Profit Mapping

ProFIT-MAP Methodology

ProFIT-MAP is a business methodology for improving organizational performance and managing execution. Its objective is to help organizations achieve their cost and operational targets. It does this by identifying the relevant parameters that managers can control, linking them to the business objectives, showing which changes will be effective, and creating an execution roadmap that will achieve the objectives.

For any business improvement challenge, ProFIT-MAP answers four important management questions. Managers then use this information as an input into their decision making process.

  1. Can it be done? Is it possible? If not, then what additional capabilities are needed?
  2. Will it be profitable?
  3. What is the impact of my decision across the product mix and the functional capabilities of the organization?
  4. How do I transform operations from point A to point B? That is, what is the operational roadmap for achieving the business objectives?

How it works

The process of using the ProFIT-MAP methodology is referred to as Profit Mapping. ProFIT-MAP assesses the current and future operational requirements of any business challenge from three integrated perspectives representing the business process, its associated resource requirements, and the financial characteristics. Understanding the cost and profitability implications of any process improvement decision prior to its implementation is central to Profit Mapping.

Six phases

The methodology consists of six phases which must be completed in order. There is built-in flexibility to iterate within and between the phases as managers refine their thinking and gain additional experience with the particular business challenge.

Six Phases Description
Phase 1: Project Objectives Defines the business problem; frames it in terms of products, facilities, lines, operations, etc.
Phase 2: Process Captures relevant operating policies, product demand, data about operations (e.g., shifts), and the process (e.g., cycle time).
Phase 3: Resources Captures investments, labor, utilities, materials, supplies, and inventories data as appropriate.
Phase 4: Finance Captures indirect costs and SG&A expenses as appropriate.
Phase 5: “What-If” Plan Creates the plan for assessing the various business scenarios identified by management for improving performance.
Phase 6: Choose Business Execution Option Quantifies and compares the business scenarios; enables management to select option(s) that best meet the business objectives; creates the execution roadmap.

Focus on Business Execution

Profit Mapping is used by companies to execute their strategy no matter what it is. Strategy can range from everything to improving profitability, increasing customer satisfaction, reducing costs, becoming more flexible in product or service delivery, reducing waste, and so on.

As companies translate strategy into measurable objectives, Profit Mapping then bridges the gap between planning and execution. It does this by identifying:

  • The nature of the problem within the context of the capabilities and constraints of the organization.
  • The specific parameters under management control that are linked to the business challenges.
  • The sensitivity of the various parameters for improving business performance.
  • An execution roadmap showing the specific steps and actions required to achieve the business objectives.

Complementary Nature

Profit Mapping complements the many strategic frameworks, improvement approaches, and measurement options in business today. It does not replace what companies already find helpful. Rather, its integrated and dynamic nature enhances existing business improvement efforts by providing additional critical “perspective” and guidance that might not otherwise be available to decision makers.

For example, there is an implicit assumption that becoming lean or reducing product defects through Six Sigma leads to cost savings. Many companies have learned through experience that while these are sound improvement strategies, they do not always have the intended impact on overall business performance relative to the financial and time investment devoted to the efforts.

Such results should not be surprising as lean and Six Sigma are designed to improve process efficiency, but do not explicitly focus on the overall effectiveness of the organization. Profit Mapping can help these types of process-focused initiatives by showing precisely which lean or Six Sigma activities will lead to both process as well as financial improvement. This helps managers understand the cost and profitability implications of their change options so they can make more effective decisions.

Parametric activities based framework

Activities are at the core of ProFIT-MAP. The methodology employs a parametric activities based framework for capturing the business structure and dynamic characteristics of operations. ProFIT-MAP:

  • Develops a more integrated and refined understanding of operations based on the activities required to produce products at each plant and line – or site and service.
  • Translates the activities composition into the resource requirements and associated cost and profitability implications for the product or line.
  • Quantifies all identified management options for improving the business (i.e., business scenarios) in an integrated, holistic, and dynamic manner.
  • Tests the business scenarios for sensitivity to changes in order to create a more profitable environment.
  • Identifies activities that will lead to business success.
  • Identifies activities that do not further the objectives, and thereby avoid wasting time and resources.
  • Creates a profitable and sustainable operational roadmap.

Methodology and analytical requirements

ProFIT-MAP is a non-proprietary methodology and is described in the book Profit Mapping. As managers develop ideas in the form of business scenarios for improving the organization, analytical capabilities are required that can quantify the impact of the various business improvement options. The objective is to help managers select the “best” option(s) from the standpoint of the overall business – not just those that may result in isolated improvements but not necessarily for the organization.

ProFIT-MAP requires the integrated assessment of each decision option in terms of the process characteristics, resource requirements, and financial effects. There are many software tools that address aspects of each of these areas individually. Most importantly, any software tool must enable apple-to-apple comparisons within each of these domains as well as between them. Otherwise, managers will not have a level playing field to holistically evaluate and compare their alternatives for improving the business.

History

ProFIT-MAP was created by Anil Menawat. Its foundation is based on systems theory, which is an integrated approach for studying complex, dynamic, and interdependent systems. It also had roots in parametric costing which dates back to World War II where government planners needed a better way to forecast the cost of manufacturing aircraft.

The name ProFIT-MAP is derived from two elements. “ProFIT” comes from “process and finance integration technology.” This refers to the methodology’s integrated multi-perspective focus on business execution. “MAP” refers to the methodology’s ability to create a highly detailed roadmap for improving the business.

Menawat & Co.

Menawat & Co. has a trademark for ProFIT-MAP for consulting services and a brand of software.

Applies to:

Business type:

Manufacturing and business services

Business context (enhances):

Activity-based costing
Balanced scorecard
Benchmarking
Business planning
Business process improvement
Capital investment planning
Continuous improvement
Corporate or divisional strategy
Design for manufacturability
Economic value added
Financial modeling
Flexible manufacturing
Human resources management
Lean manufacturing
Lean operations
Management accounting
Mergers and acquisitions
Process design / redesign
Performance management
Product design
Product planning
Research and development
Risk analysis
Six Sigma
Sourcing decisions (e.g., insourcing, outsourcing, offshoring)
Strategic management
Supply chain management
Theory of Constraints
Toyota Production System
Value Stream Mapping

Bibliography

  • Profit mapping ISBN 0-07-147228-2
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