Total Cost of Ownership (TCO) is an upfront estimate of all costs associated with an asset over its entire life cycle, including acquisition costs, operating costs and insurance, security, and financing costs. As well as IT systems, TCO can apply to products from all sectors – in the automotive industry, for example, it outlines the cost of owning a vehicle from the purchase, through its maintenance, and finally its sale as a used car.
Glossary
Total Cost of Quality
Total Cost of Quality (TCQ) is the total cost of three classes of quality processes – Prevention, Inspection, and Failure. Prevention largely happens in design and manufacturing process design. Inspection (or appraisal) covers all checks between raw material inspection and finished goods delivery. Failure costs can be quantified through warranty costs, but many businesses see reputation damage as the larger cost. Quality initiatives are justified on the basis that TCQ is less than the Cost of Poor Quality.
Total Landed Cost
Total Landed Cost (TLC) helps capture both obvious and hidden costs in the supply chain. It includes item cost, transportation, warehousing, tariffs and taxes. In some environments it also includes inventory carrying costs, currency exchange costs, financial impact of carbon footprint and other cost categories such as corporate taxes and grants. From a seller’s point of view, TLC is the sum of all costs associated with making and delivering products to the point where they produce revenue (usually the customer’s doorstep). From a buyer’s point of view, it makes sense to use TLC to compare purchase of goods from different countries.
Total Logistics Costs
To calculate Total Logistics Costs, a manufacturer will consider costs for inbound delivery and storage of material and parts, the total cost to store, transport, and deliver (and possibly set up) product to the customer following final manufacture and assembly. Manufacturers which calculate and monitor total logistics costs are focusing not only on in-house operations, but also on the total order-fulfillment process.
Total Productive Maintenance
Total Productive Maintenance (TPM) is a holistic approach to maintenance which sets goals of:
- no breakdowns
- no slow or reduced running
- no product defects
- no accidents.
TPM shares responsibility for maintenance between equipment operators and maintenance technicians and engineers. The scope of TPM includes unscheduled maintenance prevention (through design or selection of easy-to-service equipment), equipment improvements, preventive maintenance, and predictive maintenance (determining when to replace components before they fail).
Total Quality Management
Total Quality Management (TQM) aims for long term success through customer satisfaction. To implement TQM, all members of an organization try to improve not only processes, products and services, but also the culture and style of the way they work.
A TQM strategy highlights eight aspects:
- customer focussed
- process centered
- engagement of all staff
- strategic and systematic approach
- integrated system
- evidence based decisions
- communication
- continuous improvement.
TQM implementation uses a variety of quality tools, such as QFD, Taguchi methods, SPC, corrective-action response teams, cause-and-effect analysis, problem-solving methodologies, and making operations fail-safe.
Total Recordable Incident Rate
Total Recordable Incident Rate (TRIR) was developed in the US as a measure of occupational safety. Some recordable incidents lead to an employee being unavailable for normal work duties for one or more days, and these incidents are counted in both TRIR and Lost Time Incident Rate (LTIR). Both metrics, are calculated as the equivalent number of incidents if 100 people working full time for one year had been monitored.
Some organizations outside the US (for example, the International Marine Contractors Association, IMCA) normalize the rate to ‘per one million hours worked’ rather than the two hundred thousand hours implied by the US definition (40 hours for 50 weeks for 100 people). In the US specification, if local first aid allows immediate return to work, then the injury will be noted in safety logs, but not classified as a recordable incident.
Total Shareholder Return
Total Shareholder Return is the total of two quantities:
- payments received by a shareholder due to owning one share (e.g. dividends)
- the change in the price of the share between the start and end of the time period.
The result is expressed as the equivalent annual percentage growth in the original share price.