project cost forecasting in sap solution overview
TRANSCRIPT
Forecas(ng is the Key to Successful Project and Program Management
Michael Ragozin
Agenda
• Project Management lifecycle • Forecas4ng Business Requirements
• Project Cost Forecas4ng Solu4ons – SAP Standard – BI/BPC – Noveco ePM
• Business Benefits of Cost Forecas4ng in SAP
Project Management Business Process Map
PR PO GR
PR PO SES
Invoice
● Rough cut Cost Estimation ● Budget Preparation ● Profitability Plan
● Labour Internal External ● Materials & Services ● Overheads
● Network scheduling ● Cost Plan Distribution
● Capacity planning ● Manpower planning ● Personnel Management
● Project KPIs monitoring ● Exception reporting ● Detailed Reporting
● Progress Assessment ● Cost & Work to Complete ● Estimated Costs at Completion
● Project Variation register ● Cost Estimation ● Cost integration with EAC/CTC
● Quotation from project Cost Estimation ● Pricing and Conditions ● Link to Project
● Billing: Lump-Sum, Cost Plus, Schedule of rate
● Revenue Plan & Actual Integration
Project Management Lifecycle
. . . .
Effective Project
Management
Execution
Monitoring Forecasting
Reporting Analysis Settlement
Estimating Planning Budgeting
● Project Cost Forecasting and Resource Planning take up to 80% of overall project Management efforts
● Integrated Cost Forecasting is a key for Effective Project Management
Agenda
• Project Management lifecycle • Forecas4ng Business Requirements
• Project Cost Forecas4ng Solu4ons – SAP Standard – BI/BPC – Noveco ePM
• Business Benefits of Cost Forecas4ng in SAP
Forecas(ng methods
Two methods to calculate project forecasts
- Mathema4cal methods
- Based on Actual Costs, Commitments and Costs To Complete
Automa(c methods of calcula(ng EAC
Earned Value
EAC = Plan Cost
CPI
, where CPI = BCWP / Actual Costs
BCWP = POC (actual) * Plan Costs
Linear Extrapola(on of Cost
EAC = Actual Cost(t)
POC(t) , where POC(t) - the percentage of completion at the time
Measured Unit Cost
EAC = Work * C(t) , where C(t) is the average price per unit at the time
Forecas(ng methods
Two methods to calculate project forecasts
- Mathema4cal methods
- Based on Actual Costs, Commitments and Costs To Complete
Cost To Complete method of calcula(ng EAC
EAC = Actual Costs + Commitments + Cost To Complete
where Cost To Complete is the remaining cost on the project; CTC is progressively reduced as the projects actual costs or commitments accumulate
Pain points
● Excessive use of Excel spreadsheets to produce forecasts
● Poor integra(on of Forecasts into Project Management process
Requirements
● Generate ini(al Forecasts from Cost Es(ma(on
● Automa(cally recalculate Cost To Complete and Es(mated at Comple(on as the project progresses.
● Manually adjust Work and Cost To Complete on project planning elements (e.g. WBS or NWA)
● Period Sensi(ve Cost Forecas(ng
● Distribute Cost To Complete according to Project Schedule
- Remaining costs over remaining dura(on
● Integrate Work To Complete with Resource Management
● Integrate PM/CS and PP orders into calcula(on of project CTC and EAC
● Integrate Cost Varia(ons in calcula(ng CTC and EAC
● Create Cost Quan(ty Structure in an Es(ma(ng system
● Assign SAP Cost Elements
- Labour Internal and External
- Materials and Services
- Overheads etc. ● Map es(mate to project
WBS or NWA ● Convert Es(mates to Easy
Cost Planning assigned to project planning elements
BAPI
● Cost Es(ma(on saved in SAP as Easy Cost Planning against Network Ac(vity
● Cost Plan is saved in special cos(ng version
Project Cost Estimation integrated with SAP PS
Es(ma(ng soVware
Excel
Project Scheduling
• Create Network Ac4vity Rela4onships • Schedule Network
• System determines start and finish dates (earliest and latest) for each network ac4vity and project
Distribu(on of Es(mated Costs
Original Cost Es4ma4on saved as lump-‐sum amount in one financial period
● Project CTC are created from Original Cost Es4ma4on.
