The Total Cost of Ownership (TCO) method is a set of related concepts that allow you to quantify the costs for every activity along the supply stream. TCO takes into consideration all costs related to the acquisition, transportation, storage and selling of purchased goods or services so that sourcing decisions may be made strategically. Use of the traditional Piece-Part Variance method of costing has been shown to underestimate these visible and hidden costs by more than 15%.
The TCO calculator introduced in the workshop allows the side-by-side comparison of up to four suppliers. It permits the analysis of multiple sourcing scenarios. TCO focuses on minimizing the total costs while maximizing value to the customer. It encourages a sharper focus on the big-picture concept of complete supply chain optimization.
PROGRAM OBJECTIVES • 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.
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 - Overview of TCO Calculator input and output screens and discussion of alternate sourcing decisions based on TCO results