WHAT IS TAC?

TAC stands for Total Acquisition Costs.

In today's global economy all companies are under extreme pressures to be cost competitive both in their purchasing and selling policies. In particular, procurement managers are assessed on their abilities to procure inputs at lowest possible costs. This is as it should be, but unfortunately far too often procurement managers tend to focus solely on the purchase contract price when negotiating with suppliers. The true total costs of acquiring these inputs are often either ignored, or hidden or subsumed into a variety of overheads. This can prove to be costly for any organisation and can have significant, direct negative effects on a company's bottom-line profits.
The purpose of this analytical and highly flexible model - developed over 3 years of intensive testing in a wide range of companies - is to provide an accurate and speedy assessment of the true costs involved in purchasing. This allows company managers responsible for the purchasing function within organisations to undertake a fast, reliable way of making a comparative cost evaluation of two or more potential suppliers. Moreover, the confidentiality and privacy built into the structure of the model allows the company to have complete confidential control over all the costing information entered into the model.

Outline of Model

(CAVEAT This costing model relies exclusively on actual costing data.   In essence, the old adage is so true "rubbish in then rubbish out".   If the company proposing to use this model does not posses the details of their costs, then the company will not benefit from this analysis).

The costs analysed within this TAC model are:

• Costs as defined within the specific terms of the purchase contract.

• All transport, freight, insurance, documentation, and custom clearance costs of getting the purchase goods to the destination required.

• Any currency costs arising if the purchaser is required to undertake transactions in terms of foreign currencies.

• Additional Machine tooling costs – if necessary.

• Stock-holding costs.

• Costs of liaison meetings with suppliers.

• Re-cycling or waste disposal costs.

• Any other relevant costs unique to the purchaser in procuring the required inputs.

• In addition, the model allows for the introduction of a “Risk -Factor” that may arise from problems associated with late or non-delivery of products or from the delivery of defective products. All of these can carry significant cost considerations.

Because of the world-wide usage of  “Just-In-Time” delivery practices, all of the costs outlined above are standardised within the model to a “cost per unit per delivery of order”.   This allows, for example, for a company with a purchase contract spread over a period of a year or more to calculate costs of purchase based on current data rather than on historic data.

In addition the model allows for the introduction of a “Risk Factor” that is always present within business.  This is certainly the case in procurement decision making.  To minimise these areas of risk, most companies now actively monitor their suppliers’ delivery performances and quality levels.  However, within the fast changing dynamic global-wide economy, purchasers are increasingly pressurised to search for new, less costly suppliers.  However, purchasing goods from new suppliers – without having a proven history of quality and delivery performances – can be a high risk factor.

The TAC model deals with this risk problem in a very pragmatic and sensible manner, by allowing companies to factor a “risk probability rating” into their analysis. 
Having entered the relevant costs data, the model presents the data in the form of a summary table in which comparative costs analysis can be quickly and easily assessed.