Applying total cost of ownership for strategic procurement : three industrial case studies.

Abstract

In this paper we elaborate on a Total Cost of Ownership supplier selection methodology that we have constructed using three real life case studies which are presented in this article. Analysing the value chain of the firm, data on the costs generated by the purchasing policy and on supplier performance are collected using Activity Based Costing (ABC). Since a spreadsheet cannot encompass all these costs, let alone optimise the supplier selection and inventory management policy, a mathematical programming model is used. Possible savings of between 6 and 14% are obtained for the three cases.Case studies; Studies;