Total Cost of Ownership

Abstract

This chapter will explore the concept of total cost of ownership. Total cost of ownership is defined here as a philosophy for really understanding all relevant supply chain related costs of doing business with a particular supplier for a particular good/service. Total cost of ownership (TCO) considers total cost of acquisition, use/administration, maintenance and disposal of a given item/service. As will be presented later, TCO does not actually require precise calculation of all costs, but looks at major cost issues, and costs that may be relevant to the decision at hand.

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