Lean tells you the time saved. TDABC tells you the profit gained.
Lean, Kaizen, Six Sigma and TDABC share the same DNA: process mapping and time data. But the improvement methods stop at efficiency. TDABC connects that efficiency to profitability, across every dimension of the business.
Lean, Six Sigma and TDABC start in the same place.
They all depend on the same thing: mapping processes and activities in detail and capturing real time and statistical data. It is the shared foundation. The difference is in what each one does next.
Lean / Kaizen
Eliminates waste, improves flow and runs Kaizen events for continuous improvement. It identifies the minutes that can be taken out of a process.
Six Sigma
Reduces variation with DMAIC and statistical process control. It makes the output predictable and measures process capability with data.
TDABC
Uses time equations and the capacity cost rate to price every minute. It converts the improvement into cost and into profit, dimension by dimension.
Shared foundation. All three start by understanding the process at the activity level. That is why TDABC fits so naturally into an existing Lean or Six Sigma programme: it works on the same map.
Most improvement projects succeed operationally and fail financially.
The process improves, cycle time drops, variation falls. And then the saving never shows up in the P&L. Here is why.
Soft or avoided savings
The saving is logged as a soft or avoided cost and never reaches the P&L. Cost avoidance does not impact cash flow or the financial statements.
Freed capacity left idle
Freed capacity that is not removed or redeployed produces no real saving. The time saved is still paid for if the person or the machine sits idle.
No financial business case
Research on Lean Six Sigma ROI is clear: projects fail not because the analysis is wrong, but because they lack a quantifiable financial business case that ties the improvement to profit.
This is the gap TDABC closes. Lean shows the minutes. TDABC prices them and tells you whether they became profit, and where.
How TDABC converts improvement into profit.
TDABC uses two parameters: the capacity cost rate and the time equations. When a Kaizen or Six Sigma project changes a process, you change the time equation, and TDABC recomputes the cost instantly.
Each activity has a time equation. When Lean removes steps or Six Sigma reduces variation, that equation changes. TDABC multiplies the new time by the capacity cost rate and returns the new cost, without rebuilding the model.
Because it starts from practical capacity, TDABC shows the time that was freed. That number is the decision: remove the resource or redeploy it. While it sits idle, the improvement is not profit.
The activity cost of the affected products drops. And TDABC shows the 120 minutes freed, which must now be removed or redeployed for the saving to be real. Lean finds the minutes. TDABC prices them and tells you whether they became profit.
The arithmetic behind these figures: at an illustrative capacity cost rate of EUR 1.20 per minute, the activity costs EUR 288 per batch before and EUR 144 after, and across 1,000 batches a year that is EUR 144,000. That saving becomes profit in exactly two ways: remove the cost, reduce headcount, return the leased equipment, give up the floor space, so the spending actually falls; or redeploy the freed capacity to absorb new volume, so revenue rises without a matching cost. Until one of the two is decided and executed, the saving is potential, not realised.
An improvement does not affect "the company". It affects transactions, products, customers and channels differently.
This is the real differentiator. With TDABC in CostCtrl, you see the same improvement cascade up the levels. A Lean dashboard or a Six Sigma project charter cannot show this.
The improvement you already made, now priced and in profit.
Before / after model
A TDABC model of the target process, with the before and after state of the improvement.
Time equations
The time equations your team owns, ready for the next Kaizen.
Capacity decision
The freed-capacity number and a clear remove-or-redeploy decision.
Profit impact
The profit impact mapped across transaction, product, customer and company.
CostCtrl platform
CostCtrl to keep it live, so every future Kaizen is instantly priced.
Independent, fixed-scope. Six to ten weeks for a first process or value stream. We do not sell improvement software. We give you the profit number your Lean or Six Sigma programme did not yet have.
For those who need to prove the financial impact.
- 01Operations and continuous-improvement leaders, Lean managers, Black Belts and COOs who need to prove the financial impact of their work.
- 02CFOs who want improvement projects tied to the P&L, not to theoretical savings.
- 03Manufacturers, logistics, services and healthcare running Lean or Six Sigma programmes who want to close the financial half.
The link between process improvement and cost is already documented.
What people ask before starting.
How does TDABC relate to Lean and Six Sigma?
Why do Lean and Six Sigma savings often not show up in profit?
What does remove or redeploy capacity mean?
Can TDABC quantify a Kaizen event?
What is multidimensional profitability?
Do we replace our Lean programme with TDABC?
How long does it take?
Do we need CostCtrl?
Sources
Canonical works behind this method. Each opens in a new tab.
- BookLean Thinking: Banish Waste and Create Wealth in Your CorporationWomack, J. P. & Jones, D. T. (1996). Simon & Schuster (Free Press).Canonical text defining Lean principles of value, flow and waste elimination.
- BookLean Six Sigma: Combining Six Sigma Quality with Lean Production SpeedGeorge, M. L. (2002). McGraw-Hill.Foundational text integrating Six Sigma quality with Lean speed methods.
- PaperTime-Driven Activity-Based CostingKaplan, R. S. & Anderson, S. R. (2004). Harvard Business Review 82(11).The founding article defining TDABC and its two-parameter model.
- PaperActivity-Based Systems: Measuring the Costs of Resource UsageKaplan, R. S. & Cooper, R. (1992). Accounting Horizons 6(3).Distinguishes resource supplied from resource used, quantifying unused capacity.
Bring one process you have already improved. We will show you whether it became profit.
No deck, no follow-up sequence. A senior partner. Thirty minutes. Free. NDA on request.
Proof
A distributor in New Zealand. €1.335M of cost-to-serve made visible, then halved, and 830 loss-making customers brought down to 295.
Read the case study →Who you would be talking to
Miguel Guimarães, Founding Partner
Cost and profitability practitioner for 25+ years. Presented the Damco cost-to-serve case at Managing for Profit (Amsterdam RAI, December 2009), on the same programme as Robert S. Kaplan.
Call +351 910 313 731
Published
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