Before making a major capital purchase, it is wise to understand all costs beyond just the purchase price. This video guides you through the four categories of the total cost of ownership model and offers advice on how to correctly apply this model to your critical purchasing decisions.
- When you make a major purchase,…whether at home or at work, you are of course…interested in the total cost of the purchase.…In addition to the price itself,…you're interested in sales taxes and delivery charges.…If you bought this item from another country,…there might even be customs duties to be paid.…In a total cost of ownership analysis, or TCO,…you strive to understand all these costs and more.…You want to capture all the costs incurred…after the item is delivered as you use it.…
For example, after you buy a new car,…how much do you spend on gas, and oil,…and tires over the lifetime of the car?…This tells you how much it costs…to own and operate this car.…And you want to bring all those costs…over time back to a present value figure.…Due to inflation, a dollar spent today…is not the same value as a dollar spent next year.…A TCO model provides one total figure for the purchase…so that you can easily compare one purchase to another.…
It's based on the total cost of ownership figure.…From your perspective as a professional buyer,…
- Explain the purchasing process.
- Define purchase order.
- Describe the intent of a purchasing policy.
- Distinguish types of purchasing structures.
- List the steps of selecting a supplier.
- Identify enablers for success in worldwide sourcing.
- Perform price and cost analysis.
- Measure supply management performance.