The true cost of C-parts management : Quality and supply matter for Total Cost of Ownership

Abstract: C-parts encompasses a wide variety of products, making it a complex category, withcompanies sourcing hundreds or even thousands of distinctive parts from many differentsuppliers. Yet, the area is of low focus for purchasers and researchers alike. This study aimsto examine the Total Cost of Ownership (TCO) of C-parts, find the factors driving total costand how different measures affect TCO. The theoretical framework encompasses literature covering TCO, Supplier management, Corporate & purchasing strategies as well as Vendor-managed inventory. The method for this study is a qualitative research study conducted through 7 semi-structured interviews within various industries and analyzed thematically,according to the themes Total Cost of Ownership & Cost factors, Supplier management &VMI as well as Corporate & purchasing strategies. Our findings show that purchasing &sourcing managers have a low focus on TCO and place a greater emphasis on ensuring thattheir C-parts suppliers can perform in terms of quality and supply reliability. Theconsequences of runouts and quality issues can quickly become substantial, especially incomparison to the direct purchasing costs of the C-parts. Furthermore, scenario uniquemodeling is suggested for TCO analysis when it comes to C-parts, due to a high complexityand variations between industries.