The rise of technological innovations changes routines and the operation of companies, with transformations related to products, processes and people. In addition, it is necessary to consider the economic scenario in the country and in the world, which requires special attention to avoid damages that put profitability and business maintenance at risk.
In this text, we will show the applications of the Opex and Capex concepts, considering the 4.0 Industry era. Read and find out the best way for finance in your organization.
Opex and Capex
Opex and Capex are acronyms that mean Operational Expenditure and Capital Expenditure – and they are widely used when planning an organizations finances.
Capex is an expense related to investments and acquisitions of capital goods, while Opex focuses on the expenses and costs of maintenance of equipment and resources related to activities and services of the company.
The purchase of a printer to print catalogs, for example, is Capex. The hiring of a printer to print these materials is Opex. In the first case, the payment is made at the time of purchase and the tax discounts occur from the depreciation of the asset, while in the second the expenses occur only when there is need for service and the tax deduction occurs in the current year.
Opex and Capex in Industry 4.0
In view of the rapid technological advance – a characteristic inherent to Industry 4.0, which has already reached its second wave – Opex has taken on a leading role in organizations. And there are good arguments in favor of that.
The rhythm of discoveries and technological innovations that make outdated technologies faster, as well as the possibility of outsourcing services and reducing burdens, make Opex offer an excellent cost-benefit ratio for business.
Thus, instead of employing a high investment in the acquisition of computers, for example, it is possible to rent the equipment. Besides the capital savings, the company:
- doesn’t have to worry about maintenance, which is already included in the rent;
- avoids depreciation, since every product or equipment loses value as soon as it leaves the store;
- can more easily replace the equipment with more modern ones whenever necessary – you can even change the supplier at the end of the contract;
- does not need to decapitalize, keeping the cash on hand or using it for whatever it thinks is most interesting.
We must not forget, however, that Capex expenses are incorporated as assets in the company’s balance sheet. These tangible assets are responsible for demonstrating the asset value of the organization, making it more valuable in the market.
Other examples of the replacement of Capex by Opex are:
- renting a commercial property (Opex), instead of buying it;
- signing applications using the software as a service model (SaaS), instead of the final acquisition (Capex).
In the next topic, learn more about these two perspectives, their advantages and disadvantages, in view of the current phase of the world industry and how they should be analyzed to generate benefits to the activities.
Capex and Opex: what is ideal in Industry 4.0?
To start answering that question, check out the main advantages and disadvantages of Opex and Capex:
- Advantages – Opex: it is easier to approve expenditures (which is usually lower when compared to the other modality); greater flexibility of costs, without resorting to decapitalization; deduction in the taxation of the current year;
- Disadvantages – Opex: values are understood as expenses (and not investments); there is the possibility of high costs in the long term;
- Advantages – Capex: value spent is understood as investment; it gives long term return; it increases the assets cash flow;
- Disadvantages – Capex: high costs in the short term; greater difficulty in approving expenditures, usually higher in Opex; depreciation of assets acquired.
Deciding whether to use Capex or Opex therefore depends on an assessment that identifies the best option for organizational results, and a careful study is essential to compare the costs of: manufacturing equipment, acquisition or provision of services, taxes, revenues and return on investment time for each option (Capex and Opex).
But, as we said, it is undeniable that Opex offers the agility and flexibility necessary for companies to remain competitive in a market that is constantly changing, making use of the most modern products and services and generating savings for the organization.
In fact, the current market moment has even gained its own name. It is the VUCA moment, an acronym that describes four resources very present in our daily lives: volatility, uncertainty, complexity and ambiguity – learn more by reading this Forbes article.
Having subsidies to define Capex and Opex will ensure the best benefits for your company. And, speaking of advantages, take the opportunity to know Soluparts differentials by reading this article about our value proposition.
What is the impact of this shrinkage on business and the supply chain? In this post, we will reflect on this topic. Check it out!
Why Slowbalisation is happening
In the 1990s, globalization gave rise to the idea of a flat world, where borders mattered little when it came to the flow of ideas, goods, services and capital.
Development in the technology, communication and transportation sectors reinforced this concept, suggesting a world increasingly connected.
But in recent years this movement has begun to slow down, giving rise to Slowbalisation. Why is that?
A conjunction of factors has led to this condition, among them, geopolitical changes. The advance of nationalist and protectionist governments, especially in the United States, has put globalization in the spotlight.
But that is not the only reason. The technological advance that has occurred in every corner of the planet has leveled products and services, making it easier for the final consumer to find what he or she needs in a place close to where they are located. This is because the same consumer, more aware and demanding, started to create a demand for customized products and faster deliveries.
Another determining factor for Slowbalisation is the high costs involved in purchasing raw materials. Especially fuel, which also interferes with the value of transporting goods.
Price fluctuations in the fuel market, in fact, constantly affect the logistics sector, generating inflation in the final price of products. They act as a kind of domino effect, where carriers increase their values in order to not suffer losses and purchasing companies pass on the same increase to the final price of products, in a compensation that affects the logistics chain.
And we must not forget that globalization has allowed emerging countries to become richer, being able to produce more and, of course, increase the consumption of their own goods – which leads us to conclude that it may have been a victim of their great success.
Slowbalisation X Supply Chain
During the 1990s and early 21st century, many companies defined their supply chains in the use of cheap labor, even if it was on the other side of the planet.
With the shift to just-in-time logistics, however, this type of decision changed, creating yet another reason for Slowbalisation.
The adoption of a model where stock is acquired as needed, operating at continuously low levels, helps to reduce costs and increase efficiency. However, it requires a very careful programming for the demand of products, avoiding shortage of materials – in our blog you find an article that shows what is the most beneficial for company finances in industry 4.0: buying products or services (CAPEX or OPEX)? It’s worth reading to find out!
Instead of large quantities of materials – purchased at lower prices in countries with lower labor costs – we now see came into play:
- local workforce, with greater qualification and knowledge of the production stages;
- technological solutions capable of planning and monitoring each stage of the production process, avoiding waste and interruptions due to lack of parts.
These capabilities generate increased visibility and control of the supply chain, allowing rapid identification of any failure that may affect it, making your operations more efficient and optimized.
And, for the future, it is quite reasonable to assume that new technologies will emerge to develop the supply chain according to the needs of different markets and decrease the dependency on products that today can only be found in more distant places. This is the case of the 3D printer, for example, among other innovative technologies we have already talked about in our blog – learn more about 4 technologies that will change global trade forever!
Reliable Supply Chain: essential in Slowbalisation
One of the main precautions to be taken with the supply chain in post-globalisation is to guarantee the availability of the materials needed for production.
This is already possible with the existing sophisticated technologies, which analyze the chain in real time, ensuring efficiency, agility and cost reduction – in this sense, know a proposal that unites reliability and speed at the time of purchasing your company.
But in the Slowbalisation era it is also essential to have an extended supply chain network. And the best way to guarantee this network is to count on the partnership of a company that can supply any item with the best price and term conditions.
Soluparts specializes in the acquisition of all types of industrial materials for maintenance, repairs and operations, facilitating the entire purchasing process.
Count on experienced professionals to make your supply chain much more efficient – even in times of Slowbalisation. Get a quote and surprise yourself with our service.