SAP Enterprise Portfolio and Project Management - Expertsoft

SAP Enterprise Portfolio and Project Management A Guide to Implement, Integrate, and Deploy EPPM Solutions — Joseph Alexander Soosaimuthu SAP Enterprise Portfolio and Project Management A Guide to Implement, Integrate, and Deploy EPPM Solutions Joseph Alexander Soosaimuthu SAP Enterprise Portfolio and Project Management: A Guide to Implement, Integrate, and Deploy EPPM Solutions Joseph Alexander Soosaimuthu Sydney, NSW, Australia ISBN-13 (pbk): 978-1-4842-7862-8 https://doi.org/10.1007/978-1-4842-7863-5 ISBN-13 (electronic): 978-1-4842-7863-5 Copyright © 2022 by Joseph Alexander Soosaimuthu This work is subject to copyright. 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For information on translations, please e-mail booktranslations@springernature.com; for reprint, paperback, or audio rights, please e-mail bookpermissions@springernature.com. Apress titles may be purchased in bulk for academic, corporate, or promotional use. eBook versions and licenses are also available for most titles. For more information, reference our Print and eBook Bulk Sales web page at http://www.apress.com/bulk-sales. Any source code or other supplementary material referenced by the author in this book is available to readers on GitHub via the book’s product page, located at https://github.com/Apress/SAP-Portfolio-andProject-Management. For more detailed information, please visit http://www.apress.com/source-code. Printed on acid-free paper I dedicate this book to my late beloved father, J.SOOSAIMUTHU, who mentored and emboldened me to lead an insightful life. I also dedicate this book to my dear mother, NIRMALA, who bestowed precious virtues by her infallible love. Table of Contents About the Author�� xi Acknowledgments�� xiii Chapter 1: Enterprise Project, Program, and Portfolio Management Fundamentals�� 1 Enterprise and Organizational Structure�� 2 Project Work Breakdown Structure�� 3 Project Definition�� 4 What Is a Project?�� 4 When Is a Project Created?�� 5 Work Breakdown Structure�� 7 Project Network�� 7 Activities�� 8 Milestones�� 9 Activity Elements�� 10 Subnetworks�� 11 Integration with Other SAP Modules�� 11 Integration with Plant Maintenance�� 11 Integration with Sales and Distribution�� 12 Integration with Material Management�� 14 Integration with Production Planning�� 19 Integration with Controlling�� 20 Periodic Settlement vs. Full Settlement�� 28 Integration with Finance�� 30 General Ledger vs. Cost Element�� 36 Portfolio and Program Structures�� 37 v Table of Contents Creating Portfolios�� 38 Integration of Project Management with Portfolio and Program Management�� 39 Synchronizing Project, Program, and Portfolio Structures�� 40 Vertical Synchronization�� 41 Horizontal Synchronization�� 42 Prioritization Framework�� 44 Activities for this Chapter�� 49 Summary�� 51 Chapter 2: SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM�� 53 Project Planning and Forecasting�� 54 Different Planning and Forecasting Methods�� 54 Guidelines Related to Planning, Actual, and Forecast�� 63 Network Costing�� 65 Project Budgeting�� 86 Overall vs. Annual Budget�� 87 Release vs. Current Budget�� 88 SAP Project Budgeting Fundamentals�� 90 Year End Budget Carry Forward�� 112 Useful Transactions in Budgeting�� 116 Project Variation Management�� 116 Project RAG Status Commentary�� 121 Project Risk, Issue, and Change Request Registers�� 124 Project Procurement and Project Execution�� 129 Prerequisites�� 130 Network Planning and Execution�� 132 Project Resource Planning�� 133 Project Billing�� 145 Progress or Milestone Based Billing�� 146 Resource Related Billing (RRB)�� 147 Periodic Billing�� 150 vi Table of Contents Project Delivery-Based Billing�� 152 Order-Based Billing in Assembly Processing�� 159 Project Settlement and Capitalization�� 164 Project Settlement and Capitalization�� 164 Settlement Rule�� 165 Settlement Profile�� 166 Settlement Strategy�� 166 Settlement Types in the Settlement Rule�� 168 Settlement Processing Type�� 170 Settlement Processing�� 171 Settlement Scenarios�� 172 Project Closure�� 174 Activities for this Chapter�� 178 Test Your Learning�� 180 Summary�� 181 Chapter 3: Interface with Scheduling, Estimation, Costing, and Forecasting Applications�� 183 Fundamentals of Scheduling�� 184 Project Calendar�� 184 Scheduling Type and Scenarios�� 187 Network Diagram�� 189 Recording Actual Work�� 192 Project Variations and Their Impact on Scheduling�� 194 Scheduling and Its Impact on Forecasting�� 195 Detailed Date and Schedule Planning�� 197 Integration with Procurement and Production�� 198 Integration with Resource Management�� 202 SAP Interface with Schedule Management Applications�� 204 Why is the interface to third party schedule management application required?�� 204 Design Principles for the Interface�� 206 vii Table of Contents Fundamentals of Estimation and Costing�� 218 Internal Labor�� 218 External Labor/Service�� 220 Subcontracting (Externally Processed Activities)�� 222 Internal Material�� 223 External Material�� 224 SAP Interface with Estimation and Costing Applications�� 226 Why is the interface to the third party estimation and costing application required?