Total Cost of Procurement

Understanding the procurement cycle.
December 23, 2022 by
Total Cost of Procurement
Muda Management



When procuring goods or services, organizations consider total cost of ownership (TCO) to make the best decision for the company. TCO is the total price of acquiring and using a product or service, including all costs related to purchase, installation, operation, maintenance, and disposal.

In the past, organizations would focus on the initial purchase price when making decisions about what to procure. However, TCO offers a more holistic view that includes all costs associated with a product or service over its entire life cycle.

TCO is a powerful tool for organizations because it allows them to compare products or services that have different initial costs but different total costs. For example, one product may have a lower purchase price but a higher cost of ownership, while another product may have a higher purchase price but a lower cost of ownership.

Organizations should consider TCO when making decisions about which products or services to procure. TCO is a comprehensive way to compare the costs of different options and make the best decision for the company.

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