If you have been considering the implementation of a business analytics program in your business, you’ve undoubtedly uncovered several good reasons to do so. From making better business decisions to staying ahead of industry trends, analytics is changing virtually every aspect of how companies are operating. Perhaps the most compelling reason to invest in business analytics, though, is the simple fact that using the insights gleaned from your company’s data can save a significant amount of money every year.
As you develop your budget and explore ways to make better use of your resources in the coming months and years, consider these potential money-saving benefits of using business analytics.
Improved Building Efficiency
In many companies, the costs of the building — and all the equipment, utilities and supplies used to run it — are seen as fixed overhead costs, and thus nothing can be done about reducing them. So when revenues slow, cost-cutting tends to focus on other areas, including reducing staff. The result is that businesses often end up paying the same amount of money for a building even when it’s housing fewer people. This isn’t an efficient use of resources, and in some cases, doesn’t even reduce costs all that much.
However, by utilizing analytics, businesses can more effectively find areas where they can cut costs, in some cases, without reducing staff. For example, one grocery store chain was able to reduce refrigeration costs by 20 percent by analyzing the temperatures of in-store coolers. In-depth analysis found that the coolers were being kept several degrees lower than necessary, thereby increasing power usage. By increasing the temperatures by just a few degrees, power costs went down without affecting safe food storage. Other businesses have been able to use a combination of data sensors and analytics to identify heating and cooling inefficiencies, water leaks and other costly problems, significantly improving the efficiency of the buildings and saving money.
Reduced Fraud and Better Risk Reduction
Many companies, particularly in the finance sector, have begun using analytics as a tool to reduce fraud and the risk to businesses and customers. For example, banks and credit card processors use analytical data to identify potentially fraudulent purchases, using a defined set of markers based on the analysis of thousands of previous transactions. A business may not conduct this analysis directly, but they do benefit from partnering with other companies that do, saving them thousands of dollars in fraud costs every year.
By the same token, predictive analytics is being used to look at customer profiles and gauge the level of risk they present. Using data gathered previously, businesses are better able to rate the risk that a particular customer presents and thus move forward accordingly. This analysis helps prevent losses, and builds stronger customer relationships.
Reduced Manufacturing Costs
In one notable example of analytics at work, technology giant Intel has been using predictive analytics since 2012 to reduce manufacturing costs — to the tune of more than $3 million. They’ve done this by using analytics to determine which chips need which tests before being released to market. Prior to using analytics, Intel performed an exhaustive 19,000 tests on each chip being manufactured. However, by using the data gathered from all of that testing, the company is better able to identify which chips need which tests and save both time and money.
Implementing an Analytics Program
These are just some of the ways that business analytics can save your business money over time. However, for many companies, especially small businesses, implementing such a program is a perceived stumbling block. However, you do not need a team of data scientists, programmers and engineers to implement business analytics. In fact, thanks to programs where you can earn a master’s in business analytics online, managers with a quantitative background can develop the skills necessary to build a stronger balance sheet.
Before beginning any analytics program it’s vital to develop clear, quantifiable metrics that align with the stated basic objectives and goals or else you risk spending time on fishing expeditions that are less likely to produce any real insights that can be implemented for cost savings. When you put the right people in charge, and launch your analytics program with clear goals in mind, you should see quantifiable results and significant savings.