● Cost Forecast is distributed for dura4on of project planning element (i.e. WBS or NWA)
● convert Cost Es4ma4on to Project Forecasts
● Forecast Costs are distributed along project 4me line
Cost Estimate
Cost To Complete
t
t
$
$
Feb-10 Mar-10 Apr-10 May-10
Feb-10 Mar-10 Apr-10 May-10
Cost Forecast
Project Es(mated Cost are distributed as Cost Forecasts
• Cost Forecasts are distributed along the project 4me frame.
• Equal distribu4on can be used
Project Procurement
materials
Services
Procurement of Materials or Services directly to project
Procurement of materials to project stock
Automa(c adjustments of Cost to Complete from raising commitments or actual costs
Purchase Requisition
Purchase Order
Invoice
Good receipt or
Service Entry
EAC Actual Cost Commitments Cost To Complete
$1,000.0 $0.0 $0.0 $1000.0
EAC Actual Cost Commitments Cost To Complete
$1,000.0 $0.0 $800.0 $200.0
EAC Actual Cost Commitments Cost To Complete
$1,000.0 $500.0 $300.0 $200.0
Cost Forecas(ng: EAC, CTC, Actual Costs
Cost Element EAC Actual Cost Commitments Cost To Complete
60000 Concrete work $3,000.0 $3,000.0 $0.0 $0.0
90100 Electrical labour $2,500.0 $1,000.0 $0.0 $1500.0
80100 Equipment installation
$8,000.0 $4,500.0 $2,500.0 $1,000.0
Total $13,500.0 $8,500.0 $2,500.0 $2500.0
EAC CTC EAC CTC
EAC
CTC
July’10 August’10 September’10
AC AC
Automatically calculated and manually adjustable
Recalculated from Actual Costs, Commitments and CTC
Cost Forecast Scheduled
Quantity Plan Rate
CTC Value
Today Date
150.0 H $80.0/H $12,000.0
Finish Date
Actual Quantity
Actual Rate Actual
Value
Start Date
Finish Date
45.0 H $80.0/H $3,600.0
EAC Start Date
Finish Date
$12,000.0
Actuals & Commitments
Cost To Complete
Estimate At Completion
Forecas(ng: Cost To Complete calcula(on Methods
Cost Element based CTC calculation
Cost Element EAC Actual Cost Actual Qty
Commitments Qty To Complete
UOM Cost To Complete
60000 Concrete work $3000.0 $3000.0 100.0 $0.0 0.0 m3 $0.0
61000 Electrical labour $2500.0 $1000.0 20.0 $1500.0 $50.0 Hr $1500.0
71000 Equipment installa4on $5500.0 $4500.0 90.0 $500.0 $10.0 Hr $500.0
Total $11,000.0 $8,500.0 $2,000.0 $2,000.0
Forecas(ng: Network Opera(on based
Operation Work quantity
Cost Element EAC Actual Cost
Actual Qty
Commitments Qty To Complete
UOM Cost To Complete
61000 Electrical labour $4500.0 $1500.0 30.0 $0.0 60.0 m3 $3000.0
62000 Plumbing labour $300.0 $300.0 10.0 0.0 $0.0 Hr $0.0
65000 Project Manager $500.0 $500.0 10.0 0 $0.0 Hr $0.0
Total $5300.0 $2300.0 $0.0 $3000.0
Ac(vity Descrip(on Plan Qty
Actual Qty
EAC Qty
UOM Ac(vity Type Rate Cost Element
Qty To Complete
Cable Laying 100.0 50.0 110.0 Hr EL01 $50.0 61000 $60.0
Forecas(ng Work and Cost To Complete by Personnel
Cost Element EAC Actual Cost
Actual Qty
Commit. Qty To
Complete
UOM CTC
60000 Design $10,400.0 $2,400.0 30.0 $0.0 100.0 H $8,000.0
Total $10,400.0 $2,400.0 30.0 $0.0 100.0 $8000.0
● Plan Cost to Complete from Work to Complete allocated to individual personnel
Person N Name Work Planned Actual Work UOM Work To Complete Rate Cost To Complete
101001 John Smith 50 10 H 40 80 $3,200.00 103004 Peter Lang 80 20 H 60 80 $4,800.00
Mul(level forecas(ng: Forecast on NWA, Execute on PM/CS Cost Element EAC Actual
Cost Actual
Qty Commit. Qty
To Complete
