The TCO as defined in the textbook adds "all costs associated with the acquisition, use, and maintenance of a good or service." The TCO is then broken up into three major cost categories. List the three cost categories, provide a definition of each, and then provide two examples of each of the three types of costs

Answer 1

a . Pre-transaction Costs - Costs incurred before the order and receipt of the purchased goods.

Examples: supplier certification, supplier training, investigating delivery options for new suppliers, cost associated with finding a new supplier, costs associated with comparing suppliers and their supplies...

b. Transaction Costs - Costs of goods/services and cost associated with placing and receiving the order.

Examples: purchase price of the product, order preparation, delivery costs, insurance, packaging, costs associated with requesting the order...

c. Post-Transaction Costs - Costs incurred after goods are in possession of the company.

Examples: Field failures, defective items delivered to the customer, damage to the company's reputation, costs with maintaining broken items, warranty costs, legal costs, fines, and logistical costs associated with retrieving damaged or defective items in the field.