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TCO - Total Cost of Ownership

Total Cost of Ownership refers to the sum of the costs incurred by a product or service throughout its lifetime.

TCO was first used in the IT sector in the 1980s and was later adopted in other sectors.


Direct and indirect additional costs are often ignored when purchasing. This may bring temporary satisfaction with false information. However, correct decisions can only be made in the long term with Total Cost of Ownership Analysis.


When calculating the Total Cost of Ownership, the following items must be added in addition to the Initial Purchase Cost;

1. Pre-purchase costs

  • Portfolio work

  • On-site inspection

  • Sample run

  • Contract process

2. Purchasing process costs

  • Initial purchase price

  • Financing cost

  • Shipping cost (International/domestic)

  • Shipping insurance cost

  • Customs fee

  • Certificate / Passport fee

  • Cost of on-site quality control during the production process

  • Cost of expected time for delivery

3. Post-purchase costs (Time until use)

  • Preservation costs

  • -- If the material in question has not arrived in the required packaging conditions

  • The cost of returning damaged products and the resulting time without materials

  • VAT etc. incurred due to missing or incorrect documents. additional taxes* Additional labor and equipment costs incurred during unloading as a result of inadequate packaging or incorrect loading

  • Physical cost of keeping in stock

  • Financing cost of holding in stock

  • Waste due to expiration dates

4. Costs incurred during use

  • Additional consumption compared to its equivalent

  • Additional manufacturing costs compared to equivalent

  • -- Length of time for paint to dry

  • -- The obligation to be more meticulous and to have technical personnel compared to its counterpart

  • Delay in work and loss of reputation in the eyes of the employer due to more damage/failure than expected due to insufficient quality

  • Spare parts consumption

  • Maintenance and Approval cost

  • Energy consumption

  • License and Subscription

  • Training and Adaptation/Orientation

  • Software update

  • Operation and Support

  • Residual value

  • Renewal


 

Resources

  • Total Cost of Ownership: How it's calculated with Example

  • What is total cost of ownership (TCO)?

  • Chat Based AI Tool – ChatGPT

  • Chat Based AI Tool - BARD

 
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