The Hidden Drivers of Operational Costs | SoundHeal

Operational costs, which account for 60-80% of a company's total expenses, are a critical component of a business's financial health. According to a study by Deloitte, the average company spends around $1.3 million per year on operational costs, with labor costs making up the largest share at 40%. However, as noted by management expert Peter Drucker, 'there is nothing so useless as doing efficiently that which should not be done at all.' The skeptic might argue that many operational costs are unnecessary, and that companies can reduce their expenses by streamlining processes and eliminating waste. For instance, a case study by McKinsey found that a company was able to reduce its operational costs by 20% by implementing a lean management system. As companies look to the future, they must consider the impact of emerging technologies, such as artificial intelligence and automation, on their operational costs. With the global operational cost management market projected to reach $14.5 billion by 2025, it's clear that companies will need to stay ahead of the curve to remain competitive.