How total cost ownership and real options valuation contribute to effective purchasing decisions
| Key elements of effective purchasing decisions | Contribution of the tools | |
|---|---|---|
| TCO | ROV | |
| Holistic cost structure assessment (Purchasing price & total cost consideration) | x | x |
| Assessment of risk dimensions | x | |
| Cash flow, revenue and profit considerations | x | |
| Support the decision-making process | x | x |
| Optimize flexibility | x | |
| Aid in negotiating with suppliers | x | |
| Measurement of commodity risk mitigation strategy effectiveness | x | x |
| Contribution of the tools | ||
|---|---|---|
| ROV | ||
| x | x | |
| x | ||
| x | ||
| x | x | |
| x | ||
| x | ||
| x | x | |
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