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We are entering the age of advanced cost management but it will cost the population also under this new era. By 2030 the global unemployment level will scale up significantly across major economies and cost of production will be zero and incremental profit will be huge. Yes don’t be surprised what I have written and what I am going to say. Over the last 14 years I have tried to present those things which are going to be the game changers in the global map of business and trade. In continuation to that I bring this series also to you. Cost Management has been a boon for the global economy across industries. Get the products at least cost available to the world at large have been a prime target for the subject cost management.  Surprisingly billions of people are still left to get the benefit despite of marginal cost of production coming down to zero. The best example is Micro SD cards where economies of scale of production made it zero cost of production.

Now the surprising part is that this cost management itself has given birth to Artificial Intelligence and robotics which are advanced stage of reducing manufacturing cost by eliminating human labor. Well by 2030 or before that billions of jobs will be lost and the beginning of the same has happened from Japan.AI will now be handling insurance industry jobs. Don’t be surprised Japan has already started replacing human labour through AI in insurance industry. This is an industry which is linked with huge employment as there is a huge back office work involved and this very place is going to be ruled by AI. One Japanese insurance company, Fukoku Mutual Life Insurance, is replacing 34 human insurance claim workers with an AI called “IBM Watson Explorer,” starting by January 2017.

Now this AI will scan hospital records and other documents to figure out insurance payouts, factoring injuries, patient medical histories, and procedures administered. This has been informed by the company press release. Yes AI will replace the jobs and soon this will spread to broking industry and other segments also. The surprising part is that it will replace an industry which is high employment generation and cost management is optimum level required so as ROCE don’t get deviated from the objective of the shareholders.  Now through this automation process, the efficiency level of the organization and its resources will achieve new heights which are a part of cost management tool. Fukoku Mutual will spend $1.7 million (200 million yen) to install the AI system, and $128,000 per year for maintenance, according to Japan’s The Mainichi. The company will saves roughly $1.1 million per year on employee salaries by using the IBM software according the sources. So cost management and strategic savings will be the key segment for the industry in the long term.

These AI will replace BPO and call centre jobs since the software typically takes the customer’s words, converts them to text, and analyzes whether those words are positive or negative. Hence service industry will soon find significant change in its employment structure. Cost management is taking new jump into a new world which will be quite difficult to understand currently unless it becomes routine. Global uncertainty has made companies to look for variable costing tools and reducing more of the fixed cost burden improving the leverages. This fixed reduction now will lead to adoption of AI and Robotics making every industry to adopt a seasonal approach of sustainability and resulting less mandatory burden of fixed cost and adoption of labor laws.  Rising wages have been cost along with compulsory state and country social benefits for the labor. Now AI and robotics frees up the capital compulsion for investments and also from the burden of slowdown and fixed cost burden during hard times.

In another part of the world an Israeli insurance startup, Lemonade, has raised $60 million on the idea of “replacing brokers and paperwork with bots and machine learning. These are countries are going to go for advanced levels of information technology as they lack human skills. Now in order to get health GDP growth and attract investments technology plays pivotal role replacing the human manpower. Now least focus will be given towards improving the human skill and more investments will be towards these AI and robotics. It will be foolish argument that wills AI and robotics will replace all human manpower.

We are in the era of smart technologies where a car is getting parked through smart phone software. It’s bound to create problem for the human manpower but my only worry is that service industry is getting replaced soon by AI. Well cost management is taking new leaps in the new world.


Published by

Indraneel Sen Gupta
(Vice President-Business Development,Research & Product IFAN Finserv Private Ltd.(SPA Group Company) )
Category Others   Report

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