The Advantages/Disadvantages of the Total Cost of Ownership

Advantages:
1)Take all cost elements into consideration, because it extends the procurement to the whole life cycle of product within a firm.
2)Reflects the real cost of the purchasing rather than the pure acquisition.
3)It helps to define a rational purchasing policy for the buyer, for instance, how to allocate the purchasing volume, and to whom, and etc.
4)It can be a tool to evaluate outsourcing deals.
5)Can be used in negotiations with suppliers, by making visible some of the committed costs induced by that supplier.
Disadvantages:
1)It is a complex system, and not easy to implement. Especially, if a company has a lot of purchasing items.
…