| Course | MT436 Purchasing and Supply Chain Management |
|---|---|
| Unit | Unit 3 |
| Paper type | Total cost of ownership model |
| Length | About 920 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | BS in Business Administration |
| Updated | October 2026 |
Free sample paper for MT436 Unit 3
The Cheapest Quote Finishes Last: An MT436 Unit 3 Total Cost of Ownership Model for Frame Weldments
[Student Name]
Purdue University Global
MT436: Purchasing and Supply Chain Management
Unit 3 Total Cost of Ownership Model
[Instructor Name]
[Date]
Marsh Run Utility Vehicles, the three suppliers and every cost are composite; results come from the per-set model and script described, and the sources cited are real.
The Model
Marsh Run buys 2,900 frame weldment sets a year, one per vehicle. The model builds a per-set cost for each supplier from nine rows: the quoted price, inbound freight, receiving inspection, in-plant rework of weld defects, field claims from defects that escape, line stoppages from late trucks and the cost of switching from the incumbent, spread over a three-year award. Ellram (1995) describes total cost of ownership as the full cost of acquiring and using a purchase, beyond its price, and each row here is a cost that differs by supplier.
The Quotes and the Delivery Costs
The incumbent in Goshen, Indiana, quotes $2,480 a set, a Wisconsin shop $2,340 and an Ohio shop $2,395. Freight to Muscatine adds $38 from Goshen on Marsh Run's regular trucks, $96 from Wisconsin, whose shop ships by common carrier, and $71 from Ohio.
Inspection and Quality
Receiving inspection costs $9 a set for Goshen, whose frames arrive with a certified weld inspection report and need only a sample check, $31 for Wisconsin, whose frames need full dye-penetrant inspection at receiving, and $14 for Ohio, which offers source inspection but not certification.
Weld defect rates, from each shop's trial lot and references, are 0.6 percent for Goshen, 2.9 for Wisconsin and 1.1 for Ohio. A defect caught in the plant costs $640 to grind out, re-weld and re-inspect. About one defect in ten escapes to the field, where a cracked frame costs about $3,800 in a warranty repair. Per set, rework costs $3.84, $18.56 and $7.04, and field claims $2.28, $11.02 and $4.18.
Delivery Reliability
When a frame truck arrives late, the frame line stops for about 3.5 hours at a cost of $2,900 an hour in idle labor and lost output. Based on each supplier's delivery record, Marsh Run expects 2 late trucks a year from Goshen, 14 from Wisconsin and 8 from Ohio. Spread over 2,900 sets, that is $7.00, $49.00 and $28.00 a set.
Switching Cost
Moving away from Goshen means new fixtures, first-article inspections and engineering time: about $118,000 for Wisconsin and $86,000 for Ohio. Over a three-year award, that is $13.56 and $9.89 a set. Goshen has none.
Totals
Adding the rows, Goshen's total is about $2,540.12 a set, Wisconsin's $2,559.14 and Ohio's $2,529.11. The Wisconsin shop's quote is $140 below Goshen's, but its total is about $19 higher. Ohio is cheapest by about $11 a set against Goshen, about $31,900 a year.
Wisconsin's $140 price advantage disappears in freight, inspection, defects and late trucks, and then some.
Sensitivity
The Ohio lead is narrow, so the panel tests its two least certain inputs. If Ohio's defect rate were 2.2 percent rather than 1.1, its total would rise to about $2,540.33, just above Goshen's. If it had 12 late trucks rather than 8, its total would be about $2,543.11. Either change would erase the saving. By contrast, Wisconsin stays last under every reasonable change, because its gap is spread across four rows.
Ellram and Siferd (1993) noted that total cost models are most useful when they show which costs drive the decision, and here two rows, defects and late trucks, decide between Ohio and Goshen.
What the Model Leaves Out
Some differences between the suppliers resist a per-set figure. Goshen's engineers have years of experience with Marsh Run's drawings and catch problems before they reach the shop floor; neither new supplier has that knowledge yet. Ohio has offered to hold two weeks of finished frames in a nearby warehouse at no charge, which would cut the effect of a late truck, but only once it proves its delivery record. Wisconsin's lower price reflects a newer, highly automated welding cell, which could lower its defect rate over time. None of these is in the totals, because none can be priced reliably today, but each could shift the ranking within twelve months. The model should therefore be rerun after six months of actual deliveries.
Why Per-Set Costs Matter
Expressing every cost per set puts unlike costs on one scale. A line stoppage, a warranty claim and a freight bill are paid by different departments at different times, and in the general ledger they never appear beside the frame's price. Converting each to a cost per set shows the buyer the full price of each offer in the same unit as the quote.
The Script
A short Python script holds the inputs for each supplier, computes each row per set and prints the totals and the sensitivity cases. Changing any input reruns the comparison in a second.
Recommendation
Award the frame contract to Ohio for three years, with two conditions: certified weld inspection at source within six months, and a delivery clause that credits Marsh Run for any truck more than two hours late. Keep Goshen qualified as a backup for the first six months, so that if Ohio's defect rate or deliveries fall short of the assumptions, Marsh Run can return without a new switching cost. Monczka et al. (2021) recommend that awards based on total cost carry performance terms tied to the assumptions that produced them.
