Cost Time Profiles (CTPs) can help you document and visualize the synergies of cost and time information of a process. It is a great tool for process diagnostics and improvement as it can help you identify activities that create value as well as ones that create waste.
The best way to illustrate the value of a CTP is through an example. However, before we jump into the example, we need to know that the two key pieces of information that go into a CTP are:
- Activity times: This can be obtained by using any Time based Process Mapping (TBPM) system.
- Activity costs: This can be captured using a process costing system (like ABC Costing).
We need to capture the data in the example format shown below:
These two pieces of data help us create a CTP. Now, let us get to our example. Let us assume that we are a chicken nuggets manufacturer. We have captured the two key pieces of data (time and cost) for a portion of our Supply Chain process using the approach described above and we have plotted the data points, as shown in the graph below.
The CTP shows areas that consumer time and costs within the process, highlighting those for further investigation that could yield savings. For example, in our CTP Graph above, Distribution is 35% of the time but only 3% of cost. An important point to note is that when leveraging the graph, you need to interpret both the horizontal and vertical lines of the CTP.
Long horizontal lines: Relatively small increases in total cost as a result of an activity that runs over a relatively long period of time (Ex: Storage of Finished Goods).
Steep vertical lines: Costs are consumed over a relatively short period of time. In this example, deboning.
If you are looking to reduce process time, the focus should be on the Long, horizontal sections of the CTP whereas if the focus is cost reduction, you need to analyze the vertical lines. A good way to segment activities from a CTP is using a grid like the one shown below:
In the Cost time grid example above, Processes in the top right-hand box are prime candidates for savings in both time and cost. Processes in the bottom left-hand box are low on the list of priorities.
Disclaimer: This is a personal blog site and views and perspectives expressed here are solely my own and do not express the views or opinions of my employer.