TDABC Process Design
Design a Time-Driven ABC model that captures how your business truly works — and scales as it grows.
What is TDABC Process Design?
TDABC Process Design is the methodology for building a Time-Driven Activity-Based Costing model. It involves mapping your processes into resource groups (cost pools), defining time equations that capture how long each activity takes under different conditions, and connecting this to financial data to produce cost rates.
Why It Matters
The quality of your TDABC model depends on the quality of its process design. A well-designed model captures real complexity — different customer types, service variants, order characteristics — while remaining maintainable. A poorly designed model is either too simple to be actionable or too complex to sustain.
Maturity Levels
Where does your organisation stand?
No Model
No formal cost model. Costs allocated by simple rules or not at all.
Basic ABC
Activity-based model with fixed cost drivers. Doesn't capture process complexity.
TDABC Prototype
Time equations defined for main processes. Model covers major cost pools.
Full TDABC
Complete TDABC model with capacity costing, scenario analysis, and regular refresh cycle.
How to Improve
Map Your Processes
Identify all major processes and the resource groups that perform them. Define the scope — which products, customers, and activities are in scope for the first model.
Write Time Equations
For each process, write a time equation: T = a + b*X1 + c*X2... that captures how time varies with order characteristics, customer type, or service complexity.
Calculate Cost Rates
Divide the cost of each resource group by its practical capacity. Apply rates to time equations to produce cost-per-transaction for each scenario.
Comparing Approaches
| Method | Process Complexity Captured | Scalable Updates | Capacity Visibility |
|---|---|---|---|
| Simple Overhead Allocation | ❌ | ❌ | ❌ |
| Traditional ABC | ✅ | ❌ | ❌ |
| TDABC with Time Equations | ✅ | ✅ | ✅ |
Frequently Asked Questions
What is a time equation in TDABC?
A time equation expresses the time required to perform an activity as a function of its characteristics: T = 5 + 3*[if_rush_order] + 2*[number_of_lines]. This allows a single equation to capture dozens of process variants without creating separate cost pools for each.
How many cost pools should a TDABC model have?
A first TDABC model typically has 10-30 cost pools covering the major departments or functions. Granularity should reflect decision relevance — more detail where cost complexity is highest.
How long does it take to build a TDABC model?
A focused TDABC implementation with a clear scope typically takes 6-12 weeks from kick-off to first results. CostCTRL is designed to accelerate this process significantly.
Can TDABC work in service businesses?
TDABC was originally developed for manufacturing but has proven especially powerful in service businesses — banking, professional services, healthcare, logistics — where overhead is high and cost complexity is significant.
Related Topics
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