Total cost of ownership (TCO) is an assessment of all costs, direct and indirect, involved with an item over the useful life of that item. Most frequently, The Total cost of ownerships is used at the beginning of the purchase process to evaluate which is the most cost-effective choice. When TCO is calculated at the time the selection decision is being made, many of the included costs are estimated, because they have not yet been incurred Calculating the total cost of ownership can give an organization more detailed information with which to make the purchasing decision. Most purchasers know that quoted purchase price is not the only cost involved in obtaining and using an item. Inclusion of all other known cost factors allows a more complete picture to emerge. TOTAL COST OF OWNERSHIPS REDUCTION APPROACH :- The total cost of ownerships are the burden of the organisation thats why we need to reduce the TOC with the APPROACH There Should be process for reduction of total cost of ownerships there Standardization , Centralization and Automation procedure
The total cost of ownerships The total cost of ownership can be applied to the cost of any purchase. In "a manufacturing environment it is most commonly applied to the purchase of inventory and MRO (maintenance, repair, and operating) materials". In the service industry environment, TCO is often applied to the purchase of any supply item or capital purchase. How Total Cost of Ownership Analysis Can Help:- Understands all the costs that wiil need to be covered to support technology adquetlty Help develop a technology vision you can support for the long term Understand direct and indirect (“hidden”) costs Understand the potential long-term costs of a particular approach Understand all of the costs that will need to be covered to support technology adequately TOTAL COST OF OWNERSHIPS INCLUDES:- Many cost factors are known to end users or to others in the organization and may not be known to purchasing. A combined analysis of the total cost of ownership can be compiled through a team effort that includes, at a minimum, purchasing plus the end users,your technical experts, and finance. Other departments or representatives may be included, such as legal, production, supply management, transportation, and import/export, depending on the purchase being made. It is important that all involved parties have the chance to participate in order to obtain a useful result.
HOW TCO SUPPORTS THE ORGANIZATION TCO TOC is supported to the organisation costs and associated with various types of activities costs Very much focused on purchase region and continuous improving on purchase Improve purchasing processes. Increase Competition leads to requirement of the providing best value in the term of purchase of material there should be also Need for the Re engineering required to all who work with suppliers Freeing up purchasing to work with the Here organization have different strategic as per there requirements REASONS TO IMPLEMENT
- Spring '14
- MRO, Total cost of ownership