The acquisition and employment of all materials and services in an enterprise involves direct costs plus other associated (and often hidden) costs. The quantification and sum of all these costs through the life-cycle is the TCO - Total Cost of Ownership.
Similarly known as Total Acquisition Cost, or Total Life-cycle Cost, the understanding and quantification of all these costs is essential to any real cost reduction initiative.
This is particularly important not only for operations, but also the purchasing and procurement function.