From the course: Excel Supply Chain Analysis: Solving Procurement Problems
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Calculate total cost of ownership
From the course: Excel Supply Chain Analysis: Solving Procurement Problems
Calculate total cost of ownership
- [Instructor] Total cost of ownership, or TCO, goes beyond the initial purchase price of a product or asset. It includes all of the costs associated with acquiring, operating, maintaining, and eventually disposing of the asset. This concept is crucial for two main types of procurement, indirect materials and capital equipment. When it comes to indirect materials such as office supplies, spare parts, or maintenance tools, the purchase price is just one part of the equation. TCO includes additional factors like storage costs, handling fees, and the cost of managing obsolescence. Understanding TCO helps organizations make informed decisions that minimize these long-term expenses. For capital equipment such as machinery, vehicles, or IT infrastructure, TCO becomes even more critical. These assets often involve significant upfront investments, but the true cost of ownership includes ongoing maintenance, energy consumption, repairs, and eventual disposal or resale. By calculating the TCO…
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