Supply Chain Glossary

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Total Cost of Ownership


Source: Procurement Glossary
Author: Paul Rogers
Institute: CIPS - UK

Courtesy of


 

The concept of total cost of ownership highlights the fact that the initial purchase price is a small component of the total cost of some assets.  Support, maintenance, training, insurance, security, energy consumption and disposal, all add to the total cost of ownership.  The concept is widely used in procurement, though calculation of the total cost is not as straightforward as calculating the acquisition cost.  All lifetime costs need to be identified and assumptions made about the scale of future costs, which are then incorporated in an overall cost model.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




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