Exploring a Differentiated Approach to Total Cost of Ownership

Purpose – The purpose of this paper is to develop a differentiated approach to the cost management system of total cost of ownership (TCO), a system based on cost data. Existing TCO‐related literature has investigated the tool from a focal buyer perspective but has consequently neglected to study TCO from an inter‐organisational perspective.Design/methodology/approach – An explorative single case‐study approach is used, involving a large, industrial Danish manufacturing company. Interviews were conducted with relevant representatives from both the purchasing division and a range of the division's suppliers and observations made.Findings – This paper indicates that a differentiated approach to TCO might be necessary, as suppliers might react negatively to the focal company presenting TCO data in negotiations. A matrix is proposed involving two dimensions: the nature of the relationship and the complexity of cost drivers.Research limitations/implications – This study involves a single case study and is ther...

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