Machine learning (ML) and artificial intelligence (AI) have many viable uses in business, including reducing overhead costs. They can automate or optimize most variable expenses using data and high processing speeds. Here is how this technology can decrease expenditures.
What Are the Benefits of Using ML and AI?
Leveraging ML and AI is beneficial because it’s a low-risk, high-reward approach to reducing overhead costs. You could utilize them to their full potential with only a minor understanding of the technology.
Why should you use AI over other cost-reduction methods? It’s one of the few tools that can work more efficiently than a human in high-processing tasks. Plus, it can operate independently with little oversight or maintenance.
How Can ML and AI Reduce Overhead Costs?
Overhead expenses can be fixed, variable or semi-variable. ML and AI can’t reduce the cost of salaries or insurance premiums, but they can make most other things more affordable.
Transition to Automation
AI outperforms other technologies regarding automation because it approaches tasks with insight and adaptability. Most businesses could use it to overhaul their current processes. AI can automate nearly 80% of manual labor, according to research.
ML and AI can also automate things other than labor. For example, they can monitor utility and supply usage to identify potential pain points. Since they function with human intelligence, they can take over most manual responsibilities.
“While many tools are effective, intelligent algorithms are unparalleled in their speed, processing power and utility.”
The first way ML and AI can reduce overhead costs is through efficiency. While many tools are effective, intelligent algorithms are unparalleled in speed, processing power and utility. They can rapidly analyze hidden patterns in massive data sets to identify areas of improvement.
Increasing the efficiency of the processes behind overhead costs makes them more affordable. Most businesses can benefit from leveraging this technology. For example, around 80% of telecom professionals lowered operational expenses after utilizing AI.
“An overhead of 35% is standard, so you should reanalyze your budget allocations if your percentage is significantly higher.”
Data-Driven Decision Making
One of the most significant benefits of ML and AI is their ability to make informed choices. Since they can process information much faster than humans, using them in decision-making is much more effective. They might find things you have previously overlooked.
For instance, most businesses allocate around one-fourth of their budget to marketing. In 2023, those selling products spent nearly 23% of their total funds advertising to consumers. Communication service providers averaged almost 22% in the same year.
Even with segmentation and demographic targeting, a marketing attempt is a shot in the dark without data. ML can collect customer information, analyze it to find patterns and give you relevant insight.
“You can leverage ML and AI to improve almost every overhead cost as long as it’s variable or semi-variable.”
An overhead of 35% is standard, so you should reanalyze your budget allocations if your percentage is significantly higher. Even if you spend much less, it’s still beneficial to integrate ML and AI to reduce overhead costs.
For instance, you can spend less on water and electricity. Typically, businesses pay a little over $2 per square foot to supply utilities to their office space. It adds up quickly for larger workplaces, so it’s an ideal area for improvement.
Which Overhead Costs Can ML and AI Impact?
You can leverage ML and AI to improve almost every overhead cost as long as it’s variable or semi-variable. They can increase efficiency, automate processes or support you with data-driven insight.
Here are the most expensive standard overhead costs:
- Utilities: AI can monitor utility usage and recommend how to use less. For example, it could identify how most of the electricity bill comes from low-traffic areas where people forget to turn the lights off.
- Supplies: Most businesses waste supplies, whether they expire or never get used. ML can compare usage statistics to buying history to show where you can scale back unnecessary purchases.
- Payroll: Minor miscalculations can change payroll from a fixed overhead cost to a variable one. Integrating AI could minimize human error, reliably reducing overhead costs.
- Maintenance: ML can perform predictive maintenance, analyzing current and historical data to determine when equipment needs servicing. It can greatly reduce downtime since you only tend to machinery when necessary.
- Commission: Algorithmic recommendations personalize the shopping experience and don’t require a financial incentive to land a deal. AI can reduce the overhead sales-oriented businesses must pay in commission.
- Transportation: Delays and miscommunication are common factors in supply chains. ML can analyze routes in real time to optimize them. It could reduce fuel use, avoid high-traffic areas and deliver products faster.
Although every business has different overhead costs, most share these. AI can automate or optimize almost every variable since it is such an adaptable technology.
Which Industries Will This Help?
ML and AI can help every industry reduce overhead costs. You can find a use for them no matter which one you’re in. They’re incredibly adaptable, considering you can train them on whatever information is relevant to you.
However, some have much more potential for improvement than others. For example, the construction industry could automate 45% of its duties by 2035. Businesses should consider their overhead costs and identify where they could use AI integration most.
Integrate ML and AI
Consider integrating ML and AI into your processes to reduce your overhead costs. Since they can adapt to fit whatever need you have, there is undoubtedly an area of improvement you can target.