Enhancement of Time-Driven Activity–Based Costing (TDABC) by using Simulation in Manufacturing Process towards Industry 4.0

Abstract

The new industrial revolution brings changes to organizations that will need to adapt their system to sustain their business in a highly competitive market. In term of costing, most manufacturers continuously working towards reducing production costs by focusing on activities process improvement and resources as a cost driver. One of the current problems faced by most manufacturers that adopted Time-Driven Activity-Based Costing (TDABC) is lack of combined used of simulation as a tool for validation. Conventional technique also caused users estimated incorrect variables consideration to the costing system. The purpose of this paper is to provide a system for managers or decision makers to analyze results which can significantly reduce production costs by eliminating unnecessary resources with the aid of a simulation model. Simulation was proposed as new approach to determine the optimum results based on the given scenarios. An analysis on how the framework was implemented at an automotive manufacturing company was illustrated the enhancement of TDABC by using simulation. Results of conventional method using Activity Based Costing (ABC) was compared with TDABC where existing production layouts and parameters were maintained. Simulation model was created based on current situation and the results were compared to the old method. The results indicated that simulation can easily be adapted to support the planned and operational TDABC activities. Towards industry 4.0 it was proven that simulation is one of the key technologies in the new industrial revolution. Besides that, TDABC methodology in this research is more accurate and faster, by means of an enhanced decision-making process and supported organization manufacturing system.