Worldwide sourcing involves dealing with both foreign and domestic suppliers, hence the need to understand total cost. Total cost data is vital in computing and measuring total cost. Total cost is a computation of the price paid and additional costs accrued up to the acquisition of the products sourced from suppliers. Total cost models employ four A’s of aggregate cost data which are applied to a business organization to achieve the total cost. The four A’s presents aspects of data that would be useful in an organization and others that would not be useful, as discussed below.
The first A in total cost data is accuracy. Organizations highly rely on accurate data, which provides precise information on total cost expenditure. Actual data is specific hence identifying the particular prices involved in acquiring products. This type of data would be beneficial in an organization such that it would facilitate cost computations and identify particulars in these computations.
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The other A is data approximations and averages. The data mainly comes from internal sources. Averages are applied in the case where there are limited time and resources to compute specific costs of late deliveries. In this case, a standard is conducted to reveal expenses that are very close to reality. However, this approximations should be narrow to enhance the believability of the cost data provided. Averages are helpful in an organization as they save on time and resources in the event of late deliveries.
The third A represents data based on assumptions. Employing assumptions in cost computations renders a total cost model doubtful seeing as the data is from external sources. Assumptions are inefficient since different organizations use varying forms of interchange. Moreover, data based on assumptions is highly unreliable.
Finally, the fourth A represents data that is absent from the total cost model. Missing data poses a challenge in making data-based decisions as they do not present any figures on the total cost model. Missing data also increases the cost of data collection, which often outweighs the value of data itself. Hence, missing data is not necessary for an organization.
In conclusion, total cost models employ different data to achieve total cost in worldwide sourcing. Actual data and data based on averages are instrumental in an organization. However, data based on assumptions and missing data are unnecessary and of no help to an organization.
