Total Cost of Ownership in Procurement
Total cost of ownership (TCO) is complex topic of discussion. Procurement tries to estimate the total cost of owning or operating a product, equipment or service as long as it is meeting our intended fit for use or fit for purpose needs. We need to consider product life cycle costs and disposal or remediation costs over several years where many of the variable costs are unknown or may be out of our direct control – legislated requirements for example.
What should be included or excluded in the cost estimates from a procurement perspective? What are internalized costs versus externalized costs? How do cost and volume fluctuations affect a business case? How does the TCO affect our behaviour and reward systems?
An organization may encourage autonomous decision-making in its reporting structure which invites a dilemma over lowest cost versus best value. Can an understanding of TCO remove the subjectivity in these decisions?
This eSeminar will use case studies to address the issues in a TCO analysis and provide quantitative tools for procurement staff to evaluate options and make business recommendations based on objective evaluations.
- Review the key issues which affect TCO
- Examine internalized versus externalized costs
- Explain how fixed and variable costs can be measured
- Discuss the importance of a business case involving subjective values
- Relate our decision-making to information bias
April 17, 2018
10:00 – 11:30 AM PST