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# Forecas(ng

## is  the  Key  to  Successful

Project  and  Program  Management
Michael  Ragozin
Agenda

## •  Project  Management  lifecycle

•  Project  Cost  Forecas4ng  Solu4ons
–  SAP  Standard
–  BI/BPC
–  Noveco  ePM
•  Business  Beneﬁts  of  Cost  Forecas4ng  in  SAP

## ●  Rough cut Cost Estimation ●  Quotation from project Cost Estimation

●  Budget Preparation ●  Pricing and Conditions
●  Profitability Plan ●  Link to Project

## ●  Billing: Lump-Sum, Cost Plus,

Schedule of rate
●  Revenue Plan & Actual Integration
●  Labour Internal External
●  Materials & Services

●  Network scheduling
●  Cost Plan Distribution PR PO GR

PR PO SES
●  Capacity planning
●  Manpower planning
●  Personnel Management
Invoice

●  Progress Assessment
●  Cost & Work to Complete
●  Estimated Costs at Completion

## ●  Project KPIs monitoring

●  Project Variation register
●  Exception reporting
●  Cost Estimation
●  Detailed Reporting
●  Cost integration with EAC/CTC
Project  Management  Lifecycle

Execution

  Estimating   Reporting
Effective
  Planning .   .   Project .   .     Analysis
  Budgeting Management   Settlement

Forecasting Monitoring

## ●  Project Cost Forecasting and Resource Planning take up

to 80% of overall project Management efforts

Management
Agenda

## •  Project  Management  lifecycle

•  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
Plan Cost , where CPI = BCWP / Actual Costs
EAC =
CPI BCWP = POC (actual) * Plan Costs

## Linear  Extrapola(on  of  Cost

Actual Cost(t)
EAC = , where POC(t) - the percentage of completion at the time
POC(t)

## 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

## 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
Project Cost Estimation integrated with SAP PS

## ●  Create  Cost  Quan(ty

Structure  in  an  Es(ma(ng
Excel system
●  Assign  SAP  Cost  Elements
BAPI   -  Labour  Internal  and
Es(ma(ng
External
soVware
-  Materials  and
Services
●  Map  es(mate  to  project
WBS  or  NWA
●  Convert  Es(mates  to  Easy
Cost  Planning  assigned  to
project  planning
elements

## ●  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  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

\$
Cost Estimate
Original  Cost  Es4ma4on
saved  as  lump-­‐sum  amount
in  one  ﬁnancial  period

## Feb-10 Mar-10 Apr-10 May-10 t

●  convert  Cost  Es4ma4on  to
Project  Forecasts
●  Forecast  Costs  are
distributed  along  project
4me  line
\$ Cost Forecast

Cost To Complete
●  Project  CTC  are  created  from  Original
Cost  Es4ma4on.
Feb-10 Mar-10 Apr-10 May-10 t ●  Cost  Forecast  is  distributed  for
dura4on  of  project  planning  element
(i.e.  WBS  or  NWA)
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

## EAC Actual Cost Commitments Cost To

Purchase Complete
Requisition
\$1,000.0 \$0.0 \$0.0 \$1000.0
materials

## EAC Actual Cost Commitments Cost To

Purchase Complete
Order
Services \$1,000.0 \$0.0 \$800.0 \$200.0

##   Procurement  of  Materials  or

Services  directly  to  project
EAC Actual Cost Commitments Cost To
  Procurement  of  materials  to   Good receipt
Complete
or
project  stock   Service Entry \$1,000.0 \$500.0 \$300.0 \$200.0
  Automa(c  adjustments  of  Cost  to
Complete  from  raising
commitments  or  actual  costs

Invoice
Cost  Forecas(ng:  EAC,  CTC,  Actual  Costs

## EAC   CTC   EAC   EAC

CTC   AC
AC
CTC
July’10 August’10 September’10

## Recalculated from Actual Costs, Automatically calculated

Commitments and CTC and manually adjustable

## 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 \$8,000.0 \$4,500.0 \$2,500.0 \$1,000.0
installation
Total \$13,500.0 \$8,500.0 \$2,500.0 \$2500.0
Cost  Forecast  Scheduled

## Actual Actual Start Finish

Quantity Rate Actual Date Date
Value
Actuals & Commitments
45.0 H \$80.0/H \$3,600.0

## Plan CTC Today Finish

Quantity
Rate Value Date Date
Cost To Complete
150.0 H \$80.0/H \$12,000.0

Start Finish
EAC Date Date

Estimate At Completion
\$12,000.0
Forecas(ng:    Cost  To  Complete  calcula(on  Methods

## Cost Element based CTC calculation

Cost  Element   EAC   Actual  Cost   Actual   Commitments   Qty  To   UOM   Cost  To
Qty   Complete     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

Ac(vity  Descrip(on   Plan   Actual   EAC   UOM   Ac(vity  Type   Rate   Cost   Qty  To
Qty   Qty   Qty   Element   Complete
Cable  Laying   100.0   50.0   110.0   Hr   EL01   \$50.0   61000   \$60.0

Cost  Element   EAC   Actual   Actual     Commitments   Qty  To   UOM   Cost  To
Cost   Qty   Complete     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
Forecas(ng  Work  and  Cost  To  Complete  by  Personnel

Cost Qty To
Complete

## Total \$10,400.0 \$2,400.0 30.0 \$0.0 100.0 \$8000.0

Work  To

Person  N Name
Work  Planned
Actual  Work UOM   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

## ●  Plan  Cost  to  Complete  from  Work  to  Complete

allocated  to  individual  personnel
Mul(level  forecas(ng:  Forecast  on  NWA,  Execute  on  PM/CS
Cost Element EAC Actual Actual Commit. Qty UOM CTC
Monitoring and Forecasting
Cost Qty To
Complete

installation

## ●  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
Execution

## ●  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
Agenda

## •  Project  Management  lifecycle

•  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

## ●  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

Costing
Quan(ty   CTC
Structure  for
Actual
services  s(ll  to
be  rendered   Commit.

