Using Technology to Reduce Total Cost of Ownership

Introduction

                Total cost of ownership includes compute every cost related to the firm, defined as “the present value of all costs associated with a product, service, or capital equipment that are incurred over its expected life”  (Monczka, 2009) another definition is the price of an asset and the costs of operation, when you count the total cost of ownership ramified to categories which is purchase price, acquisition cost and usage cost, to calculate total cost of ownership must build a model or use one, It is not an easy process to gather data and quantify costs. Technology has a critical role in reducing total cost of ownership, despite the high cost of technology but it has the effect of reducing the total cost in long-term (Yi-Ming Tai a, 2009), the emerge of technology on procurement process through using e-model such as e-procurement, electronic data interchange (EDI) and Radio frequency identification (RFID), using the technology may transforming purchasing process from “an operational into a strategic activity” (Yi-Ming Tai a, 2009). Will address this technology as follows

E-procurement model and EDI

Electronic data interchange was the common method in the pre-Internet era for purchasing process, EDI is the transfer of data from one computer system to another by “standardized message formatting” (Yi-Ming Tai a, 2009) this includes data like invoice, price and purchase order.The cost of electronic data interchange is high “The cost of implementing and maintaining EDI is high and only large-sized companies can afford it” (Yi-Ming Tai a, 2009) surveys emerge the most use of EDI within large entities and that due to the high cost of EDI and large size of the business . The  e-procurement model is a term used to describe the electronic method (usually the internet) to conduct transactions between buyers and suppliers,.

E-procurement defined as “The suite of tools used to achieve efficiency in purchasing transactions” (Monczka, 2009) purchasing manager use e-procurement to automate the generation and transmitting documents to suppliers. Web-based procurement system has a significant impact on the procurement process “strengthen search ability, facilitate faster and more accurate data transmission” (Yi-Ming Tai a, 2009) furthermore it provides extensive information and enhancing buyer-supplier relationship.

I recommend an e-procurement system or model to the company which I belong to it (UPC), it will enhances the buyer-supplier relationship with lower cost “achieve relatively low communications and coordination cost” (Yi-Ming Tai a, 2009), EDI system confined in Sending and receiving purchase orders while e-procurement exceed that by providing information, EDI and e-procurement model share in the virtual elimination of paperwork handling which is safe time, our company consider as  medium-sized company, e-procurement model lower cost than EDI, where the company has a large number of suppliers I think the e-procurement model will be more compatible and flexible, e-procurement system has a direct impact of buyer and supplier performance “H3:Use of Web-based procurement positively influences buyer organizational” (Yi-Ming Tai a, 2009).

Radio frequency identification RFID

RFID Technologies allow enhanced collaboration in the supply chain network it can be defined as “ Automatic identification technology which uses radio-frequency electromagnetic fields to identify objects carrying tags when they come close to a reader” (CNRFID) these tags used to capture data of goods within the supply chain network,

In an attempt to measure applying this technology  in UPC (a chain of pharmacies) and measure their benefits and limitations, regarding to limitations of RFID and at first glance appear to  me the difficulty inclusion of RFID tag on the drug box due to the small size of most drugs and cosmetic items “The tag's location on the tracked item is vital. Whether it is a vial of vaccine or a shipping container on a dock, the tag's orientation and position must be carefully picked and set up to be consistently read by the reader” (Poulsen, 2010). although the benefits of this technology, especially in the medical field “Companies are developing RFID tags and readers that can be combined with software systems to alert doctors and nurses of potential problems” (Violino, 2005) also using  RFID in the retail business to make sure product is always on the shelf when customers want to buy it, according to report of (Journal, 2011) RFID technology has improve packing and shipping accuracy, inventory accuracy and better tracking of goods. The big limitation of using RFID in UPC is the high cost in addition to collision “Attempting to read several tags at a time may result in signal collision and ultimately to data loss” (Mandeep Kaur, 2011).

When applying such this technology, we need to analyze and address many issues like process evaluation, requirements and feasibility Studies. According to (Poulsen, 2010) some steps should be considered to implement RFID successfully which is managing Expectations, process evaluations, Performing … ite Survey, System Testing  …etc (Poulsen, 2010). When apply this technology in UPC we need for a system include RFID tags, computer software and hardware, network, scanning devices, also collecting and analyzing data about goods.

Bibliography

CNRFID. http://www.centrenational-rfid.com/definition-of-rfid-article-71-gb-ruid-202.html accessed date: 4/11/14

Journal, R. (2011). How to RFID-Tag Apparel and Benefit Internally. Available at  https://www.rfidjournal.com/purchaseaccess?type=Article&id=8233&r=%2Farticles%2Fview%3F8233 accessed date: 3/11/14

Mandeep Kaur, M. S. (2011). RFID Technology Principles, Advantages, . International Journal of Computer and Electrical Engineering . Available at  http://www.ijcee.org/papers/306-E794.pdf accessed date: 3/11/14

Monczka, R. R. (2009). Purchasing and Supply Chain Managemnt (4 ed.).

Poulsen, B. (2010). How to Implement RFID Successfully. : Available at http://www.rfidjournal.com/articles/view?7797/4 accessed date: 3/11/14

Rouse, M. Electronic Data Interchange http://searchdatacenter.techtarget.com/definition/EDI.

Violino, B. (2005). RFID Consumer Applications and Benefits. Available at  http://www.rfidjournal.com/articles/view?1332/ accessed date: 4/11/14

Yi-Ming Tai a, C.-F. H.-H. (2009). The Performance Impact of Implementing Web-based e-procurement Systems. International Journal of Production Research , 5397-5414.