There are four different Total Cost Of Ownership (TCO) categories that a supplier could impact when they manage a customer's inventory:

Revenues - In some cases (not all) a supplier can have a positive impact on revenues. Through better inventory management, downtime may be reduced that could allow the customer to produce more products.

Assets - The obvious asset affected should be a reduction in inventory levels, either through consignment or improved turns on items not consigned. Other assets could be impacted as well, such as storage space and storage/handling equipment requirements (although usually only to a minimal extent).

Expenditures - When a supplier manages the customer's inventories, it usually results in their consolidating orders that can result in fewer deliveries. If the customer is charged for freight, this could lower their freight costs. Additionally, some suppliers charge for this service, either as a fee or through higher prices. If true, this savings needs to be included as well.

Processes - Suppliers that manage or help manage their customer's inventories also reduce the processing costs for their customers by performing the processes for them. Typical processes impacted would include: ordering, invoicing, and receiving/stocking activities.

By using the Impact Diagram below, companies can “sort out” and visually see the costs that a specific event impacts. This can make the impact easier to measure.