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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.

, 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.