References
Ellram, L. M. (1995). Total cost of ownership: An analysis approach for purchasing. International Journal of Physical Distribution & Logistics Management, 25(8), 4-23. https://doi.org/10.1108/09600039510099928
Ellram, L. M., & Siferd, S. P. (1993). Purchasing: The cornerstone of the total cost of ownership concept. Journal of Business Logistics, 14(1), 163-184.
Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2021). Purchasing and supply chain management (7th ed.). Cengage Learning.
The Purdue Global MT436 Unit 3 instructions
For MT436 Unit 3, suppliers are ranked by everything a purchase costs over its life, not by quoted price. Instructors expect a table with a row for each cost that differs by supplier: price, freight, inspection, quality costs in the plant and in the field, delivery reliability, switching cost and any others the case supplies. Each row needs a figure and its basis, expressed per unit so unlike costs share one scale. The ranking by total cost often differs from the ranking by price, and that reversal is usually the point of the case. A sensitivity test on the least certain inputs should show how firm the winner's lead is. The recommendation should attach conditions tied to the inputs that decide it. A short script or spreadsheet is common.
How the MT 436 Unit 3 example is put together
The sample first sets out the model's nine rows and why each differs by supplier, citing Ellram. Sections then build freight, inspection, quality costs and delivery reliability from each supplier's evidence. Switching cost is spread over the award. The totals are reported, under a highlighted line on where the cheapest quote loses its lead. The sensitivity panel tests Ohio's defect rate and late trucks and shows either could erase its lead, with Ellram and Siferd on finding the decisive costs. Sections note what the model leaves out and why per-set costs matter, and describe the script. The recommendation awards Ohio with source-inspection and delivery conditions, citing Monczka and colleagues, and keeps Goshen as a backup.
Reading the MT436 Unit 3 grading rubric
Total cost models draw the heaviest criticism when they list cost categories without figures, because the reversal a case plants only appears once the rows are added. Rubrics reward a basis for every figure and costs expressed per unit. Credit goes to including quality costs both in the plant and in the field, and delivery reliability converted into line-stoppage cost. Switching cost spread over the award term shows care. A sensitivity test that reveals how narrow a lead is earns judgment marks, and a recommendation with conditions tied to those inputs earns more. Naming costs that resist pricing shows honesty. A per-unit table, a sensitivity panel and the tool behind them complete the expected exhibits.
MT436 Unit 3 help: mistakes that cost points
The most frequent weak total cost model lists the categories of ownership cost in a paragraph and then chooses the lowest price. Another common error adds costs in different units, annual for some and per unit for others. Students often include in-plant rework but forget field claims, or count late deliveries without pricing the line stoppage. Switching costs are frequently ignored for the incumbent's rivals. Many papers report a winner by a few dollars without testing whether that margin would survive a modest change. Before submitting, double your winning supplier's least certain input and recompute. If the winner changes, say so, and make the award conditional on that input.
Get an MT436 Unit 3 example written to your instructions
Send the competing quotes for Unit 3, any quality, delivery or inspection records supplied, and the rubric too. Within 24-48h a first model arrives at no charge, every row priced per unit by script, each estimate marked apart from quoted figures and the winner's margin stress-tested before any award is recommended. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
More MT436 papers and BS in Business Administration samples
- MT436 Unit 1: Purchasing and Profit Board Post
- MT436 Unit 2: Spend Analysis
- MT436 Unit 4: Supplier Selection Matrix
- MT436 Unit 5: Request for Proposal
- MT436 Unit 6: Seminar Reflection
- MT436 Unit 7: Negotiation Plan
- MT436 Unit 8: Contract Clause Review
- MT436 Unit 9: Supplier Scorecard
- MT436 Unit 10: Category Sourcing Strategy
- MT435 Unit 3: Bottleneck Analysis
- MT434 Unit 3: Carrier Selection Memo
- MT433 Unit 3: Tariff Classification Memo
MT436 Unit 3 questions, answered
Which rows does a tube-set cost model need?
Every cost that follows from which supplier wins: the price, freight, receiving inspection, rework of defects found in the plant, warranty claims for defects found by customers, downtime from late deliveries, switching cost and extra inventory. Costs identical across suppliers can be left out, provided the model lists them so a reader knows they were considered.
How should switching cost be treated?
As a one-time cost spread over the period the award will last, so it can sit beside annual costs on the same basis. The example divides each challenger's qualification and tooling cost by three years of volume. Charging it all against a single year would punish every challenger; ignoring it would flatter them. Stating the award period makes the choice visible.
What if the model's winner leads by very little?
Then the paper should say so and test it. The example asks what leak rate or switching cost would erase Ohio's twelve-dollar lead, finds both plausible, and recommends a trial lot instead of a full award. A thin margin is itself a finding: it tells the buyer the decision rests on estimates worth verifying before committing volume.
Where can I find a free MT436 Unit 3 sample paper?
This page holds the complete MT436 Unit 3 model, comparing three frame suppliers on nine cost rows per set for a utility vehicle maker.
Why does the cheapest quote lose in the MT436 Unit 3 sample?
Wisconsin's $140 price advantage disappears in freight, full receiving inspection, a 2.9 percent defect rate and fourteen late trucks a year.