CPIM Practice Exam

In supply chain management, what does Total Cost of Ownership (TCO) encompass?

1. Only the upfront cost of goods purchased

2. The cost of ownership inclusive of all supply stream activities

3. Only the logistics and handling fees

4. The cost of goods and the cost of returns

The correct answer is: The cost of ownership inclusive of all supply stream activities

Total Cost of Ownership (TCO) in supply chain management takes into account the comprehensive costs associated with the purchase of goods and the entire lifecycle of owning those goods. This includes, but is not limited to, the initial purchase price, logistics and handling fees, operational expenses, maintenance, training costs, and any disposal costs at the end of the product's life cycle. Approaching TCO in this holistic manner helps organizations make better-informed decisions by understanding not just the upfront costs, but also the long-term financial implications of their purchases. This perspective is crucial for maximizing value and effectively managing the resources of the supply chain.