TLMT312 WEEK 2 FORUM - Assignment Example

Total Cost Ownership Procurement managers in organizations view TCO as the costs related to a product throughout its lifetime. The life time of a product has several phases; development, design, usage, maintenance, and finally disposal of the product. Sustainability also considers the effect of the environment during the entire lifecycle (Richard, 2004). TCO considers the long term cost value of products to organizations, through evaluation of direct costs and indirect costs during purchase. In management accounting, TCO is applicable in cost accounting, ecological economics.

TCO is much wider in manufacturing; the cost involve include cycle time, repair, ship, re-ship, opportunity, incentives, tax credit, delivery and supplier visits costs (Richard, 2004). TCO ensures financial analysis by determining the total economic value of products and investments. The financial analysis entails; economic value added, rapid economic justification, and internal return rate. TCO analyzes the total cost of assets and related systems, in the entire organization processes. This ensures adequate forecasting of profitability of the organization (Richard, 2004).

TCO is applied in the computer industry, fro financial analysis by multinationals. TCO describes the financial effect of using the information technology products, throughout the entire lifecycle. The cost analysis considers the main aspects of computer hardware, training and software. Technology implementation entails three levels of costs. Hardware and software analysis costs like; warranties, licenses, purchasing research and risks. Operation costs entail infrastructure, electricity, insurance, testing and back up.

Long term costs include replacement, upgrade and decommissioning (Richard, 2004).When comparing the TCO between present and proposed technology solutions, maintenance expenses should be analyzed. The maintenance expenses for present solutions may not be applicable for the proposed technological solution (Richard, 2004). ReferencesRichard, S. (2004). Total Cost Ownership. NY: Adison-Wesley Professional.