On Economic Impact of Industry 4.0: Time-Driven Activity-Based Costing System

Abstract

<div class="section abstract"><div class="htmlview paragraph">As the world is moving toward optimized production strategies, third-world countries are also putting their efforts into contributing to this smart manufacturing approach. However, despite realizing the impact of its global significance and reduction in financial overheads, most of the third-world potential industries are hesitant to this transformation. The predominant reasons are huge capital investments and the cost of handling technology. In this study, a cost calculation methodology is recognized that analyze the cost benefits of technological investment. The case shows that the adaptation of Industry 4.0 is more economical than the traditional manufacturing approach. In an existing setup, a traditional TDABC is being applied, where cost id resources such as labor and material are included in a product cost at the end. This approach losses the visibility of associated labor and material cost used for the particular activity giving an offset in a product cost. Therefore, it is highly necessary to improve this traditional methodology by measuring and analyzing activities for every resource consumed. The methodology used in this study is advantageous, easy to implement, and maps the strategy that can be commonly utilized for any manufacturing activity to gain a competitive advantage in an entire value chain of Industry 4.0. In this study, a modified real-time application costing tool, time-driven activity-based costing (TDABC), is proposed. A comparative analysis of existing and proposed TDABC is performed. The outcomes of this study signify the adaptation of digital manufacturing for higher productivity, a reduced amount of operational budget, and efficient utilization of resources.</div></div>