Improving the efficiency of the purchasing process using total cost of ownership information: The case of heating electrodes at Cockerill Sambre S.A.
✍ Scribed by Zeger Degraeve; Filip Roodhooft
- Publisher
- Elsevier Science
- Year
- 1999
- Tongue
- English
- Weight
- 136 KB
- Volume
- 112
- Category
- Article
- ISSN
- 0377-2217
No coin nor oath required. For personal study only.
✦ Synopsis
Improving the eciency of the purchasing process provides important opportunities to increase a ®rm's pro®tability. In this paper we introduce a mathematical programming model that uses total cost of ownership information to simultaneously select suppliers and determine order quantities over a multi-period time horizon. The total cost of ownership quanti®es all costs associated with the purchasing process and is based on the activities and cost drivers determined by an activity based costing system. Our approach is motivated by the purchasing problem of heating electrodes at Cockerill Sambre, a Belgian multinational steel producer. In this case quality issues account for more than 70% of the total cost of ownership making the quality of a supplier a critical success factor in the supplier selection process.