Yesterday my friend told me about an item he purchased.  He went on and on talking about it.   He started with specifics about the item, basically discussing the features, functions, his phone call to the company, the shipping of the item, and finally the price.  Our conversation lasted about 50 minutes.  My friend believed that he spent 32 hours, yes 32 hours! researching, ordering and follow ups with the supplier. How could that happen?  In our conversation we also discussed the total cost of ownership of the item.

Background

My friend and I started the conversation by understanding the technology he purchased. What could be the total cost of ownership? 

Most people believe that they are good at buying.  Perhaps, because they buy something every day, or they’re a professional buyer, or have been going to the store to buy for years and buy only items on sale.   Well, my friend believed that his buying skills were the best until he realized, through our conversation, the real cost of his buying venture.

What do people not understand?  The conversation with my friend has provided him with new wisdom about the total cost of ownership.  Our conversation went like this.

Factors that must be considered on the purchase of an important item.

When buying an item, there are five things that go with that purchase from the supplier of the service or product. Basically, there are five important individual factors that are related to the cost:  technology, quality, service, delivery, and price. 

1. The technology is any item or service with its “features and benefits.” 
2. The reliability of the item is part of the quality, that includes the physical elements as well as other elements such as software.  
3. The service relates to the manual. The person, that picks up the phone to tell that the item will be shipped in two weeks, works through the set up because he can’t figure out the return; if it doesn’t work or it is not what is expected. 
4. Then there is the delivery.  How much will it cost to have it delivered, or returned, if necessary?  There is also a cost associated with late delivery, extended warranty, and supplier delays, among others, may be very costly.
5. The price is an inherent part of the buy.  It could be low cost, medium or high-cost version of the technology being purchased. 

Summary of the total cost

The value of the technology, whether low, medium, or high level, with more benefits and features, includes the quality, service, delivery, and price. These factors are all part of the total cost of ownership.

Summary:

The five factors mentioned above should be considered in every major purchase whether a service or a hard good technology. Some of the costs of the factors listed above are often ignored at the time of purchase. However, it is likely that, over time, they will become apparent. Other factors include entry of the item into the market. Typically, the price will be higher for early entry and reduced as the volume into the market increases. The quality may be lower, as well as the service. Buying serial number 1 may offer unforeseen challenges. 

Reach out to Core Pointe

Want to learn more about purchasing?  Reach out to Core Pointe. Our team will do our best to help you expand your wisdom by listening to you, reviewing data, asking questions and suggesting some possibilities that we believe will result in good decisions.