What is total cost of ownership? For example, the visible part of an iceberg represents the purchase price or purchase cost of the model, while the "huge ice" below the water surface represents the hidden cost. The total cost of ownership is the sum of the two parts. The purchase price plus the extra costs of each step in the supply chain, such as transportation and logistics, inventory, operation, maintenance and parts scrapping.
There are three keys to reduce the cost of customized processing: quality, consistency and speed. According to the expansion of partnership in manufacturing industry, companies often underestimate the cost. The survey shows that the hidden cost can be underestimated by 20% only by using the purchase price without considering the total cost of ownership. One factor driving this trend is that the cost of supply chain may be higher than most companies think. Total cost of ownership provides a more comprehensive measure of visible and hidden costs.
More and more companies begin to focus on quality, consistency and punctuality rather than just purchase price. As the economy tightens and recently finance gains more influence in purchase decision-making and product development. As companies decide where to purchase or manufacture parts, total cost of ownership is also given more consideration.
In order to effectively help companies understand the costs of purchasing decisions, from labor costs to product quality to political and security risks, these additional costs may include inventory coordination of products across international borders, transportation, tariffs or duties, reliability of suppliers in terms of product quality, and the ability to meet on-time delivery quotations. Supplier's ability to expand production and long-term relationship with suppliers. It's hard to completely reduce every element of the purchased product, but the idea is to take more measures than traditional methods, and more importantly, you're trying to further expand it and incorporate more measures into these decisions.