IDEAS home Printed from https://ideas.repec.org/a/pal/jorsoc/v56y2005i1d10.1057_palgrave.jors.2601832.html
   My bibliography  Save this article

The use of total cost of ownership for strategic procurement: a company-wide management information system

Author

Listed:
  • Z Degraeve

    (London Business School)

  • F Roodhooft

    (Katholieke Universiteit Leuven
    Vlerick Leuven Gent Management School)

  • B van Doveren

    (Katholieke Universiteit Leuven)

Abstract

We present a general company-wide management information system for defining procurement strategies. We believe that existing practices for determining purchasing strategies can be improved and a new approach developed. The system uses total cost of ownership information. We argue that mathematical programming models should be used for exploiting this information, when evaluating the firm's strategic procurement options. As an example, we show how we have successfully applied our approach to develop a decision support system at Usinor, a European multinational steel company.

Suggested Citation

  • Z Degraeve & F Roodhooft & B van Doveren, 2005. "The use of total cost of ownership for strategic procurement: a company-wide management information system," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 56(1), pages 51-59, January.
    • Handle: RePEc:pal:jorsoc:v:56:y:2005:i:1:d:10.1057_palgrave.jors.2601832
    DOI: 10.1057/palgrave.jors.2601832
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/palgrave.jors.2601832
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/palgrave.jors.2601832?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Z Degraeve & F Roodhooft, 1998. "Determining sourcing strategies: a decision model based on activity and cost driver information," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 49(8), pages 781-789, August.
    2. Zeger Degraeve & Filip Roodhooft, 2000. "A Mathematical Programming Approach for Procurement Using Activity Based Costing," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(1&2), pages 69-98.
    3. Degraeve, Zeger & Labro, Eva & Roodhooft, Filip, 2000. "An evaluation of vendor selection models from a total cost of ownership perspective," European Journal of Operational Research, Elsevier, vol. 125(1), pages 34-58, August.
    4. Amir A. Sadrian & Yong S. Yoon, 1994. "A Procurement Decision Support System in Business Volume Discount Environments," Operations Research, INFORMS, vol. 42(1), pages 14-23, February.
    5. S Yahya & B Kingsman, 1999. "Vendor rating for an entrepreneur development programme: a case study using the analytic hierarchy process method," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 50(9), pages 916-930, September.
    6. Zeger Degraeve & Filip Roodhooft, 2000. "A Mathematical Programming Approach for Procurement Using Activity Based Costing," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(1‐2), pages 69-98, January.
    7. Gary D. Eppen & R. Kipp Martin & Linus Schrage, 1989. "OR Practice—A Scenario Approach to Capacity Planning," Operations Research, INFORMS, vol. 37(4), pages 517-527, August.
    8. Harvey M. Wagner & Thomson M. Whitin, 1958. "Dynamic Version of the Economic Lot Size Model," Management Science, INFORMS, vol. 5(1), pages 89-96, October.
    9. Shapiro, Jeremy F., 1999. "On the connections among activity-based costing, mathematical programming models for analyzing strategic decisions, and the resource-based view of the firm," European Journal of Operational Research, Elsevier, vol. 118(2), pages 295-314, October.
    10. Ittner, Christopher D. & Larcker, David F. & Nagar, Venkatesh & Rajan, Madhav V., 1999. "Supplier selection, monitoring practices, and firm performance," Journal of Accounting and Public Policy, Elsevier, vol. 18(3), pages 253-281, September.
    11. Degraeve, Zeger & Roodhooft, Filip, 1999. "Improving the efficiency of the purchasing process using total cost of ownership information: The case of heating electrodes at Cockerill Sambre S.A," European Journal of Operational Research, Elsevier, vol. 112(1), pages 42-53, January.
    12. Roodhooft, Filip & Konings, Jozef, 1997. "Vendor selection and evaluation an Activity Based Costing approach," European Journal of Operational Research, Elsevier, vol. 96(1), pages 97-102, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mauro Lizot & Flavio Trojan & Paulo Afonso, 2021. "Combining Total Cost of Ownership and Multi-Criteria Decision Analysis to Improve Cost Management in Family Farming," Agriculture, MDPI, vol. 11(2), pages 1-20, February.
    2. Kristianto, Yohanes & Gunasekaran, Angappa & Helo, Petri, 2017. "Building the “Triple R” in global manufacturing," International Journal of Production Economics, Elsevier, vol. 183(PC), pages 607-619.
    3. Aries Susanty & Hery Suliantoro & Arfan Bakhtiar & Diana Puspitasari & Affandirahmat, 2015. "Critical Success Factors for Implementing SNI in Public Procurement," International Journal of Business and Administrative Studies, Professor Dr. Bahaudin G. Mujtaba, vol. 1(3), pages 78-88.
    4. Baller, Reinhard & Fontaine, Pirmin & Minner, Stefan & Lai, Zhen, 2022. "Optimizing automotive inbound logistics: A mixed-integer linear programming approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 163(C).
    5. Andrea Bacchetti & Stefano Bonetti & Marco Perona & Nicola Saccani, 2018. "Investment and Management Decisions in Aluminium Melting: A Total Cost of Ownership Model and Practical Applications," Sustainability, MDPI, vol. 10(9), pages 1-36, September.
