Total Cost of Ownership for supply chain management: A case study in an OEM of the automotive industry

Abstract

The selection of the best suppliers is a key issue for many companies. Nevertheless, it is important to highlight that the most economical supplier may not be the one that has the lowest purchase price. The cheapest supplier is the one that represents the lowest cost to the company, after being considered various aspects of supplying, such as quality, reliability of deliveries, the history of supplier performance, its location, its financial condition, etc. The goal of this paper is to discuss the application of the methodology Total Cost of Ownership (TCO) as a tool to support supplier's selection. The case studied allowed to understand TCO in practice, to study the contribution of the various cost parameters for the TCO and to demonstrate the procedures that support the systematic application of the TCO in a worldwide company. © IFIP International Federation for Information Processing 2013.