1 / 24

Chapter 3

Chapter 3. TOTAL COST OF OWNERSHIP (TCO). DOSEN : IR . HOETOMO LEMBITO, MBA, CSLP. Objektif Perkuliahan. Memahami konsep TCO Memahami fungsi TCO dalam SCM Memahami keterkaitan konsep TCO dengan aktivitas purchasing management. Total Cost of Ownership.

dominy
Télécharger la présentation

Chapter 3

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 3 TOTAL COST OF OWNERSHIP (TCO) DOSEN : IR. HOETOMO LEMBITO, MBA, CSLP

  2. Objektif Perkuliahan • Memahami konsep TCO • Memahami fungsi TCO dalam SCM • Memahami keterkaitan konsep TCO dengan aktivitas purchasing management

  3. Total Cost of Ownership • Total cost of ownership is a philosophy for really understanding all supply chain related costs of doing business with a particular supplier for a particular good or service (Lisa Ellam, May 1999) TCO

  4. Key Concepts • Purchase Price: But One Component of Cost • The Importance of Total Cost of Ownership in Supply Management • Service Providers • Retail • Manufacturing

  5. Key Concepts • Three Components of Total Cost • Acquisition Costs • Ownerships Costs • Post-Ownership Costs • TCO, Net Present Value Analysis (NPV), and Estimated Costs • Supply Management Action

  6. Total Cost and WCSM • To achieve World Class Supply ManagementSM, managers must shift their focus in procuring materials, services and equipment from price to total cost.

  7. Importance of TCO • Service Providers • Retail • Manufacturing • Supply Chains/Supply Networks

  8. Service and Retail Providers • Understanding what drives the cost of overhead expenditures is crucial to any service business • Revenue must cover the direct costs, material and labor, and overhead in order to generate a profit • TCO analysis of recurring material costs are often overlooked and can yield great savings • TCO analysis of the labor base can reap lower per person costs, greater benefits, and improved morale • TCO analysis of equipment purchases may help reduce the expenditures for maintenance and parts over the lives of the investments

  9. Manufacturing • Manufacturers are concerned with all of the same TCO issues as service and retail firms, with some added issues • Issues that are particularly important in cost analysis for manufacturers are: • Direct materials • Manufacturing overhead • Emphasis should be placed on the variance between “should cost” and actual cost. • This should not be confused with price variance

  10. Activity Based Costing • A major problem in TCO analysis of manufacturers is accurate allocation of manufacturing overhead • Many manufacturers have used activity-based costing to help improve cost allocation • Activity-based costing (ABC) is a technique for accumulating cost for a given cost object that represents the total and true economic resources required or consumed by the object

  11. Supply Chain/Supply Networks TCO analysis may include the study of: Manufacturability Infrastructure Outsource decision Analysis of suppliers beyond tier one Structure of foreign and domestic tariffs/duties/taxes Costs of delivery Foreign regulations Foreign political/economic stability Foreign exchange risk Language/communication requirements Volatility of end-customer demand Inventory carrying costs Inventory risk Quality costs

  12. Three Components of Total Cost • Acquisition Costs • Ownerships Costs • Post-Ownership Costs

  13. TCO Components Acquisition costs Purchase price Planning costs Quality costs Taxes Financing costs Ownership costs Downtime costs Risk costs Cycle time costs Conversion costs Non-value added costs Supply chain costs Post-ownership costs Environmental costs Warranty costs Product liability costs Customer dissatisfaction costs TCO

  14. Acquisition Costs • Purchase Price • Planning Costs • Quality Costs • Taxes • Customs Duties and Tariffs • Regional Trade Agreements • Income-Base Shifting • Financing Costs

  15. Ownership Costs • Downtime Costs • Risk Costs • Cycle Time Costs • Conversion Costs • Non-Value Added Costs

  16. Ownership Costs • Supply Chain Costs • Forecasting • Administration • Transportation • Inventory • Manufacturing • Customer service • Supplier selection/relationships • Global sourcing

  17. Post - Ownership Costs • Environmental Costs • Warranty Costs • Product Liability Costs • Customer Dissatisfaction Costs

  18. TCO, Net Present Value Analysis (NPV), and Estimated Costs • NPV analysis is frequently incorporated into TCO analyses • NPV analyzes present values of the initial expenditure along with the likely future revenue and expenditure streams • The present value of a sum of future cash flows discounted by a required rate of return • NPV greater than zero suggests accepting the investment • NPV less than 0 suggests rejecting the investment • NPV = 0 is the point of indifference

  19. Major Categories for the Components of TCO Pretransaction Components Identifying need Investigating sources Qualifying sources Adding supplier to internal systems Educating: Supplier ins firm’s operations Firm in supplier’s operations Total Cost of Ownership • Transaction Components • Price • Order placement/preparation • Delivery/transportation • Tariffs/duties • Billing/payment • Inspection • Return of parts • Follow-up and correction • Posttransaction Components • Line fallout • Defective finished goods rejected before sale • Field failures • Repair/replacement in field • Customer goodwill/reputation of firm • Cost of repair parts • Cost of maintenance and repairs Source: Lisa Ellram, “Total Cost of Ownership: Elements and Implementation,” International Journal of Purchasing and Materials Management, Winter 1993.

  20. Tangential Reprographics Example

  21. TCO Formula n TCO = A + P.V.  (Ti + Oi + Mi – Sn) i = 1 A = delivered acquisition cost P.V. = net present value Ti = training costs in year i Oi = operating costs in year i Mi = maintenance costs in year i Sn = salvage value in year n

  22. PVA Incorporated into a TCO Analysis Acquisition Cost = $120,000 PV Cash Outflows, yrs 1 - 6 = 23,279 PV of overhaul in yr 3 = 5,208 PV of salvage value in year 6 = (2,512) TCO = $145,975

  23. PVA Formulas • PVAnnuity = CF [ 1/r – 1/r(1+r)t ] • CF = periodic cash inflow or outflow (must be the same each period) • r = discount rate per period (annual rate divided by the number of periods in one year) • t = total number of periods • PV = FV / (1 + r)t • FV = future value of single cash inflow or outflow • r = discount rate per period (annual rate divided by the number of periods in one year) • t = total number of periods

  24. Concluding Remarks • TCO is an analytical tool and a philosophy • Accurate estimation of total costs requires a cross-functional approach • Supply management is a critical member of such a cross-functional approach • TCO is also applicable in one’s private life enabling better decision-making

More Related