Advantages: 1)Take all cost elements into consideration, because it extends the procurement to the whole life cycle of product within a firm. 2)Reflects the real cost of the purchasing rather than the pure acquisition. 3)It helps to define a rational purchasing policy for the buyer, for instance, how to allocate the purchasing volume, and to whom, and etc. 4)It can be a tool to evaluate outsourcing deals. 5)Can be used in negotiations with suppliers, by …
showed first 75 words of 548 total

showed last 75 words of 548 total
…Use TCO for products with long life cycle within the organization e.g. PC's, machines. Cannot be applied to: 6)Lack of negotiation power, fro instance, with monopoly supplier; if supply is behind demanding, and etc. 7)Buy service from banking, insurance, and consulting. 8)Company with very simple process, e.g. pure re-selling and wholesale. 9)Companies spend a small proportion of total spending on purchasing. 10)Too competitive internal environment, for instance, each department has an individual budget.