"The objective of the procurement process is to purchase goods and services at the ?best?price, which may not be the lowest price per unit at the vendor source. For the buyer, the totalprocurement price is more than just the basic purchase price.Total cost of ownership (TCO) is a methodology and philosophy which looks beyond theprice of a purchase to include many other purchase related costs. This approach has becomeincreasingly important as organisations look for ways to better understand and manage theircosts. TCO is comprised of:? Acquisition costs (e.g. supplier price, supplier terms, taxes and duties, delivery costs)? Ownership costs (e.g. inventory costs, warehousing cost, manufacturing costs, qualitycosts)? Post-ownership costs (e.g. reputation, warranty and product liability costs,environmental costs, supplier capabilities)Therefore, it is important to recognise that supplier performance should be compared basedon the impact on total cost of ownership. In addition to acquisition costs, ownership and post- ownership costs should also be considered. In many instances, a higher acquisition cost ismore than compensated for by lower ownership and post-ownership costs.7 Supplier Selection[This page should take about 40 minutes to complete] flickr photo sharedby aoberg under a Creative Commons ( BY-NC ) license.There are a variety of factors in supplier selection. The most important one is usually quality.Reliability comprises on-time delivery and performance history, the second- and third- ranked factors for most procurement professionals. One way risk may occur is if there islikely variability in the cost of purchased products or services that may result in higher prices.Other ways in which risk may occur include supply uncertainties and unusual variation indelivery lead times. Capability considers the potential supplier’s production facilities andcapacity, technical capability, management and organisational capabilities, and operatingcontrols. Financial considerations constitute the fifth major supplier selection criterion. Another supplier selection factor is geographical location. This factor addresses the issue ofwhether to buy from local or distant suppliers. Supplier/Vendor Evaluation and Relationships:Many successful companies have recognised the key role that sourcing and procurement playin supply chain management and that supplier/vendor relationships are a vital part ofsuccessful procurement strategies. This is especially true when companies reduce the total number of their suppliers, frequentlyin conjunction with total quality management (TQM) programs or just-in-time (JIT)production and inventory systems.The strategy to utilise a smaller number of suppliers/vendors frequently means an alliance orpartnership with suppliers/vendors because of the need to assure an adequate supply ofquality materials over time at an optimum total acquired cost. Certifications and RegistrationsA topic of interest to many buyers of products and services is the extent to which potentialsuppliers have achieved excellence in terms of process management and continuousimprovement been developed that address issues relating to soundness of processes, resultsachieved, and continuous improvement.? TQM—represented a strategy in which entire organisations were focused on anexamination of process variability and continuous improvement.? Six Sigma—is similar to TQM but involves training experts (known as green beltsand black belts) who work on solving important problems while they teach others inthe company.? ISO 9000—involves a third-party registration program certifying that companies arefollowing documented processes.While it is encouraging to know that certain potential suppliers have committed theirorganisations to approaches such as these, one needs to be sure to document the benefits andimprovements that are likely to be created as a result. "