Today on the International Trade Resources Podcast, our host Kim Kirkendall is joined by Ricardo Moreira to discuss Total Cost of Ownership or Optimization (TCO). Many companies already have implemented a series of initiatives to reduce costs, which has made it more difficult to find ways to bring costs down even further. In this episode we explore ways to find “hidden” supply chain costs that can add to the company’s bottom line.
First, Kim and Ricardo look at what factors contribute to cost. This encompasses everything indirectly related to buying the materials or product, activities such as; training your workers to use the new machine, testing to accept a new material, and more. It can also include costs related to not taking actions, items such as; poor quality materials or machines that are defective, down time in the factory, or scrap rates.
Ricardo quotes Richard Drucker, "You can't manage what you don't measure,” underlining one big issue for the procurement team. How can procurement measure expenses in other departments of the company? Thankfully, Ricardo shares some methods to convinceing colleagues to share information so that an analysis can be done.
Lastly, Kim and Ricardo discuss process-based costing, also known as ABC or Activity Based Costing. Now known as Quantum Costing, it’s a method to capture the cost of procedures and activities in the supply chain and related areas of the business.
How does this fit into TCO?
Learn all this and more in this information-packed episode!
Things you’ll learn
Episode Sponsors:
Acclime China:
Corporate Services and full Accounting/CPA/Tax for China.
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