Purchase Price vs Total Cost Of Ownership

By Joe Torrago on May 23, 2017 | Topics > Financial

I have written in the past regarding methods and discussions regarding how to optimize your supply chain. I'd like to take the discussion deeper into one particular area and make an offer I believe is very good.

I am sure most companies talk about the need to go beyond Purchase Cost when evaluating where to buy both key components for direct production as well as support items. But how many actually have a formal method to perform this evaluation? Well look no further than your friendly neighborhood MEP in Kansas, MAMTC. We have a Total Cost of Ownership (TCO) calculator that creates the formal and consistent method for performing just such analysis.

This TCO calculator has 81 separate inputs spanning such categories as quoted price, shipping costs, financing costs, inventory, quality, oversight, regulatory issues to consider, intellectual property, risk assessment, as well as a few other categories. You don't need to have data for all 81 fields to make the TCO calculator work for you, but the more data included, the more accurate the analysis will be. The calculator also has output methods to compare multiple vendors, look at future trends, as well as looking at the environmental impacts of sourcing any item. An example of the output is shown in the image along with this article. The best thing about the calculator is it is Excel-based and therefore does not need any fancy, expensive or complicated software to use. If you can use Excel, you can use the TCO calculator.

We normally offer the calculator, along with a half-day of instruction on how to populate the data using a real example from your company for $1000.  However, the first 5 companies that contact us and mention this blog will receive the calculator and the half-day for $500.