Cost of Ownership of Capital Equipment

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An interview is an integral part of the recruitment process because it matches the applicants' skills with the job requirements.  The essay's purpose is to provide responses to interview questions for the recruitment of a new junior buyer. The basic requirements of the position are an experience of 0-2 years, excellent communication and understanding of the supply chain management practice language and a bachelor’s degree in a related field.

Job titles of within the supply management and their contribution to the organization’s success

            The question seeks to determine if the applicant understands the workforce within the supply management. The examples of job titles include a supply chain manager, coordinator and data analyst (Hugos, 2018). The applicant can also give job titles like a supply management consultant.  These job titles have a significant impact on the overall operation and performance of the organization. For example, the manager is responsible for the coordination of the logistics in regards to the overall plan or strategy, the source of raw materials, the productivity and operation, efficiency of the delivery system and the development of return policy in case of low quality, defective or unwanted goods supplied to the organization.

             The supply management data analyst also contributes to an organization’s goals by collecting, analyzing and interpreting the supply chain data like the stock turnover, cost of raw materials as offered by various vendors and the delivery statistics.  Besides, an analyst uses the analyzed data to coordinate the different departments within the supply chain system with a view of improving them and boosting the performance of the organization as a whole.  The final job title that contributes to an organization’s success is that of a supply management consultant.

            The occupant of the consultancy office plays a vital role in the coordination of supply management activities in different departments. For example, the consultant checks the quality of data used by the analysts, ensures the implementation of business architecture occurs according to the plan and helps the organization in the development of key performance measurements.  The applicant should be able to demonstrate that he or she understands the roles of at least three employees within the supply management structure (Wisner, Tan & Leong, 2015).

Importance of supply management with an internal partner

            The question seeks to analyze if the job applicant can understand how an organization operates and the impact of supply management and logistics in the different departments (Wisner, Tan & Leong, 2015).  For example, the logistics department relies on the supply management to cater for costs and customers’ perception.  

            The types of costs which are impacted by the integration of supply management in the logistics department include procurement, transportation, inventory management, forecast accuracy. Transportation and storage costs.  Besides, proper integration and application of supply chain management concepts can assist an organization in having an efficient logistics department which can shape customers’ perception by having short delivery lead times and proper on-time delivery system, well-maintained inventory to avoid shortages, high product qualities, and well-organized customer-service system.  Using the logistics department as an example, the applicant should be in a position to explain using specific examples of how integration of supply management can help a department within the organization to succeed.

Role of Supply management in achieving sustainability goals within an organization

            The question helps in assessing the applicants understanding of the long-term impact that supply management has on the organization. Even though there is no strict response to the question, the applicant should demonstrate an understanding of the overall organization goals and how supply management contributes to them (Mangan, Lalwani & Lawani, 2016). For example, supply management helps in the creation and improvement of an organization's identity. If the logistics department enhances customers' confidence, the branding and messaging of the organization are also boosted; thus the firm is most likely to have higher customer retention in the long term. Besides, supply management helps the organization in the development of long-term strategic plans in regards to the goals and industry benchmark. For example, the supply consultant can use data provided by the supply analyst to develop a strategy of reducing the number of purchased materials by recommending the installation of a recycling plant. 

            Supply management also plays a role in the achievement of financial stability goals in an organization. For the manufacturing firm to have future financial stability, budgets, audit, and cash flow analysis must be done on a regular basis.

            Various departments within supply management should be able to provide their budget estimates which are not only realistic but also tenable. Finally, the supply management helps the organization in achieving its sustainability goal of having constant staff development and organizational culture by conducting a regular needs assessment, evaluating and reviewing the existing employees, training the staff on particular tasks aimed at achieving the firm's mission and vision and enhancing team building within the organization.

Factors to consider when determining the Total Cost of Ownership (TCO) of capital equipment

            The Total Cost of Ownership (TCO) is the item’s purchasing price and the after sale costs. The Three costs involved are the acquisition cost which excludes taxes but includes discounts and incentives, the operating costs like direct labor costs and the personnel costs like training and other maintenance charges (Mangan, Lalwani & Lawani, 2016).  There are five key factors to consider, storage being the first one.

            For a manufacturing piece of capital equipment, the buyer must consider the cost of storage in case the existing storage facility is full or not optimized. For example, if a machine's engine costs $1000 and the storage cost is $200 per month, the buyer needs to consider the urgency of the machine and the total price as 1200 after the first month of purchase. Storage costs will bring a positive value in case the buyer has a storage facility. Training expenses should also be considered when determining the TCO. For example, if a machine costs $5000 but requires training that would cost $1000, the TCO would be $6000 indicating a negative value of $1000. 

            According to Christopher (2017), transportation cost or carriage inwards is another factor which a buyer needs to consider. Depending on the location of the materials, transportation costs can either be positive or negative to the overall value of TCO. For example, some vendors offer free transportation as after-sale services.  

            The fourth factor which a buyer of a piece of capital equipment has to consider is care and maintenance costs. For example, equipment which requires a particular environment for storage would make the firm to incur extra expenses in marinating the material thus having a negative impact on the TCO. Finally, an organization has to consider the risks associated with an item when determining the Total Cost of Ownership (Christopher, 2017). The risks which can have a negative impact on an item's value include strict laws and regulations, inadequate warranty to cover for an unexpected performance hitch and environmental risks like injuries associated with the equipment.

