Total Cost of Ownership


Total Cost of Ownership is a methodology that looks beyond the purchase price to include many other related costs. The concept reviews the basic of the total cost of ownership and ways to implement it.

Technique Overview

Total Cost of Ownership Definition

Total cost of ownership (TCO) is a methodology and philosophy that, in addition to the price of a purchase, incorporates other purchase-related costs. TCO approach has become increasingly important as it helps organisations to look for ways to understand and manage their costs better (Bhutta and Huq, 2002). TCO can be defined as "the present value of all costs associated with a product, service, or capital equipment that are incurred over its expected life” (Monczka et al., 2009: 408).

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Business Evidence

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Business Application

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Professional Tools

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Further Reading

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Total Cost of Ownership References (4 of up to 20) *

  • Bhutta, K.S. and Huq, F. (2002) Supplier Selection Problem: A Comparison of the Total Cost of Ownership and Analytic Hierarchy Process Approaches. Supply Chain Management: An International Journal, Vol. 7(3), pp. 126-135.
  • CamfilFarr. Air Filtration: Total Cost of Ownership. [online] Available at: www.camfilfarr.com/Global/Documents/US/Literature Library/Case Study - TCO - Hospital - CH.pdf [Accessed 20 December 2011].
  • CIPS Australia (2007) Benchmarking: So How Are We Doing and Where Do We Want To Be? The Knowledge Club, Iss.5, March. In The Knowledge Club Compendium, Iss. 5-8.
  • CIPS: Whole Life Costing.

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