It's time for a new Tool - meet the TripleTCO™
Cost focus is no longer enough, it’s time for a new tool - meet the TripleTCO™
I often wonder whether AI will make better decisions in the future that have better outcomes. But actually we don't need AI to make better decisions today...
For example, think about the Total Cost of Ownership (TCO)
We all know TCO and maybe some of use it more than others when considering offer selection from suppliers.
It's really simple - work out the costs associated with getting a product or service
Here's a basic one for a product that uses raw materials for somewhere far, far away, involves shipping to a offshore manufacturing base and then shipping to your home country for assembly and distribution
With a good old fashioned cost focus, we can do the same for a 2nd option - getting raw materials from a better source, a single shipping and then manufacture, assemble and distribute in our home country
...surprise, surprise the offshore solution wins (mostly as a result of regulation and labour costs if we dug a bit deeper)
The thing is, that we shouldn't be looking at the TCO for cost alone
You all know I believe firmly in the Triple Bottom Line
So we should be looking at TCO for Cost, Environment (how bad an impact) and People (how detrimental to their wellbeing)
Environment could include an bad impact score for CO2, energy, water, chemicals
People could include a bad impact score for diversity, working conditions, pay, legal rights
It's up to you to decide what to assess
Maybe that source of raw materials in a land far, far away is not so hot on looking after people...
Maybe that offshore manufacturing is kicking out CO2 in a coal powered factory....
Put the 3 together and now we see a true TripleTCO™
Now when we compare the 2 options, the picture is completely different...
With a triple focus we might make very different decisions and start driving change towards real value
So the you have it - the TripleTCO™ - a cool tool; maybe I'll call it a "Beaumont Analysis" (just kidding...)
More importantly, you can now have the visual evidence to have a real discussion with your senior stakeholders about aligning procurement decisions with strategic value...
...and that is what really matters!
Let me know your thoughts... could you start using it?
Keep having fun; Procurement is Awesome!
Richard
©Eruditic Ltd 2023
