa!
What's this? Who are you, girl? What are you doing here? Why,
Celia, it is Hetty!"

"Hetty!" exclaimed Mrs. Eyre, hurrying forward. "Oh, Hetty! how did
this happen? Some one knocked, I suppose, and the door shut of
itself; that happened to me once. Oh, my poor little Flo! You should
have been more careful, Hetty. John, dear, open the door; you have
the latchkey."
John put his hand into his pocket, felt all about, tried other pockets,
and finally said, "What a stupid! I forgot to bring it. Now I must
clamber over the garden wall; which I shouldn't mind only for my
good clothes. Well, it can't be helped."

"Let me go, sir; I never thought of that!" cried Hetty. "I'm sure I can
get over, sir. And then I'll let you in, and give Miss Flo the kitten.
You'll let me do that before I have to go, won't you, ma'am?"

She ran along the side of the house towards the garden wall, and as
she went she tied the kitten up in her apron. Putting the struggling
little bundle on the top of the wall, she was over in a moment, for she
was very active. Seizing the kitten, she ran into the house; she had
soiled her neat calico apron, and torn two long strips out of it; but she
was quite past fretting over that. She flew up the kitchen stairs and
opened the hall door.

Mrs. Eyre hurried in and looked at Flo; the child was asleep, and
seemed very comfortable.

"Oh, ma'am, you need not be afraid for Miss Flo, for I was very
careful not to make any noise, and she was willing for me to go. I
know you told me not to leave her, but I forgot. The poor little thing
fretted so because she could not see the lambs, and I told her I
thought I could get her a kitten, and then she wanted to get it at
once; but I forgot what you said about leaving her, and I shut the
door. Oh, dear, I am very sorry."

"Is that you, Hetty? How quick you went!" cried Flo, whom the sound
of voices had awakened. "Had Mrs. Fenton a kitten left?"

"Oh, Miss Flo! Yes, my dear, she had. I've got it here."

She went up to the sofa, and Mrs. Eyre saw how the child's face
brightened.

"Why, you are wet, Hetty! Is it raining? Oh! oh! what a beauty! Oh!
you dear, darling kitten. Hetty, you are so kind; I will not fret a bit
more. See how she curls herself up in my arms! And, oh, Hetty, it's
actually purring! I didn't know such little cats could purr."

Hetty stooped and kissed the child; then she went out into the hall,
where Mr. and Mrs. Eyre stood, watching the little scene. Lina was
watching, too, with her hands full of sweet wild flowers; the two little
boys were in the basket carriage, and were both asleep.

"Ma'am," said Hetty, "must I go to-night? I'm very, very sorry. It was
dreadful careless of me—and to forget the pudding, too! I'll go this
moment if you wish it, ma'am."

"Not to-night, Hetty. There is no real harm done, I am thankful to say.

To-morrow I will decide. You may go down now, and get the things
ready for tea. Put the pudding into the oven; we must use it cold to-
morrow. The children must have some bread and jam to-night."

Here Edgar, who was generally a good-tempered child, and not

given to greediness, raised a howl because he could have no
pudding. He was only half awake, which must be his excuse. The
noise roused Flo from rapt contemplation of the kitten.

"Oh, mamma! Have you come home? Come here and see what
Hetty has brought me."

"Edgar, stop that noise at once! I'm ashamed of you; run upstairs
with Lina. Yes, Flo, I see. It is a very pretty kitten—a Persian, I think."

"And Hetty was so kind, mamma; so sorry to see me cry, because I

could not go with you all. She ran ever so quick to get the kitten from
Mrs. Fenton, and I promised not to move, and I fell asleep; so she
was back in a moment. Mamma, Hetty's mother is a very good
woman. When her father died, she said it was God's will, and she did
not fret. Hetty told me because I was fretting. Wasn't she very good,
mamma? her mother, I mean."

Here Hetty came in with the tea-tray, and Flo was soon very busy,
feeding her kitten with some milk, and laughing with delight to see its
little tongue go in and out as it lapped.

CHAPTER IV.
"WHAT'S IN A NAME?"

POOR Hetty! she thought herself the most unfortunate girl in the
world. How vexed her mother would be if she were sent home! And
Matty would be so sorry, and Dan would laugh. But worst of all, little
Flo would miss her; and she had become very fond of the frail,
suffering child.

