Improving the efficiency of the purchasing process using total cost of ownership information: The case of heating electrodes at Cockerill Sambre S.A.
Degraeve, Zeger Roodhooft, Filip
Degraeve, Zeger
Roodhooft, Filip
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Publication Type
Journal article
Editor
Supervisor
Publication Year
1999-01
Journal
European Journal of Operational Research
Book
Publication Volume
112
Publication Issue
1
Publication Begin page
42
Publication End page
53
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Abstract
Improving the efficiency of the purchasing process provides important opportunities to increase a firm's profitability. In this paper we introduce a mathematical programming model that uses total cost of ownership information to simultaneously select suppliers and determine order quantities over a multi-period time horizon. The total cost of ownership quantifies all costs associated with the purchasing process and is based on the activities and cost drivers determined by an activity based costing system. Our approach is motivated by the purchasing problem of heating electrodes at Cockerill Sambre, a Belgian multinational steel producer. In this case quality issues account for more than 70% of the total cost of ownership making the quality of a supplier a critical success factor in the supplier selection process.
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Keywords
46 Information and Computing Sciences