Prepare a memo for all team members that identifies and elaborates on
1. The generic life cycle stages used in estimating the cost of ownership. In the memo, discuss
2. Why it is important for supply chain management to incorporate knowledge of the life cycle into its cost estimation and decision-making processes.
3. As an example for the team, create your own example or cite a current example of a company that has used its understanding of the life cycle costs in a supply chain make or buy decision and how that knowledge impacted the decision process.
The response addresses the queries posted in 909 words with references.
// This paper will emphasize on the importance of life cycle costing in supply chain management to the team members of the organization, in the form of the memo with the help of an example. The following section will explain the concept of life cycle costing and different parameters that an organization takes into consideration under this method.//
Date: February 20, 2013
To: Team members
Subject: Importance of life cycle costing in supply chain management
Life cycle costing refers to the estimation of economic value of an asset throughout its life. The cost incurred at different stages during its life is considered while calculating the total value of ownership. This method of costing concerns the cost related to acquisition, as well as ownership of an asset. The different stages that are considered while estimating the cost are research and development, operation and maintenance, construction and disposal of an asset. This cost analysis facilitates smooth decision making process in all types of industries as it helps firms to compare costs of available alternatives in order to select the best alternative so as to achieve the desired objective (Watson, 2005).
This type of costing not only include the acquisition or start up investment, but also considers the anticipated cost that can be incurred in the future stages of the life of the asset. The relevant and critical costs related to the assets are equated in present value, which in turn facilitates comparison ...
The solution provides a logistics cost analysis.