Total cost of ownership in the services sector: A case study

Few detailed studies exist of the trade‐offs to be made when developing a comprehensive, strategically focused total cost of ownership (TCO) model. Moreover, most studies of TCO have been conducted in manufacturing firms, with little or no TCO research directed toward service organizations. This research presents the results of a study conducted at a leading vehicle glass repair and replacement organization. The results show how TCO information can be used for strategic decision making regarding the allocation of volumes. This information can also be used in the identification of improvement areas for preferred suppliers by introducing a limited number of key performance indicators that have a significant impact on the TCO of supplier offerings. The paper highlights some of the trade‐offs required in designing such a model. It fills an existing literature gap that allows service organizations to better understand the development and implementation of total cost measurement systems.