Total Cost of Ownership Becomes a Primary Objective

IDENTIFYING THE TOTAL COST OF OWNERSHIP BECOMES A PRIMARY OBJECTIVE 

Traditional approach focused on item cost reduction through supplier leverage. Future focus needs to measure the total value that suppliers bring 

15 mi faa 1 Ordering costs Receiving costs Invoice and payment processing costs Quantity testing costs Quality testing costs Litigation costs for problems with quality Internal transportation costs Quality control costs Production delay costs Waste collection 

With the potential value improvement opportunities identified and the selected suppliers committed to providing resources for the selected SRM activities, joint teams are now dispatched to review the opportunities in a formal manner. The opportunity list should be divided so teams can be assembled with the expertise to tackle each major area. These sub-team meetings are arranged and comprehensive review formats established to monitor progress. Executive reviews should be overlaid on these meetings 

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