A High Level TCO Template

Over on Strategic Sourcing Europe, Jean-Philippe Massin has posted a rather simple, though certainly useful total cost of ownership (TCO) calculation template. In all sourcing decisions -- not just global ones -- companies should look to calculate total landed costs. I can't tell you how many times I still see companies bidding out items on a unit cost basis -- especially in the lower and middle market -- and awarding to the supplier that they perceive to be lowest cost and best value. But perception, unfortunately, is dangerous. Only through a rigorous total landed cost approach -- which should include a variety of factors that most people overlook including estimated supplier management time, supply risk, etc. -- will procurement make the best sourcing decisions.

- Jason Busch