Total Cost of Ownership Essay Example | Topics and Well Written Essays - 3500 words

Total Cost of Ownership - Essay Example The paper tells that the concept of Total Cost ownership is one of the fast-growing concepts in today’s business environment. Based on this concept the entire cost of the procurement is been determined rather than calculating only the initial purchase price of the raw materials. The term Total cost ownership is quite new in the business environment but it is quite similar to the notions of life cycle costs and other criteria’s which are been used to properly evaluate the business operations. This particular concept aims at understanding the true cost that is incurred in a purchase process when a particular material is been bought from a specific vendor and this concept also indicates all the types of costs that are involved in the entire purchase process. This includes the per-transaction cost which is incurred from the time of requisition to the time of placing the order, the transaction costs which is incurred from the order placement to the receipt and the post-trans action flow of cost which refers to the cost incurred from the receipt to the disposal of the materials. In case of the pre-transaction cost the cost associated in investigating and determining the sourcing strategies or addition of new vendors to the IT system is been taken care, in case of transaction of different costs such as the delivery cost, purchase cost and also the quality inspection cost can be seen and in post-transaction cost the reworks been done, the cost incurred at the time of warranty and fallouts are been considered.