Total Cost of Ownership Presentation Tyson Foods, Inc. Total Cost of Ownership Presentation

Total Cost of Ownership Concept “The cost of owning an item goes far beyond the initial purchase price of that item. It includes the initial cost of purchase as well as all related and ongoing costs of purchasing, operating, maintaining, and disposing of the item.” “Often the cost of ownership and operation far outweigh the purchase price of the item”

The Key: Value Value includes : Price (What did it Cost?) Service: (What did the seller do beyond the sale?) Quality: (Did the item perform as represented?) Time: (Is the seller Simple to do Business With?) Cost of Operation: (Cost of Supplies, Maintenance, Service, Etc.)

Purchasing Philosophy Buy Value ! Pay a fair price for the quality of the item purchased. Manage Value ! Aggressively manage the costs related to the operation, supply, and maintenance of the particular item.

Example: Car #1 Total 5 Yr. Cost: $37,500 Car #2 Initial Cost: $25,000 Value at end of life: $10,000 (5 yrs) Operating Costs: Annual x 5 years ($4,500x5 Yrs) Insurance $1,000 Taxes $250 Interest $750 Fuel $2,000 Repair/Maint. $500 Car #2 Total 5 Yr. Cost: $40,000 Initial Cost: $15,000 Value at end of life: $5,000 (5 yrs) Operating Costs: Annual x 5 years ($6,000x5 Yrs) Insurance $1,500 Taxes $100 Interest $400 Fuel $3,000 Repair/Maint. $1,000

Items Often Overlooked as Value Payment Terms Knowledgeable Service Staff Residual Value or Cost of Disposal at Life End Information provided about associated costs Simplicity of Dealing with the Supplier Training provided to users Energy Consumption of the item