Beyond the initial price tag: This article delves into the concept of total cost of ownership (TCO), a methodology and philosophy that considers purchaserelated costs beyond the initial purchase price. In today's cost-conscious environment, TCO is increasingly vital for organizations to manage their expenditures. The paper examines case studies of 11 firms utilizing TCO concepts in their purchasing decisions. Based on case study data and existing literature, the benefits and barriers associated with TCO are explored, providing a balanced view of its implementation. The TCO models used by the firms are classified as either dollar-based or value-based and by the model usage: supplier selection or supplier evaluation. This classification revealed a strong correlation between usage and model type. This paper provides practical guidance for businesses seeking to implement TCO. By examining real-world examples and offering a clear framework for model classification, the research helps organizations make more informed purchasing decisions, optimize their supply chains, and improve overall cost management. The discussion of barriers also allows practitioners to anticipate and address potential challenges in adopting this approach.
Published in the International Journal of Physical Distribution & Logistics Management, this paper aligns with the journal's scope by examining cost management within supply chains. The research contributes to the journal's focus by providing insights into optimizing purchasing decisions and improving logistics management through a comprehensive assessment of all costs.