Saving money and eliminating waste through total cost of ownership

Abstract

As a learning organisation transforms into an enduring healthcare company, hospital operational leaders must look deeper into the elements of total cost of ownership (TCO). TCO requires operational leaders to measure and analyse all costs associated with products and services lifecycle management, not just the acquisition cost. TCO not only focuses on the cost-value of the products themselves, otherwise known as cost of goods (COGs), but various other cost drivers such as labour expenses, expired/obsolete inventory, variable supplier lead-times, transportation, excessive inventory levels, and other costs associated with those products and services. To achieve the full benefits of TCO and decrease costs, a parallel effort must be deployed utilising strategies and lean principles to minimise waste and operational costs found in budget categories such as sales, general, and administrative (SG&A). By streamlining its TCO expenses a hospital will maintain control over its expanding operational costs in the unpredictable healthcare future. This paper is aimed at resource managers, operations managers, sourcing managers, programme managers and executive staff, rather than clinical caregivers.