Characteristics shared with professional negotiators and the connection to the role in supply management

            The question seeks to link the applicant’s inherent skills with the junior buyer job requirements.  As a negotiator, the skills shared with professional bargainers should include innovation and problem solving, avoiding taking proposals and other statements personally when negotiating, sensitivity to non-verbal cues, patience, and persistence (Hugos, 2018).

             These skills are essential in ensuring that the junior buyer cannot only communicate the company's position but also persuade stakeholders to buy into his or her ideas.  Besides, possession of such skills have a role of not only making a junior buyer a negotiator but also helping him or her in fulfilling other tasks like recordkeeping, researching and monitoring of the shipped materials.

Choosing a new supplier

            The supplier's selection depends on many factors like the supplier's flexibility, quality of products, cost, and experience. The best method of choosing a new supplier using data is open bidding (Monczka, Handfield, Giunipero & Patterson, 2015).

            Using this method, interested suppliers are asked to provide their bids then the best bid is selected.  The first process in the process is to set criteria which will be used in the selection of the final bid.  For example, order quantity, preferred delivery method, return policy and payment terms and conditions can be included as the decision criteria.  The second stage is a definition of the process. For example, the unrestricted bids can be invited via mainstream media by advertisements.

            The third stage is a call for bids which are then evaluated. Once all bids are received, data is used in determining the supplier performance. For example, a supplier willing to supply the highest quantity of items at the lowest cost per item gets a high score in the benchmark.  

            The bidding method is not only fair but also consistent with the supply and procurement laws. For example, all bidders are given equal opportunity to present their offer, and the information or data provided is tested against the set-out decision criteria.  Besides, unrestricted bidding allows a manufacturing firm to source for the best available supplier whose terms and conditions are in line with the organization’s sustainable goals.

Seeking international sources of materials

            According to Mangan, Lalwani & Lawani (2016), a manufacturing firm can seek for a foreign source of materials because of many factors like the inadequacy in the domestic market. However, there are many considerations which influence the choice of an international supplier.  

            The first factor is the trade regulations. Different countries impose economic bottlenecks and other regulatory restrictions on specific equipment to prevent their exportation. A United States-based manufacturing should consider the impact of such trade regulations on the total cost to be charged by the supplier. The difference with doing business domestically is that all laws and regulations passed in the United States affect both the supplier and the sourcing firm thus the prices of materials or services are not affected by the trade restrictions.  

            Product or service quality is the second consideration which influences the choice of an international supplier. A firm can be willing to pay for extra costs if the global supplier offers exceptional quality product or service which would have a significant positive impact on its brand. If a firm does business with a domestic supplier located within the United States, the shipping costs may be lower even if the quality remains high.

              A supplier’s responsiveness is also an important consideration when it comes to international supply management.  Being that the manufacturing industry is competitive; a firm would only seek services or products of an international supplier who can take a short time to make the product or service available in the market. It is expected that a firm that chooses to seek supplies from a domestic supplier will have a shorter time-to-market thus one needs to consider the impact of international suppliers' responsiveness on the firm’s competitive advantage.  

            The other important aspect of international supply is financial costs. Just like a domestic supplier, foreign suppliers have costs caused by external factors like inflation and political stability.  For example, politically stable countries with low inflation rates have low production costs thus the suppliers are most likely to charge low costs on the equipment. However, the domestic suppliers’ finance costs are influenced by other factors like experience and quality of products.  

            Finally, the ability to add value to the original products supplied from international sources should be considered. A manufacturing firm should go for a supplier whose services and products provide a room for value addition. The difference between such suppliers and the domestic ones in the United States is that the international supplies would have more from for value addition (Hugos, 2018).

Application of fixed-price contracts

            According to Christopher (2017), the fixed type-contracts are legally binding, and the suppliers are expected to meet all the terms as specified without uncertainty.  The first type of a lump sum contract is the Firm Fixed-Price Contract (FFP).  The FFP is mostly applied in the government contracts and has fixed fee. In this type, the extra expenses incurred due to law performance are catered for by the seller, and the buyer only needs to provide the entire fixed fee for the work or supply.  

            Fixed Price with Economic Price Adjustment Contract (FP-EPA) is a type applied if the contract is expected to last for a long duration thus the project cost is expected to grow over time. The contract implies that the buyer must be willing to change the terms and conditions as proposed by the seller depending on the prevailing economic conditions.  Finally, Fixed-Price Incentive Fee Contract (FPIF) is one which has a fixed price, but the buyer can give an incentive based on the seller's performance. For example, a 5% incentive can be offered for quick completion of a project. 


            The applicant should provide satisfactory responses to the above-discussed questions and demonstrate his or her understanding of the supply management. It is vital to ensure that the applicant's responses justify his or her suitability to occupy a junior buyer’s position at the firm.


Christopher, M. (2017). New directions in logistics. In Global logistics and distribution             planning (pp. 47-58). Routledge.

Hugos, M. H. (2018). Essentials of supply chain management. John Wiley & Sons.

Mangan, J., Lalwani, C., & Lalwani, C. L. (2016). Global logistics and supply chain            management. John      Wiley & Sons.

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and          supply chain management. Cengage Learning.

Wisner, J. D., Tan, K. C., & Leong, G. K. (2014). Principles of supply chain management: A           balanced approach. Cengage Learning.

September 04, 2023

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