UOM CTC
60000 Concrete work $3000.0 $3000.0 100.0 $0.0 0.0 m3 $0.0
61000 Electrical labour $2500.0 $1000.0 20.0 $1500.0 50.0 Hr $1500.0
71000 Equipment installation
$5500.0 $4500.0 90.0 $500.0 10.0 Hr $500.0
Total $11000.0 $8500.0 $2000.0 $2000.0
● Cost Forecas4ng on Network Ac4vity (based on PM/CS orders a^ached to NWA)
● Actual costs and Commitments can be collected by PM/CS Orders, NWA or WBS elements
● Actual costs and Commitments are rolled up to NWA from PM/CS order
● Cost to Complete is recalculated on NWA from actual costs and commitments received on PM/CS orders
● Manually adjust Cost To Complete or Work To Complete on Network Ac4vity
Mon
itorin
g an
d Fo
reca
stin
g Ex
ecut
ion
Agenda
• Project Management lifecycle • Forecas4ng Business Requirements
• Project Cost Forecas4ng Solu4ons – SAP Standard – BI/BPC – Noveco ePM
• Business Benefits of Cost Forecas4ng in SAP
SAP standard Cost Forecas(ng: t/c CJ9L
Quan(ty Structure for services s(ll to be rendered
CTC Actual Commit.
Actual Commit. values
Costing
CO version 000
Forecast version
● Determines Project EAC as Actual + Commitment + CTC
● Cost To Complete of Internal Ac(vi(es is distributed over remaining dura(on of Network Ac(vi(es
● Uses Work planned on Network Ac(vity as a source to determine Cost To Complete
● The value of External Services planned in network ac(vity is included in CTC un(l PR or PO is generated.
● Cost To Complete of external services is not automa(cally distributed
● Cost To Complete is saved in separate Cos(ng Version
Update Forecasts: Internal Ac(vity
Cost Planning
Actual Costs & Commit.
Forecast
Run Forecast
Report
Internal Ac(vity
● Change Forecast work (not CTC) ● CTC will be distributed over remaining period ● CTC will be saved on forecas(ng version
Run Forecast: Internal Ac(vity (ini(al)
int
Plan Quantity
Plan Rate Plan Value
Start Date
Finish Date
100.0 H $80.0/H $8,000.0
Internal Activity
Forecast Quantity
Plan Rate
CTC Value
Today Date
100.0 H $80.0/H $8,000.0
Create Cost Forecast from Cost Plan
Finish Date
Estimate/Plan
Cost To Complete
Estimate At Completion
Finish Date EAC
Value
$8,000.0
Run Forecast: Internal Ac(vity (ongoing)
int
Internal Activity
Forecast Quantity Of Work
Plan Rate
CTC Value
Today Date
150.0 H $80.0/H $12,000.0
Finish Date
Actual Quantity
Actual Rate Actual
Value
Start Date
Finish Date
45.0 H $80.0/H $3,600.0
EAC Value
Start Date
Finish Date
$8,000.0
Actual Costs
Cost To Complete
Estimate At Completion
Update Forecasts: External Ac(vity
Cost Planning
Actual Costs & Commit.
Forecast
Run Forecast
Report
Change amount of Es4mated Cost at Comple4on as lump sum amount (ini4al plan will be overwri^en in version 000)
Change quan4ty of Es4mated Work (ini4al plan will be overwri^en in version 000)
External Ac(vity :
Service Activity :
Run Forecast: External or Service Ac(vity (ini(al)
ext.
Plan Quantity
Plan Rate Plan Value
Start Date
Finish Date
100.0 H $80.0/H $8,000.0
External or Service Activity
Forecast Quantity Of Work
Plan Rate
CTC Value
Start Date
100.0 H $80.0/H $8,000.0
Finish Date
Initial Step: Create Cost Forecast from Cost Plan
Estimates/Plan
EAC Value
Start Date
$8,000.0
Finish Date
Cost To Complete
Estimate At Completion
Run Forecast: External or Service Ac(vity (ongoing)
ext.