�� 231 Design Principles for the Interface�� 232 SAP Interface with Forecasting Applications or Products�� 235 Why is the interface to the third party forecasting application required?�� 235 Design Principles for the Integration�� 236 Activities for this Chapter�� 238 Test Your Learning�� 240 Summary�� 241 Chapter 4: Industry Best Practices and Business Recommendations�� 243 Industry Best Practices�� 244 Mobility and App Based Project Management Solutions (Cross Industry)�� 244 Resource-Related Billing (Professional Service)�� 270 Revenue Recognition via Results Analysis and Integration with Revenue Accounting and Reporting (IFRS) (Cross Industry)�� 272 Project Management Controls�� 275 Portfolio and Program Management Controls and Decision Making�� 286 Project Accounting and Integration with Other Modules/Third-Party Applications (Cross Industry)�� 289 Phases and Decision Points: (Government or Public Sector; New Product Development; Infrastructure projects of Telecom and Utilities))�� 291 Business Challenge: Project Structure�� 295 Work Breakdown Structure vs. Cost Breakdown Structure�� 296 Recommendation on Work Breakdown Structure vs. Cost Breakdown Structure�� 296 Business Challenge: Level of Planning During the Lifecycle of the Project�� 297 Estimates (BoQ/BoS/BoM)�� 297 viii Table of Contents Detailed Plan (Schedule of Quantities, Services, and Materials Against a Delivery Plan)�� 298 Recommendation About the Level of Planning�� 299 Business Challenge: Remote Project Location, Offshore Work, or Work Location with No Computer Access�� 299 Recommendation about Remote Work and Offshore Work�� 300 Business Challenge: When to Use Mass Upload�� 300 Mass Upload: When to Use It and When Not to?�� 301 Recommendations Regarding Mass Upload�� 302 Commonly Asked Questions�� 304 When a Project Involves an Internal Customer and Deliverer, Should the Internal Customer and its Deliverers Be Housed in One Project?�� 304 Variation Management Using Claims vs. CPM Change Request vs. Version Management (Baselining)—Which Method Is Better?�� 306 Network Costing vs. Easy Cost Planning—Which Is Better?�� 307 How Do You Manage Narratives for a Project?�� 307 Standard RICEFW List by Industry�� 308 Standard Functionality List by Industry�� 324 Activities for this Chapter�� 342 Test Your Learning�� 343 Summary�� 344 Chapter 5: Reporting and Analytics: Operational and Strategic�� 345 Operational Reporting�� 346 Real-Time Operational Reporting�� 347 Period End/Monthly Operational Reporting�� 349 Strategic Reporting�� 351 Diagnostic and Descriptive Analytics�� 352 Long-Term Trend Analysis�� 355 Predictive Analytics�� 358 Activities for this Chapter�� 361 Test Your Learning�� 363 Summary�� 364 Index�� 365 ix About the Author Joseph Alexander Soosaimuthu is a professionally certified business process and integration expert with more than 17 years of SAP consulting experience, which includes ten endto-end project implementations in APJ, MENA, and EUR. He has extensive solution, design, and delivery experience and has worked in various capacities, including as a functional expert, data migration expert, solution architect, and roll-out manager. He holds a bachelor’s degree in civil engineering from the National Institute of Technology, Tiruchirappalli (NITT) and is certified in Project System (SAP PS), Management Accounting (SAP CO), and Business Foundation & Integration (SAP TERP10). xi Acknowledgments First, I want to thank the LORD for giving me the knowledge and health to author this book. Second, I want to show my deepest appreciation to my loving wife, Anne Nisha, for her unfailing support and to my beloved children, Fiona, Shaun, and Christof Arlo, who cooperated during the busy times of lockdown. I also want to express my sincere gratitude to my extended family and friends, who inspired me in many ways to write this book. Third, I want to extend special thanks to Harikrishna, Divya, James, and Mark, my production and editorial team, for their review and support. Last but not least, this book would not have been possible without my clients and colleagues, who provided me with rich experiences to write this book. xiii CHAPTER 1 Enterprise Project, Program, and Portfolio Management Fundamentals SAP implementations that involve enterprise project, program, and portfolio management structures are complex and it is vital to determine the correct enterprise and organizational structure for a successful implementation. In this chapter, you learn what the various enterprise and organization units represent and what to look out for when making the decision about your enterprise’s structure and organizational units. Many enterprises fail to define when project, program, and portfolio management structures should be created. Due to this lack of clarity, data is not standardized. This impacts the organization’s ability to summarize and report key figures at different levels. In this chapter, you learn at what level projects, programs, and portfolios should be created and when to use a WBS (Work Breakdown Structure) element and network. SAP is widely known for its integration and, in this chapter, you learn how to integrate SAP Enterprise Portfolio and Project Management (EPPM) with other SAP modules, such as Plant Maintenance, Material Management, Production Planning, Procurement, Controlling, and Finance. Within SAP EPPM, how information is synchronized between SAP Portfolio Management and Project Management and vice versa. Enterprise and government organizations that manage capital projects and programs need to prioritize ideas, proposals, and concepts as part of the investment decision. In this chapter, you learn about the prioritization framework, including how it is used to prioritize projects for different uses, such as customer work, internal work, and work performed for the public. 