Total cost of ownership for asset management: Challenges and benefits for asset-intensive organizations

© 2020, Springer Nature Switzerland AG. Nowadays, optimal supplier selection process is essential for the performance success of business organizations. Total cost of ownership (TCO) is a method which enables purchasing firms to access all key information for assessing and selecting suppliers. An effective supply chain process which is based on TCO tool is argued to extend purchasing decisions beyond the initial price and consider the long-term perspective of all hidden and explicit costs for carrying out business with various suppliers. All purchasing enterprises are seeking the maximum profit from the purchased products/services. In order to identify all cost drivers, both quantitative and qualitative methodological approaches have been operated and analysed in the TCO application. However, it is not clear which methodologies are better, and under what circumstances, in relation to the TCO concept. This paper examines the application of a range of qualitative and quantitative methodologies in TCO purchasing techniques. The paper outlines and reviews the strengths, limitations and barriers of both qualitative and quantitative methods. In conclusion, the framework supports optimizing decision-making based on total cost of ownership in a firm’s cost management process

Assessing total cost of ownership: Effective asset management along the supply chain

Firm purchasing models are an important tool for effectively managing business costs over the different time horizons and business cycles of the organisation. However, there is a lack of a clear understanding of the optimum method for supporting purchasing decisions for businesses and less knowledge of the costs over the entire supply chain of a product or service. Total cost of ownership (TCO) method helps the purchaser to compare different goods or service providers with regard to total cost rather than choosing a supplier due to their lowest initial price alone. The mining industry is an important sector in which to investigate the TCO as it is a valuable sector to the economy and the long-time horizons and large-scale projects require careful planning and management. This paper investigates models for purchasing and assesses the optimal performance issues accorded to purchasing and firm costs in the mining sector by the various methodologies. The notion and use of TCO as a basis for reviewing supplier selection models will be explored and investigated in detail. This review outlines the impediments of feasible TCO analysis execution and reveals common obstacles that must be attentively considered in the supply chain across mining industries assets