Essay About Various Factors And Qualitative Evaluation

Tco Vs Weighted Point Method
Weighted point method
TCO method
Advantages
– includes various factors and weigh based on the current firm’s needs
– flexible because companies can change weights placed on measures overtime
– moderate implementation costs
– combines both qualitative and quantitative methods
– considers a broader range of factors covering the whole life cycle costs
– reflects the “actual” cost of purchasing
– objective cost measures
– provides analysis of how the firm is to cost fluctuation
 better sourcing policies
– helps firms realize costs that can be improved/saved
 increase competitiveness
Disadvantages
– measures fewer evaluation factors determining the “actual” transaction costs
– still subject to subjectivity
– difficult in practice because the value of one performance measure is relative to another
– qualitative evaluation is difficult
– some measures cannot be taken into account (business risk, opportunity costs, success chance in negotiation
– shows little implications of how supplier choice may affect the business performance
– complex and time-consuming
– difficult to accurately define, categorize, and track all costs
– changes in internal/external factors may have immediate impact but can’t be calculated right away
– Uncertain data availability
– requires cooperation and inputs from all department
– some measures cannot be taken into account (business risk, opportunity costs, success chance in negotiation)