Total Cost of Ownership User Group
This user group supports SPLC members who are using a new, generalized Total Cost of Ownership calculator* as part of procurements.
Total Cost of Ownership (TCO) involves considering all the costs associated with a product over its lifetime—from initial purchase price through its use, maintenance, and disposal costs. Many of these additional costs are associated with social and environmental impacts, such as energy use, worker exposure, and landfill/incineration. Therefore, reducing a procurement’s TCO is often a win for an organization’s bottom line and a win for sustainability.
In practice, calculating a TCO for any given product or service can be tricky. SPLC member Practice Greenhealth has released a breakthrough TCO calculator that simplifies calculating TCOs for a wide range of products in general use, such as electronics, lighting, freezers, faucets and showerheads, laundry equipment, boilers, ovens, cleaning supplies, and more.
To date, the tool has not been used outside of the healthcare sector. Through this user group, SPLC wishes to (1) demonstrate the usefulness of the tool for purchasers in all sectors, (2) develop a few case studies that can be shared back with the SPLC member community, and (3) further develop the business case for the general application of TCO in procurement.
Benefits of Joining SPLC’s TCO User Group
- Better Procurement
When evaluating bids, have confidence that the organization’s total cost of ownership is understood and comparable, so the best choice can be made for the organization’s economic, social, and environmental bottom line.
- Technical Support
SPLC is hiring the tool’s developers to answer User Group members’ questions via “office hours” conference calls and an online discussion forum.
- Cohort-based Learning & Sharing
User Group members will all be actively deploying the tool within one of their procurements in a similar timeframe, making this a valuable cohort-based learning and sharing opportunity, supported by conference calls, confidential file sharing, and an online forum.
- Leadership Recognition
To the extent that User Group members are willing and able, SPLC would like to share the outcomes of their experience with this cutting-edge tool via member articles, member-to-member Sharing Calls, webinars, and/or presentations at SPLC’s 2017 Summit.
Applying to Join the User Group
- User must be an SPLC member.
- User must be leading a procurement suitable for using the tool and have permission/support for trying out the TCO tool as part of the sourcing project.
- The procurement must be pre-solicitation at this time. (The solicitation will need to request data for entry into the TCO tool.)
- Ideally, the procurement will be on schedule for award before the end of January.
- User Group members will be invited to attend 4 bi-weekly “office hours” conference calls with the tool’s developers. During these calls, group members may ask questions arising from their own use of the tool as well as learn from the questions and answers being surfaced by other group members.
- Between the conference calls, User Group members will be encouraged to share challenges and solutions via an online discussion group.
- The most time consuming aspect will be collecting and verifying lifecycle cost data from within the organization (e.g., average power, fuel, and water costs) and from the bidding suppliers (e.g., expected power, fuel, and water demands). This can take varying amounts of time depending on the size and type of the organization, the level of management and stakeholder support, and the clarity with which the data is requested.
- Once the data has been collected, previous users of the tool have found that it took less than 2 hours to enter the data into the tool and produce a comparative analysis of each product’s total cost of ownership. (This could be less or more depending on the number of products and/or suppliers that need to be compared.)
- Watch the recording of this webinar (recording is free but you must register to view it):
- Getting Started with the Greenhealth Cost of Ownership (GCO) Calculator* (45 minutes)
- Also consider attending/viewing the Detailed Assessment of Consumables and/or Detailed Assessment of Durables webinars.
- Identify an upcoming sourcing project within your organization that would be suitable for the tool. (If you have questions about whether a sourcing project would be suitable, you can email questions to email@example.com.)
- Confirm that management and sourcing project stakeholders support applying the TCO Tool to the procurement.
- Submit an application for SPLC’s TCO User Group.
* Practice Greenhealth calls their tool a “Greenhealth Cost of Ownership” (GCO) tool rather than a “Total Cost of Ownership” tool. Within SPLC, we will use the term ‘TCO’ because it is the more common terminology, because we are applying the tool outside of a ‘Greenhealth’ context, and because the tool does include most of the lifecycle cost factors found in other, non-generalized, ‘TCO’ calculators. The bubbles in the diagram above show all the areas of lifecycle cost that can be included in a TCO calculation using the the calculator published by Practice Greenhealth.