Total Cost of Behavior: Measuring Performance Beyond TCO
In the procurement universe, a disturbing truth emerges: up to 60% of your real costs remain invisible. While procurement departments meticulously scrutinize the TCO (Total Cost of Ownership), an essential dimension escapes their radar: behavior. The Total Cost of Behavior (TCB) disrupts procurement performance standards by revealing what traditional KPIs fail to measure.
When behavior becomes an invisible cost
Beyond TCO, a complex reality takes shape. Total cost of ownership certainly analyzes the acquisition, maintenance, and end-of-life of an asset. However, it systematically ignores the impact of daily usage behaviors.
Let’s take the revealing example of a vehicle fleet. TCO includes the purchase price, insurance, and scheduled maintenance. Nevertheless, it omits aggressive driving generating 25% cost overruns in fuel and premature wear. Similarly, it neglects last-minute reservations or systematic choices of premium options without business justification.
These behavioral dysfunctions constitute massive hidden costs. In indirect procurement, they represent 70% of total cost overruns. Moreover, a non-rationalized supplier portfolio generates considerable administrative costs: approximately €1,000 per supplier for registration and updates.
Thus, measuring only TCO is equivalent to flying blind. Indeed, classic indicators – average cost per transaction, rate of suppliers under contract – mask the reality of usage patterns.
TCB KPIs: a new measurement dimension
Procurement performance now requires behavioral KPIs that complement traditional financial indicators. This approach radically transforms post-contractual management.
First, the compliance rate to negotiated contracts becomes crucial. This KPI reveals the gap between contractual terms and purchases actually made. Yet, numerous organizations have employees bypassing framework agreements, thereby generating substantial missed savings.
Second, the cost/value correlation (Linear Performance Pricing) measures the effective application of reference prices. By measuring the number of invoiced lines outside the pricing schedule, this indicator precisely identifies behavioral drifts.
Third, TCB introduces innovative usage metrics: frequency of order modifications, rate of non-cancellation of unnecessary reservations, or adoption of economical and ecological alternatives. These indicators reveal previously unsuspected savings opportunities.
Finally, unlike static KPIs, TCB offers a dynamic approach. It prioritizes behaviors according to their economic impact and their “changeability” – their ease of being modified. Consequently, procurement teams can prioritize their transformation actions with precision.
From TCO to TCB: transforming procurement performance
The transition to TCB represents a strategic paradigm shift. Nevertheless, this methodology does not aim to constrain employees, but rather to guide them toward more efficient practices.
Concretely, TCB relies on a behavioral toolkit: regular feedback on consumption, default settings for economical options, nudges favoring cost-effective choices. As a result, companies can reduce their costs by 15 to 30% without degrading the user experience.
Furthermore, this approach transforms the relationship with suppliers. Instead of focusing solely on price negotiations, procurement departments develop partnerships based on joint optimization of usage behaviors. Thus, performance becomes a shared challenge.
Ultimately, TCB addresses the cross-cutting issues of finance departments (real cost optimization), HR (daily improvement), procurement (effective management), and CSR (environmental impact reduction). This convergence makes the Total Cost of Behavior an essential lever for global performance.
In conclusion, measuring procurement performance beyond TCO is no longer an option: it’s a strategic necessity for any ambitious organization.