The Total Cost Of Ownership In The Management Of The Procurement Cost Of Tts Companies Applied Research

In order to improve core competitive strength, enterprises are focusing more and more on their core technologies. For those components with low added value and which are not core parts, enterprises will mostly purchase them from suppliers. Therefore the proportion of purchase cost in sales cost has been increasing and purchase cost has been the third profit source for enterprises. This situation has made it practical and meaningful to research the purchase cost control. In this paper, the application of TCO in purchase cost management is researched. TCO of steel structure is analyzed in detail. Correlative mathematical model of each cost element is calculated. One mathematical model for analyzing purchase cost is established on basis of actual cost figures in TTS. Four steel suppliers are analyzed in cost and evaluated by using above model. As a result of this paper, mathematical model is established to supervise purchase cost of steel structure and strategies of purchase management are proposed for steel structure. The conclusions of this paper is: comparing with qualitative cost analysis, quantitative cost analysis on basis of mathematical model can reveal actual purchase cost more accurate and it's a better tool for cost control. It's proved by this paper that TCO can be used to analyze purchase cost more overall than purchase price only, it's a good tool for supplier evaluation and selection and for making strategies of purchase cost management.