Total Cost of Ownership (TCO) is a management accounting concept that is used to calculate the costs that occur in your business. But what does (TCO) really mean for manufacturers?
What is Total Cost of Ownership?
For purchasing professionals in a manufacturing company, reducing production costs is your most important priority. If you reduce production costs, you can achieve greater profits for your company. But to determine the costs of producing a product, let’s say a car; it takes time and effort to find your true costs. You have labor, raw materials and rework just to name a few. There are many methods to calculate your costs, but some methods may not accurately account for everything.
The TCO method however, incorporates direct and indirect costs attributed to the goods or services that you provide. TCO accounts for not only the typical associated costs such as labor and raw materials, but also the cost of transportation, overhead, logistics, customs, and other hidden costs that may not be accounted for normally.
The TCA Method
At Specialty Resources, Inc. we use a variation of the TCO method called the Total Cost Approach (TCA) when quoting and providing products to our customers. Our Global Sourcing department analyzes the production, operating, quality, logistics, & warehouse costs associated with a product that we supply to give our customers one price for our complete service. Since the customer receives one single cost, they are able to issue one PO for their purchase and can easily determine the true cost of a product. Buyers and Purchasing professionals of our customers are able to better utilize their time for more crucial business tasks.
SRI has used the Total Cost Approach for over 20 years. This gives us the experience and knowledge to accurately determine your lowest possible cost of production.
To learn more about the TCA at SRI, contact a sales representative at firstname.lastname@example.org.