Forecast Cost to
Complete
Start Date
$6000.0
Finish Date
Commit. Quantity Rate Commit
Start Date
Finish Date
75.0 H $80.0/H $6000.0
External or Service Activity
Run Forecast
Forecast Quantity
To Complete Rate
Cost to Complete
Start Date
0 H $80.0/H $0.0
Finish Date
Commitments
Cost to Complete
Estimated At Completion
SAP standard Cost Forecas(ng: t/c CJ9L
Pros
● Instant integra4on with ERP transac4onal system:
- Project Structures and schedules are always current
- Actual Costs, Commitments, Time Sheet confirma4ons
● Users are confident that Forecasts are calculated on the latest data
● Work to Complete (Internal Ac4vi4es) is integrated with Capacity/Workforce Planning
● Forecas4ng Results are immediately available for
- Results Analysis for Profit Recogni4on
- PS info system
Cons
● Limited to Network Planning as a source for CTC calcula4on (e.g. cannot use Easy Cost Planning)
● CTC for External or Service Ac4vi4es turn to $0.0 aber PR or PO created. Changing Plan values in Network does not affect CTC (remained to be $0.0)
● Does not reduce CTC from Actual costs or Commitments for External Ac4vi4es for which no PR/PO created
● Not possible to enter Cost or Work To Complete (only total values)
● Only Network Ac4vi4es are involved in Forecas4ng. Not possible to forecast on WBS
● Does not include PM/PP orders into calcula4on of CTC/EAC
Forecas(ng Workbench t/c CNFOWB
● One screen where user can update Costs and Work To Complete
● The results are saved in Forecast version
● Forecast recalculation (automatic reduction of CTC) is done by t/c CJ9L
SAP standard Cost Forecas(ng: t/c CNFOWB
Pros
● Easier naviga4on for the user to update forecast values
● User can enter Cost To Complete (not the total values)
Cons
● All limita4ons of CJ9L
● Previously recorded forecasts values gets overwri^en every 4me CJ9L is run
● Work To Complete on Internal ac4vity entered via Workbench is not integrated with resource planning
● No values roll up on WBS for review
● Does not integrate PM/PP orders into forecasts
● Not possible to forecast on WBS elements
Agenda
• Project Management lifecycle • Forecas4ng Business Requirements
• Project Cost Forecas4ng Solu4ons – SAP Standard – BI/BPC – Noveco ePM
• Business Benefits of Cost Forecas4ng in SAP
ERP/BPC System Architecture
Reporting and Distribution
SAP ERP
Data Warehouse Layer
Transactional System
Data Modelling – BPC Application
Forecast Workbench
Data Integration
Annual Budget Consolida
tions
Non-SAP
Project Cost Forecas(ng with BPC
Project Cost Forecas(ng with BPC
Pros
● Appealing concept
● Excel in place – easy way to win users
● Open development environment: screen layouts can be tailored to customer needs
Cons
● No Forecas4ng solu4on out-‐of the box. It must be developed
● High TCO: BI, BPC systems require license, maintenance, support.
● ERP and BPC are separate systems. Regular synchroniza4ons between ECC and BI are needed.
