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CHAPTER 6
TOTAL COST OF OWNERSHIP (TCO)
identify cost elements that are unusual or require attention, compare the total
cost for obtaining similar products from different suppliers and regions and make
better decisions. Total landed cost calculations are also an important element
of managing supply chain risk.
6.6 CONCLUDING REMARKS
Managing purchasing costs from a total cost perspective is one of the best ways
to manage supply chain costs and risk. And, as companies experience ever
greater pressure to achieve improving financial results, the benefit of making
decisions that are backed by objective data rather than incomplete or subjective
analysis become self-evident. Best practice companies have developed total
landed cost, supplier performance and life-cycle cost models as an integral part
of their strategic supply management objectives. Given the growth in international
purchasing and the uncertainty that surrounds supply chains today, these models
should no longer be thought of in theoretical terms.
6.7 REFERENCES
[1]
White L., Determining total cost of ownership, food service equipment
and suppliers, Vol. 59 (Issue 2), 2006, pp. 28-32.
[2]
Ferrin B.G. and Plank R.E., Total cost of ownership models: An exploratory
study, The Journal of Supply Chain Management, Vol. 38 (Issue 3), 2002,
pg. 25.
[3]
Ferreira J. and Prokopets L., Does offshoring still make sense? Supply
Chain Management Review, Vol. 13 (Issue 1), 2009, pg. 23.
[4]
Hannon D., 9 Hidden costs of global sourcing, Purchasing, www.
purchasing.com, Accessed March 2009.
[5]
Adapted from Rudzki R. and Trent R., Next level supply management
excellence, Fort Lauderdale, J. Ross Publishing, 2009, pg.78
[6]
Cowman K., Material costs, materials management and distribution,
Vol. 49 (Issue 7), 2004, pg. 73.
[7]
Ellram L.M., A framework for total cost of ownership, International Journal
of Logistics Management, Vol. 4 (Issue 2), 1993, pp. 49-60.
[8]
Adapted from Trent R. and Roberts L., Managing global supply and risk,
Fort Lauderdale, J. Ross Publishing, 2009, pp.78-79.