    6. Henn, Nicolas & Lohwasser, Todor S., 2020. "The advances of community cloud computing in the business-to-business buying process," Discussion Papers of the Institute for Organisational Economics 6/2020, University of Münster, Institute for Organisational Economics.
    7. Visani, Franco & Barbieri, Paolo & Di Lascio, F. Marta L. & Raffoni, Anna & Vigo, Daniele, 2016. "Supplier’s total cost of ownership evaluation: a data envelopment analysis approach," Omega, Elsevier, vol. 61(C), pages 141-154.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Z. Degraeve & Eva Labro & F. Roodhooft, 2005. "Constructing a Total Cost of Ownership supplier selection methodology based on Activity-Based Costing and mathematical programming," Accounting and Business Research, Taylor & Francis Journals, vol. 35(1), pages 3-27.
    2. Degraeve, Zeger & Labro, Eva & Roodhooft, Filip, 2000. "An evaluation of vendor selection models from a total cost of ownership perspective," European Journal of Operational Research, Elsevier, vol. 125(1), pages 34-58, August.
    3. Jans, R.F. & Degraeve, Z., 2005. "Modeling Industrial Lot Sizing Problems: A Review," ERIM Report Series Research in Management ERS-2005-049-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    4. Crama, Y. & Pascual J., R. & Torres, A., 2004. "Optimal procurement decisions in the presence of total quantity discounts and alternative product recipes," European Journal of Operational Research, Elsevier, vol. 159(2), pages 364-378, December.
    5. Liao, Zhiying & Rittscher, Jens, 2007. "Integration of supplier selection, procurement lot sizing and carrier selection under dynamic demand conditions," International Journal of Production Economics, Elsevier, vol. 107(2), pages 502-510, June.
    6. Joris van de Klundert & Jeroen Kuipers & Frits C. R. Spieksma & Maarten Winkels, 2005. "Selecting Telecommunication Carriers to Obtain Volume Discounts," Interfaces, INFORMS, vol. 35(2), pages 124-132, April.
    7. Moisello Anna Maria, 2012. "Cost Measurement And Cost Management In Target Costing," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 533-547, July.
    8. Ekici, Ali, 2013. "An improved model for supplier selection under capacity constraint and multiple criteria," International Journal of Production Economics, Elsevier, vol. 141(2), pages 574-581.
    9. Visani, Franco & Barbieri, Paolo & Di Lascio, F. Marta L. & Raffoni, Anna & Vigo, Daniele, 2016. "Supplier’s total cost of ownership evaluation: a data envelopment analysis approach," Omega, Elsevier, vol. 61(C), pages 141-154.
    10. Wouters, Marc & Anderson, James C. & Wynstra, Finn, 2005. "The adoption of total cost of ownership for sourcing decisions--a structural equations analysis," Accounting, Organizations and Society, Elsevier, vol. 30(2), pages 167-191, February.
    11. Degraeve, Zeger & Roodhooft, Filip, 1999. "Improving the efficiency of the purchasing process using total cost of ownership information: The case of heating electrodes at Cockerill Sambre S.A," European Journal of Operational Research, Elsevier, vol. 112(1), pages 42-53, January.
    12. Jaroslaw Milczarek & Piotr Cyplik & Sebastian Wieczerniak, 2018. "Using Total Cost Of Ownership As A Method For Identification Of Internal Problems In Purchase Area – Case Study," Business Logistics in Modern Management, Josip Juraj Strossmayer University of Osijek, Faculty of Economics, Croatia, vol. 18, pages 205-223.
    13. Demirtas, Ezgi Aktar & Üstün, Özden, 2008. "An integrated multiobjective decision making process for supplier selection and order allocation," Omega, Elsevier, vol. 36(1), pages 76-90, February.
    14. Oliveira, Rui Carvalho & Lourenco, Joao Carlos, 2002. "A multicriteria model for assigning new orders to service suppliers," European Journal of Operational Research, Elsevier, vol. 139(2), pages 390-399, June.
    15. Degraeve, Zeger & Labro, Eva & Roodhooft, Filip, 2004. "Total cost of ownership purchasing of a service: The case of airline selection at Alcatel Bell," European Journal of Operational Research, Elsevier, vol. 156(1), pages 23-40, July.
    16. Andrea Bacchetti & Stefano Bonetti & Marco Perona & Nicola Saccani, 2018. "Investment and Management Decisions in Aluminium Melting: A Total Cost of Ownership Model and Practical Applications," Sustainability, MDPI, vol. 10(9), pages 1-36, September.
    17. García Alcaraz Jorge Luis & Alvarado Iniesta Alejandro & Maldonado Macías Aidé Araceli, 2013. "Selección de proveedores basada en análisis dimensional," Contaduría y Administración, Accounting and Management, vol. 58(3), pages 249-278, julio-sep.
    18. Aly Owida & P.J. Byrne & Cathal Heavey & Paul Blake & Khaled S. El-Kilany, 2016. "A simulation based continuous improvement approach for manufacturing based field repair service contracting," International Journal of Production Research, Taylor & Francis Journals, vol. 54(21), pages 6458-6477, November.
    19. Chen, Chen-Tung & Lin, Ching-Torng & Huang, Sue-Fn, 2006. "A fuzzy approach for supplier evaluation and selection in supply chain management," International Journal of Production Economics, Elsevier, vol. 102(2), pages 289-301, August.
    20. Yim, Andrew, 2010. "Quality Cost and Failure Risk in the Choice of Single versus Multiple Sourcing," MPRA Paper 27858, University Library of Munich, Germany.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:jorsoc:v:56:y:2005:i:1:d:10.1057_palgrave.jors.2601832. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.