Do you consider Total cost of Ownership on your Purchases

Value for money is very close to my heart and purchasing is all about ensuring value for money.

But how do you know that you are getting value for money for any particular product or service?

The search for value for money starts with quality, cost and timing but soon evolves into something more complex. As we consider quality, cost and timing we realise that total cost of ownership (TCO) must be not only considered, but used as the benchmark for any comparisons.

The concept of TCO is simple; it is the cost of acquisition PLUS operating costs, and the best analogy is when buying a new car. It is tempting to look at the finances you have available today and choose the best car for the money you have available. The trouble with this is that you get a great deal from the seller and whilst you think you have got a bargain (and therefore value for money) this may not be the case.

The cost of a car goes far deeper than the purchase price. For the purchase of a new car the TCO would typically include the cost of:

• purchase price
• financing
• depreciation / residual value
• fuel costs
• insurance
• servicing
• tyre replacement
• vehicle licensing

Of course, TCO goes even further when you start to think of the costs of downtime. If you buy an old car you may spend a lot of money on repairs or on alternatives forms of transport when the vehicle is in the garage.

In business, thinking in terms of TCO will save you money and ensure your investments represent value for money. Before you spend any money in the future make sure you consider TCO so you really know what the costs are, especially for capital expenditure projects and hardware and software, or contact Ryboc and we’ll do it for you.