Description
This study investigates the adoption of total cost of ownership (TCO) analysis to improve sourcing decisions. TCO
can be seen as an application of activity based costing (ABC) that quantifies the costs that are involved in acquiring and
using purchased goods or services. TCO supports purchasing decision-makers in focusing on total value received and
not simply price, and it extends ABC concepts and tools to an inter-organizational context. Based on ABC-adoption
literature and focus-group discussions with senior purchasing executives, a model is developed to explain relationships
among eight constructs hypothesized to explain TCO adoption: competitive pressure in customer markets, strategic
purchasing orientation
doc_325687445.pdf
This study investigates the adoption of total cost of ownership (TCO) analysis to improve sourcing decisions. TCO
can be seen as an application of activity based costing (ABC) that quantifies the costs that are involved in acquiring and
using purchased goods or services. TCO supports purchasing decision-makers in focusing on total value received and
not simply price, and it extends ABC concepts and tools to an inter-organizational context. Based on ABC-adoption
literature and focus-group discussions with senior purchasing executives, a model is developed to explain relationships
among eight constructs hypothesized to explain TCO adoption: competitive pressure in customer markets, strategic
purchasing orientation
doc_325687445.pdf