Samuel Taylor Coleridge, an English poet, wrote a poem (The Rime of the Ancient Mariner) in which the Mariner faced a desperate situation at sea described as, “Water, water, every where, Nor any drop to drink.” Many managers feel as if they drown in data but remain starved for information. As a procurement and supply manager, you are faced with ever-larger supplier bases, growing arrays of products to support, and increasing pressure to evaluate make-versus-buy options to arrive at outsourcing decisions. As the number of decisions continues to rise at a demanding pace, the costs to consider multiply exponentially.
A total cost of ownership (TCO) analysis is a useful tool for conducting meaningful analysis and providing a focus on those costs critical to our supply decisions. But while a business has many costs, not all are relevant to a TCO analysis. How we sort through our costs helps determine whether we feel awash in data, starved for information—or, ideally, we are able to strike an appropriate balance of data and information. We need to sharpen the necessary skills for identifying relevant costs to develop an accurate, comprehensive map of our process.
One way to ask the right questions and capture the “right” data that we need for the TCO is to assemble a cross-functional team. The team brings different perspectives and different needs to the table which, in essence, provides a sorting mechanism that the cross-functional team can use to begin collecting data for the TCO analysis. It can also help identify which team members possess expertise in which areas, a factor that will increase the team’s efficiency and help reduce barriers to implementing TCO.
Does your current system make you feel all at sea? Are you ready to drill-down to the key factors that affect your company’s costs? The Accenture Academy course Examining the Total Cost of Ownership Process can help you understand TCO and determine how to map your process, identify relevant costs, and gather the necessary data so you can analyze your company’s hidden costs and improve your bottom line.