One important consideration to make when acquiring a new product or system is the Total Cost of Ownership or TCO. Unanticipated factors can increase the true cost to well over face value so the extra effort in calculating TCO is well worth the exercise in the end.
Total cost of ownership (TCO) is a financial estimate intended to help buyers and owners determine the direct and indirect costs of a product or system. TCO analysis was popularized in the 1980’s in the computer and software industries. Many different methodologies and software tools have been developed to analyze TCO.
For manufacturing, it goes beyond the initial manufacturing cycle time and the cost to make parts. TCO includes a variety of cost of doing business items, for example; ship and re-ship, opportunity costs, downtime, production increases and efficiencies of scale. TCO also considers incentives developed for an alternative approach. Incentives can include tax credits, government rebate programs, even ecological economics where it includes social costs.
A TCO analysis includes total cost of acquisition and operating costs. A TCO analysis is used to gauge the viability of any capital investment. A company may use it as a product or process comparison tool. TCO analyzes the total costs of a system or process, thus giving a better picture of true profitability over time.
The relationship between the initial cost of a product or service and the true cost when analyzed with costs and benefits included is important to define. The NCE Delivered Value Program (DVP) is designed to distinguish it from overused and generic TCO programs. All customers are unique and deserve a unique approach and explanation of the value they receive from any NCE service or product. The DVP has the ability to present our true and total value proposition to customers that is specific to them. With such a diverse catalogue of services and products like Inventory Management, Energy Audits, and Training and Safety Analysis, the Delivered Value Program can cater to any customer’s needs.
Written By: Chuck Hendrick, Industrial Sales Manager for the Puget Sound Territory. Chuck played a key role in the development and implementation of the NCE Delivered Value Program. If you would like more information on how NCE’s DVP can provide you with individualized value contact Chuck at firstname.lastname@example.org