Finance and Cost Management in the Process of Logistics 4.0

Abstract

Industry 4.0is a revolution of creating added value, based on the use of machinery and robot power instead of arm strength of works that do not require any qualification and specialization on jobs that require qualification. Replacing the manpower of the machines, making them coordinable; thanks to new developments in computers and internettechnology, and making the production processes self-manageable, led to the emergence of the Industry 4.0concept. Logistics 4.0 explains the implications of Industry 4.0 on transport and cross-functional coordination tasks and how digitalization and automation in logistics should be shaped and supported. In the case of applying Logistics 4.0 in the supply chain, it provides significant and potential cost savings. The financing of the supply chain in the Logistics 4.0 process, which is the subject of this study, is extremely important for logistics companies to gain profits with low resource cost and working capital, and maximize cash flows and increase firmvalues. The supplier companies and the focal company in the supply chain utilize the credibility of the focal company to finance their investments at a low cost. Firms in the supply chain also need to reduce their working capital and increase asset turnover (sales/assets) by lowering their stock levels in order to increase their return on equity (ROE). In order to reduce the working capital of logistics companies, they need to decrease their stock levels, storage costs, transportation costs, and increase their service levels to customers. According to the case study findings relatedto SCF, if the suppliers in the supply chainuse the SCF instrument, a serious decrease in credit costs is observed. In order for Focal Company to take advantage of these transactions, the supplier companies in the supply chain must make an additional “pro rato” payment or sale discount.