Total Cost of Ownership (TCO)

Total Cost of Ownership (TCO) substantially influences buying decisions for many companies and helps negotiations from both the client and supplier perspectives. It allows corporations to think about elements outside of the direct cost(s) when identifying whether to pursue a specific course of action.

Fundamentally, TCO is a financial assessment process that estimates all the costs associated with a decision. Procurement costs are covered alongside each direct and indirect charge in the decision cycle: trade working capital (TWC), labor productivity, cost of quality, supplier rationalization and more. When you calculate TCO, you select your known cost-drivers and hidden fees to fully understand your desired impact.

By measuring the true costs of your supply chain, TCO allows you to make better business decisions. This will help you better understand the impact of implementing a system on the cost structure of your business. TCO provides a financial framework to effectively analyze your supply chain. It makes it possible to better compare the solutions presented by different suppliers by showing a much more realistic view of all the costs.