● Forecasts must be synchronized back with ECC system for:
- Result Analysis
- Workforce or Capacity Planning
● Users cannot be always 100% confident that they plan (in BPC or in ERP) on the latest actual or forecast data
● Drill down repor4ng must run in backend ECC system
● Integra4on of PM and PP orders into forecasts create extra complexity for the BPC based solu4on
● Project Cost Forecas4ng based on Individual Personnel requires complex integra4on with ERP
Agenda
• Project Management lifecycle • Forecas4ng Business Requirements
• Project Cost Forecas4ng Solu4ons – SAP Standard – BI/BPC – Noveco ePM
• Business Benefits of Cost Forecas4ng in SAP
Project Management Business Process Map
PR PO GR
PR PO SES
Invoice
● Rough cut Cost Estimation ● Budget Preparation ● Profitability Plan
● Labour Internal External ● Materials & Services ● Overheads
● Network scheduling ● Cost Plan Distribution
● Capacity planning ● Manpower planning ● Personnel Management
● Project KPIs monitoring ● Exception reporting ● Detailed Reporting
● Progress Assessment ● Cost & Work to Complete ● Estimated Costs at Completion
SAP
Stan
dard
N
ovec
o eP
M
● Project Variation register ● Cost Estimation ● Cost integration with EAC/CTC
● Quotation from project Cost Estimation ● Pricing and Conditions ● Link to Project
● Billing: Lump-Sum, Cost Plus, Schedule of rate
● Revenue Plan & Actual Integration
ePM Cost Forecas(ng
ePM applica4on is fully integrated with standard SAP ECC
Enables Management of Project Es4mates, Budgets, Cost To Complete, Es4mated At Comple4on, Varia4ons of Costs and Revenue
Present informa4on in one easy to read screen for project managers to review project KPIs, perform forecas4ng, execute drill down reports etc.
ePM: Project Manager Workbench – KPIs & Cost Element view
ePM: Project Manager Workbench – KPIs & Value Category view
ePM: Project Manager Workbench – Excep(ons
ePM: Project Manager Workbench – Update Forecast Work/Cost
● Select Change Mode
● Select Network Ac4vity ● Change Quan4ty of Work to Complete or value of Costs to Complete against
relevant Cost Element
● System recalculates EAC, Budget Deficit (overruns)
● Automa4cally update informa4on in “Project KPIs” screen sec4on
Forecas(ng Report
ePM: Project Varia(ons: Costs and Revenue
Rev
enue
Status: CREATED
Cur
r. B
udge
t
EAC CTC
Rev
enue
Cur
r. B
udge
t
EAC CTC
Rev
enue
Cur
r. B
udge
t
EAC CTC
Status: APPROVED
Status: ACCEPTED
Varia(on documents
ePM Workbench: Integrates Approved Varia(on Cost
● Approved Varia4ons displayed on the Project Manager Workbench:
- Number of approved varia4ons - Varia4on amount
● Project Budget and Forecasts changed
● Current Budget : Original Es4mate + Varia4ons ● Budget Variance: Original Budget – Current Budget ● Project EAC and CTC updated with the amount of
approved varia4on costs
● Costs are broken down by cost elements
ePM Project Cost Forecas(ng
● Instant Integra(on with ECC transac(ons: PO, (me sheets, invoices etc.
● Automa(c reduc(on of Work and Cost to Complete from Actual costs and Commitments
● Manual adjustment of Work and Cost to Complete on Network Ac(vity and WBS elements
● Forecas(ng results are immediately available for Result Analysis, Progress Analysis, Reports
● Period Sensi(ve Forecasts: designed for month end forecasts in live transac(onal system
● Project Manager Workbench provides one central place review KPIs, update forecasts, execute analy(cal and drill down reports
● Project Costs Forecasts integrated with PM/CS and PP orders
● Integrates Project Varia(ons
● No modifica(ons to SAP standard core applica(ons. No “z-‐tables” to keep forecasts costs, all data read/wriien from/to SAP standard database.
Agenda
• Project Management lifecycle • Forecas4ng Business Requirements
• Project Cost Forecas4ng Solu4ons – SAP Standard – BI/BPC – Noveco ePM
• Business Benefits of Cost Forecas4ng in SAP
Business Value of Integrated Cost Forecas(ng in SAP
● Single source of “truth” on project financial posi(on
● Consolidate project KPIs including forecasts in one system, eradicate excels spreadsheets as a planning and forecas(ng database.
● Provide realis(c view of project Es(mated Cost at Comple(on (EAC) at any given point in (me
● Manage Project Cost and Work To Complete by integra(ng:
− (me sheets
− project finances: Invoices, Materials/Services Consump(on etc.
− purchasing commitments: material and services
− integra(ng cost Varia(ons and Adjustments
● Integrate Resource (personnel) Planning into forecast of Cost To Complete
● Determine realis(c Project progress
● Provide reliable basis for management decision making
THANK YOU!