What is total cost of ownership (TCO)?

TCO is every cost of acquiring, holding and using a purchased item — not just the price paid. For a South African import that means freight and surcharges, customs duty and VAT, inventory carrying cost, insurance, currency risk, quality and rework, obsolescence and administration, added to the unit price. The cheaper supplier on paper is often the more expensive one once all of these are counted.

How is inventory carrying cost calculated?

Carrying cost is the average stock value held multiplied by your cost of capital (as a %), pro-rated for how long the stock is held: value × holding% × (days held ÷ 365). A longer or more variable lead time forces more safety stock, so it raises carrying cost — which is exactly why a slower, "cheaper" supplier can cost more in total.

Why do Incoterms matter in a TCO comparison?

Incoterms decide which costs sit with the buyer versus the seller. Comparing two quotes on different Incoterms without adjusting is a top cause of a misleading like-for-like comparison, because one quote may already include freight and insurance the other leaves for you to pay. Normalise to the same Incoterm before comparing.

Total Cost of Ownership Calculator South Africa

Two options, all-in

Normalise both quotes to the same Incoterm first. Need the duty and VAT figure? Use the Duty & VAT Calculator.

Supplier A

Unit price (R)

Annual quantity (units)

Incoterm (of the quote)

Freight + surcharges (R total)

Duty %

VAT %

Lead time (days)

Cost of capital %/yr

Insurance %

Currency risk %

Quality / rework %

Obsolescence %

Admin (R total/year)

Supplier B