However, she got up very early, and put all her belongings into her
box, to be ready if she had to go. Then she crept softly downstairs,
and got through a great deal of work. She swept and dusted the
parlour, setting out the breakfast table; she lighted the kitchen fire,
and set on the kettle. In fact, when Mrs. Eyre came down, rather
later than usual, for she had been tired the night before, she found
the greater part of her usual Sunday morning's work done.

"Oh, thank you, Hetty. I slept so long this morning. I thought we

should be ever so late."

"Ma'am," said Hetty, "do you wish me to go away now?"

"Do you wish to go, Hetty?"

"No, ma'am," and Hetty began to cry; "but I am always forgetting

things. Mother says I'll never be worth a pin."
"What's all this about?" said another voice; and Hetty saw her master
in the doorway.

"Hetty is very sorry, John; and what do you think?"

"Well, I was very angry last night, but thinking it over, it seems to me
that we might give her another chance. She did it to make the child
happy, and I don't think she will forget again."

"Sir, I don't think I could, not about leaving Miss Flo; but as to the
pudding, I really couldn't say, because I am so dreadful heedless."

"We'll say nothing about the pudding this time," said he, laughing.
"But don't be content to be heedless—no one need do that. I am
going out for a turn, Celia; but I shall be in good time for breakfast,
never fear."

"Well, Hetty, that is settled, and I am glad to keep you. For you are
so kind to my poor little Flo that I should be very sorry to send you
home; but indeed you must try to be steadier, or one could never feel
any real trust in you."

"Indeed, it's a great misfortune," Hetty said dismally; "and it's very
good of you and master to try me again."

"Don't call it a misfortune, Hetty—it is more than that. If you loved

your Master and Saviour as you love Miss Flo—for indeed I know
you do love her—you would be as anxious to please Him as you are
to please my poor little girl. And then we should have no more
forgetting or carelessness, because such things are wrong, and
grieve Him."

Mrs. Eyre went upstairs then, hoping that Hetty looked a little
thoughtful, and would ponder over what she had said. But Hetty
could do nothing but rejoice over her escape. So happy did she feel,
that she unconsciously began to sing.
Mr. Eyre, Lina, and Edgar went to morning service, and Hetty was to
go also; then she was to go home, and to return in time for her
mistress to go to evening service, Mr. Eyre remaining at home with
the children. He would be very glad to have Hetty's help, for
generally the baby refused to go to sleep on these occasions, and
his crying made poor Flo cross.

"Well, Hetty, I won't say but I'm glad to see you here again. I declare,
child, we've missed you a good bit," Mrs. Hardy remarked, when the
family reached home. "And how do you get on now?"

"Oh, I got on right well until yesterday. But I was dreadful yesterday,
mother." And Hetty proceeded to give a full account of her
misfortunes. "I thought they'd send me home at once; but they are so
kind, and Miss Flo is such a darling, it would just break my heart to
leave her now."

"Well, you needn't cry over it now, Hetty. I daresay you blubbered
plenty at the time." At which there was a general laugh at Hetty's
expense. "But if you want to stay, you'll have to mind yourself. They
won't overlook many pranks like that. I wonder how they kept their
hands off you, I declare."

"Oh, they're not that sort at all," answered Hetty. "I'd better be going
now, maybe; but I couldn't be easy in my mind until I had told you
this."

"You won't be expected until five o'clock. I settled that with your
mistress. So sit down, and we'll have dinner. After dinner you can all
go and have a walk if you like."

"And mother'll take her nap," said Dan.

"Well, I want it, Dan. I'm not so young as you, and I work very hard."

After dinner the young people all went up to the common, but Dan
and Ned soon met some lads they knew, and deserted their sisters
and the little ones. The children played about, and Matty and Hetty
had a nice quiet talk. Hetty had much to tell, for the week spent with
the Eyres had been such a new life that it seemed as if she had
been away from home a month at least. Matty gave her lots of good
advice, but she had such a gentle, kind way of advising, that no one
was ever annoyed by it.

"You know, Hetty," she said, "you are a Christian—you believe in the
Lord Jesus, and mean to serve Him. And you must mind what He
says about eye service—and it is eye service when you forget what
has been said to you the moment your mistress's eye is off you."

"But—I only wanted to please poor little Miss Flo."