Forecast version

Actual
Commit.
values
CO version 000
Update  Forecasts:  Internal  Ac(vity

Internal  Ac(vity
Cost
Planning

Actual
Costs &
Commit.

Forecast

Run
Forecast ●  Change  Forecast  work  (not  CTC)
●  CTC  will  be  distributed  over  remaining  period
●  CTC  will  be  saved  on  forecas(ng  version

Report
Run  Forecast:  Internal  Ac(vity  (ini(al)
Internal Activity

## Plan Plan Start Finish

Quantity Rate Plan Value Date Date

Estimate/Plan
int   100.0 H \$80.0/H \$8,000.0

## Forecast Plan CTC Today Finish

Quantity Rate Value Date Date
Cost To Complete
100.0 H \$80.0/H \$8,000.0

Finish
EAC
Date
Value

Estimate At Completion
\$8,000.0
Run  Forecast:  Internal  Ac(vity  (ongoing)
Internal Activity

## Actual Actual Start Finish

Quantity Rate Actual Date Date
Value

Actual Costs
45.0 H \$80.0/H \$3,600.0
int

## Forecast Plan CTC Today Finish

Quantity Rate Value Date Date
Of Work

Cost To Complete
150.0 H \$80.0/H \$12,000.0

Start Finish
EAC Date Date
Value

\$8,000.0
Estimate At Completion
Update  Forecasts:  External  Ac(vity

## Cost External  Ac(vity  :

Planning

Actual
Costs &
Commit.

Change  amount  of  Es4mated  Cost  at  Comple4on  as  lump  sum
Forecast amount  (ini4al  plan  will  be  overwri^en  in  version  000)

Service Activity :
Run
Forecast

## Change  quan4ty  of  Es4mated  Work  (ini4al  plan  will  be

overwri^en  in  version  000)
Report
Run  Forecast:  External  or  Service  Ac(vity  (ini(al)
External or Service Activity

## Plan Plan Start Finish

Quantity Rate Plan Value Date Date

## Forecast Plan CTC Start Finish

Quantity Rate Value Date Date
Of Work
Cost To Complete
100.0 H \$80.0/H \$8,000.0

## EAC Start Finish

Value Date Date

\$8,000.0
Estimate At Completion
Run  Forecast:  External  or  Service  Ac(vity  (ongoing)
External or Service Activity

## Commit. Start Finish

Quantity Rate Commit Date Date

ext.
Commitments
75.0 H \$80.0/H \$6000.0

## Forecast Cost to Start Finish

Quantity Rate Complete Date Date
To Complete
Cost to Complete
0H \$80.0/H \$0.0

## Run Forecast Start Finish

Cost to Date Date
Forecast Complete
Estimated At Completion
\$6000.0
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

•  Project  Cost  Forecas4ng  Solu4ons
–  SAP  Standard
–  BI/BPC
–  Noveco  ePM
•  Business  Beneﬁts  of  Cost  Forecas4ng  in  SAP
ERP/BPC  System  Architecture

Data Integration

Email

Budget
tions

## Data  Warehouse  Layer

Transactional System
SAP ERP 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

•  Project  Cost  Forecas4ng  Solu4ons
–  SAP  Standard
–  BI/BPC
–  Noveco  ePM
•  Business  Beneﬁts  of  Cost  Forecas4ng  in  SAP

## ●  Rough cut Cost Estimation ●  Quotation from project Cost Estimation

●  Budget Preparation ●  Pricing and Conditions
●  Profitability Plan ●  Link to Project
SAP Standard

## ●  Billing: Lump-Sum, Cost Plus,

Schedule of rate
●  Revenue Plan & Actual Integration

## ●  Labour Internal External

●  Materials & Services

●  Network scheduling
●  Cost Plan Distribution
PR PO GR

PR PO SES
●  Capacity planning
●  Manpower planning
●  Personnel Management

Invoice
Noveco ePM

●  Progress Assessment
●  Cost & Work to Complete
●  Estimated Costs at Completion

## ●  Project Variation register ●  Project KPIs monitoring

●  Cost Estimation ●  Exception reporting
●  Cost integration with EAC/CTC ●  Detailed Reporting
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
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

## Varia(on   Status:   Status:   Status:

documents   CREATED   APPROVED   ACCEPTED

Curr. Budget
Curr. Budget

Revenue
Revenue
Revenue
Curr. Budget

## EAC EAC EAC

CTC CTC CTC
ePM  Workbench:  Integrates  Approved  Varia(on  Cost

●  Approved  Varia4ons  displayed  on  the  Project  Manager   ●  Current  Budget  :  Original  Es4mate  +  Varia4ons
Workbench:   ●  Budget  Variance:  Original  Budget  –  Current  Budget
-  Number  of  approved  varia4ons   ●  Project  EAC  and  CTC  updated  with  the  amount  of
-  Varia4on  amount   approved  varia4on  costs
●  Project  Budget  and  Forecasts  changed   ●  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

•  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!