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

Email

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!