Total cost of ownership purchasing of a service: The case of airline selection at Alcatel Bell
Degraeve, Zeger Labro, Eva Roodhooft, Filip
Degraeve, Zeger
Labro, Eva
Roodhooft, Filip
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Publication Type
Journal article with impact factor
Editor
Supervisor
Publication Year
2004-07
Journal
European Journal of Operational Research
Book
Publication Volume
156
Publication Issue
1
Publication Begin page
23
Publication End page
Publication Number of pages
18
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Abstract
The multiple objective problem of purchasing for business falls into two broad categories: the purchasing of components for manufacturing and the purchasing of services. Several supplier selection models have been suggested in the literature for the purchasing of production-related components. To our knowledge, no supplier selection model for the purchasing of services has been published. In this paper we elaborate on a mathematical programming model that selects suppliers of a multiple item service and simultaneously determines market shares of the suppliers selected. The methodology is based on the collection of total cost of ownership (TCO) information, quantifying all the costs associated with the purchasing process throughout the entire value chain of the firm. We apply this methodology to the real life case study of selecting airlines for 56 destinations at Alcatel Bell and have obtained TCO savings of 19.5%.
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Keywords
46 Information and Computing Sciences, 4609 Information Systems