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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  

●  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
●  Overheads

●  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

●  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  
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  

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  
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  
-  Overheads  etc.    
●  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 Element EAC Actual Actual Commit. Qty UOM CTC


Cost Qty To
Complete

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

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

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 $5500.0 $4500.0 90.0 $500.0 10.0 Hr $500.0


installation

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  
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  


•  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  

●  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

Create Cost Forecast from Cost Plan

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

ext.   100.0 H $80.0/H $8,000.0 Estimates/Plan

Initial Step: Create Cost Forecast from Cost Plan

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  


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

Data Integration

Reporting and Distribution


Email

Data Modelling – BPC Application

Annual Forecast Workbench Consolida


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  


•  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  

●  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
●  Overheads

●  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  
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  

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  


•  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!