Total Cost of Ownership

Total Cost of Ownership (TCO) is a method for quantifying the costs for every activity along the supply stream, including acquisition, transportation, storage, and selling of goods. TCO allows strategic sourcing decisions to incorporate social costs, which historically have been difficult to assess. The working session also introduces a TCO calculator, which allows a side-by-side comparison of up to four suppliers and the analysis of multiple sourcing scenarios.

The Total Cost of Ownership allows companies to account financially, for each activity along the supply chain including costs associated with the acquisition of materials, transportation, storage, and the selling of purchased good or services. The goal is to equip companies to make strategic sourcing decisions.

The TCO Calculator, a key tool available only to participants of the MEP Supply Chain Optimization program, facilitates a side-by-side comparison of suppliers, analyzing multiple sourcing possibilities on a global scale. TCO helps minimize total costs while maximizing value to the customer.
 

OBJECTIVES OF THE PROGRAM

• Provide participants with an overview of Total Cost of Ownership concepts
• Review key elements of TCO
• Contrast Piece-Part Variance method with TCO costing
• Understand the importance of implementing an effective TCO strategy
• Learn how to identify and measure TCO cost drivers
• Demonstrate the use of the TCO calculator
• Learn how to input data, interpret results and use the output of the analysis to make strategic sourcing decisions.
   

THIS WORKING SESSION IS COMPRISED OF THE FOLLOWING KEY EDUCATIONAL ITEMS

1. Defining common TCO terms and concepts
2. Learning to identify and measure TCO costs
3. TCO cost categories and elements – using the TCO data collection form
4. Using the TCO calculator
   1. Overview of TCO calculator input & output screens
   2. Discuss alternate sourcing decisions based on TCO results