What is a Total Cost of Ownership?
A total cost of ownership (TCO) is the purchase price of a product plus the cost of operations. When calculating the total cost of ownership, it exemplifies the overall value of a product over time giving you a better idea of how much something is worth.
When gathering data to make a purchasing decision, buyers should not only consider the initial price of a product, but they should also consider the long-term price of a product which would be the TCO. The item with the lower total cost of ownership is the better value overall.Manufacturing facilities use TCO when analyzing long term decisions as a framework for large decisions like analyzing business deals and also for smaller day to day operations. TCO is helpful because while direct, initial purchase prices can be easily calculated, it’s important to analyze the potential secondary expenses that can be of significant influence in deciding to purchase.
Example of Total Cost of Ownership
A total cost of ownership executed by a TPC sales representative looks similar to the graph below. In this example, a protein processing plant had issues with their side pullers. The current wires would become damaged and break due to constant flexing and exposure to water and chemicals.
The graph below shows a comparison between their current product compared to TPC’s product breaking down the cost savings in product and labor.
Finding the Right Wire & Cable Needs
A small change can make a big difference in product and labor cost. Finding the right cables and accessories that fit your needs doesn’t have to be hard and a total cost of ownership can be especially important when comparing products. Contact us today to have your own TCO!