Analyzing Costs Using Total Cost of Ownership

Using the Total Cost of Ownership Approach to Identify and Reduce Costs

Created in partnership with: Rob Handfield, PhD

Analyzing Costs Using Total Cost of Ownership

What You Will Learn

  • Understand basic financial principals involved in calculating TCO components
  • Learn how to identify TCO projects that have the greatest potential to impact the company’s bottom line
  • Use the 3As – Actual, Approximate and Assumption – to model costs when faced with imperfect data
  • Learn how to create and manage a useful cost database

What You Will Do

  • Identify and measure Total Cost of Ownership (TCO) components for a project that will deliver value to the business
  • Structure a TCO calculation model for a selected class of products or services
  • Develop should cost models to gain greater transparency into supplier pricing

Description

Every dollar an organization takes out of its costs is a dollar that goes directly to its bottom line — the organization’s profitability. Costs can be challenging to pin down because they are continually impacted by factors such as labor and raw material prices, as well as macroeconomic conditions like tariffs, currency exchange rates, regulations and more.

In this course, participants use the Total Cost of Ownership TCO framework to identify a cost analysis project that has the potential to return significant value. They’ll learn how to evaluate possible projects, assemble a cross-functional TCO project team, and map process activities to find cost areas requiring analysis.

  • Understand basic financial principals involved in calculating TCO components
  • Learn how to identify TCO projects that have the greatest potential to impact the company’s bottom line
  • Use the 3As – Actual, Approximate and Assumption – to model costs when faced with imperfect data
  • Learn how to create and manage a useful cost database

The course also explores the value of working closely with suppliers to develop should cost models in order to better understand pricing strategies and improve how the organization negotiates with its suppliers. Analyzing Costs Using Total Cost of Ownership offers an important set of tools for creating competitive advantages.

Course Outline

Expert Faculty

Rob Handfield, PhD
Bank of America University Distinguished Professor of Operations and Supply Chain Management

Additional Material