"Hetty, dear, think more of pleasing Him than of pleasing Miss Flo. If
you'd thought for a moment, 'What would He tell me to do now?'
you'd have remembered that you were not to leave the child."

Hetty listened, and thought how good Matty was, and how much she
wished she was like her. But she had such a sad habit of only half
attending to what was said to her, that she did not really take in the
sense of her sister's words.

Hetty went home in good time, and took care of the baby so skilfully
that he never cried once.

For a while all went well. Hetty had got such a fright that she really
put her mind to her work, and when she did so, no girl could do
better than she. But presently the impression made by her
Saturday's adventure began to fade from her mind, which began to
wander about "wool-gathering," as of old. Her day-dreams were very
innocent, being principally concerned with that still unspent sixpence.
The weather was fine, and they were out on the common for several
hours of each day. Flo enjoyed this, and the fresh air made her
sleepy, so that the day did not seem so long. Moreover, the kitten
was a great pleasure to her. It was a frisky, jolly little kitten when
awake, but it had good capacities for sleep, so that Flo and her kitten
took their naps together in great comfort.
For some days Flora was in great anxiety about a name for the
kitten, which she called Kit provisionally. A name pretty enough for
so pretty a kitten was very hard to find—at least, so Flora thought.

Every one suggested names. Hetty thought Pinkie very pretty, and
the kitten had such a dear little pink nose; but Flo scouted the idea
with contempt. Mrs. Goodenough mentioned Fluffy, but that was
regarded as an insult to the kitten's personal appearance. Lina said
that all cats ought to be called Pussy. Flo was obliged to pretend not
to hear this, she thought it so silly. Mrs. Eyre thought Pet would do
nicely, but it did not satisfy Flo.

At last, waking up from a nice nap just in time for tea, Flora
announced that the kitten must be named that very night, or she
would begin to think that Kit was her real name. As the little creature,
like all Persian cats, was quite deaf, there did not seem to be much
danger of this.

"Now every one of you must think of a new name; none of those you
have said before. Think hard, now. I'll give you time."

She counted twenty, and then said, "Now, mamma, you first."

"Queen Elizabeth would be a very grand name."

"I'm very sorry, mamma, but it is too long. No one would ever say
Elizabeth, and I don't like Queen by itself. Now, Hetty, what's your
new name?"

"Miss Flo, I've told you every name I ever knew a cat to be called."

"But I don't want an old name. I wish for quite a new one."

"Well, would you like Darling, miss? My sister Annie had a kitten
once called Darling."

"It's a pretty name, but I wonder you will tell me names that have
been used before."
"I never knew a cat called My Lady, Flo," said her mother.

"Call her Nebunezzar," said Lina.

"Nebuchadnezzar, Lina! Don't be childish," Flo answered, with

dignity. "It must be My Lady, I suppose. Here comes papa! He shall
choose."

On the case being stated to Mr. Eyre, he gravely replied, "Flo, your
cat is a Persian cat, or will be, if she lives; so she ought to have a
Persian name, and you can choose between Zelica and Nourmahal."

"Oh, papa! such lovely names! Say them again, please."

Mr. Eyre having done so, she said, "I choose Zelica, papa. For
though I could say Nourmahal, I don't think Lina would, and I don't
see how it could be shortened. Zelica! it is really a lovely name—you
are sure it is Persian, papa?"

"Quite sure, my dear. I found them for you in 'Lalla Rookh.' A Persian
story, you know."

"Come here, Kit. Your name, my own dear pet, is Zelica. Don't tell
me she can't hear me—see how she listens with her pretty blue
eyes! Zelica, my dear! Lina, can you say it? It is an easy word."

So the vexed question was happily settled, and Zelica had a bit of
blue ribbon tied round her neck, to mark the day. This gave Hetty
plenty to do, for Zelica evidently thought that the right thing was to
get the blue ribbon off as soon as possible, and to run away as fast
as she could with Hetty at her heels, and her little mistress's
delighted laugh sounding sweet and clear from the sofa. Then Flo
tied the ribbon on again, and the whole performance was repeated,
until Mrs. Eyre could not but admire Hetty's endless patience. But I
suspect that Hetty enjoyed the fun quite as much as Flo did, and as
to the waste of time that would have distressed busy Mrs. Eyre,
Hetty cared nothing for that. Indeed, I think myself that she was very
well employed.