Total Cost of Ownership (TCO)

In the two previous issues (Industrie 4.0 Management 5/2016 and 6/2016) the features and characteristics of supply concepts, the fundamentals of the Total Cost of Ownership (TCO) concept as well as all supply related logistics processes, referring to specifics of the TCO concept and the ne-cessary and appropriate instruments for the evalu-ation as a basis for the selection of an optimal supply concept were explained. With the third and final part to the structuring of the methodology and an example for the practical application, a holistic view of this topic complex is available for the selection of effective and efficient supply concepts ranging from the theoretical basis to the practical application of the methodology.

The importance of efficient logistics as a key success factor for companies is well known. Efficient logistics processes can help to gain competitive advantage and to secure market positions of companies. The supplier industry is not exempt from this trend taking responsibility of diverse activities for Original Equipment Manufacturers (OEM) in providing ready modules and systems. However, complex supply chains cause high logistics costs. As various supply concepts are possible for parts and materials produced in upstream stages of the supply chain, each of these concepts entail differing costs. The identification of an economically optimal supply concept through comparison and evaluation of alternatives is therefore of strategic importance. The article demonstrates the use of the Total Cost of Ownership (TCO) concept for this purpose.