1 © Joseph Alexander Soosaimuthu 2022 J. A. Soosaimuthu, SAP Enterprise Portfolio and Project Management, https://doi.org/10.1007/978-1-4842-7863-5_1 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Enterprise and Organizational Structure SAP Portfolio Program and Project Management has the following enterprise and organization structure. All of these structures are used in SAP EPPM for financial, management, project, program, and portfolio reporting. 2 • Controlling area: Denotes the management control within an enterprise. If the management control (such as the person responsible and the reporting hierarchy) are consistent within an enterprise, it makes sense to have one controlling area. Other aspects to consider are the dimensions used for measuring the key figures and the reporting currency in an enterprise. If management reporting is performed consistently using the same dimensions, with the same reporting and responsibility hierarchies and with one reporting currency, it is advisable to create one controlling area. If any of these conditions are different, multiple controlling areas are required. • Company code: Denotes the legal entity in an enterprise. An enterprise can have many legal entities, such as subsidiaries, which require a trial balance (balance sheet and profit and loss) to be prepared based on the local generally accepted accounting principles (GAAP) of the respective country. • Business area: Signifies a line of business or a strategic business unit in a company code. Using the business area, a trial balance can be derived for internal financial reporting. This is not recommended for external financial reporting. With the introduction of a new GL, business areas have been replaced with profit centers. • Profit center: With the introduction of a new GL, a profit center represents the area of business that require a trial balance (balance sheet and profit and loss). This can be used only for internal financial accounting and reporting. If a new GL is not implemented, the profit center represents an area of business where income and expense can be reported. • Plant: A physical or logical place where goods and services are rendered within a company code. All logistic and maintenance activities within a company code are rendered, delivered, or serviced via a plant. Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals • Sales organization: Represents a sales organization within a company code where goods and services are sold on specific terms and conditions. • Distribution channel: Represents the sales channel within a sales organization that is used to deliver and sell goods and services. For example, wholesale, retail, and online direct sale can be different channels within a sales organization. • Division: Represents a sales division where goods and services are delivered and sold to the external and internal customers. Sales divisions can service one or more sales organizations and distribution channels. Specific information, such as pricing and conditions, can be defined for each customer. • Purchasing organization: Represents a purchasing entity within an enterprise with specific terms of procurement of goods and services from external and internal vendors. In the case of a central purchasing organization, multiple company code’s purchases can be centrally managed using one purchasing organization. Central purchasing is used to create volume and to negotiate better deals using a central terms of procurement depending on the goods and services procured. If your enterprise requires more specific terms of procurement governed and controlled separately by each legal entity, decentralized purchasing organizations can be created, with each purchasing organization linked to the company code. Project Work Breakdown Structure The Project Management Body of Knowledge (PMBOK) defines a project as follows: “A project is a temporary endeavor undertaken to create a unique product, service, or result. The temporary nature of projects indicates that a project has a beginning and an end.” 3 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals This understanding, when systematized, gets transformed and changed for various reasons, such as reporting, usability, and ways of working in the legacy application. Therefore it is paramount to set business rules that are aligned to the PMBOK to describe a project based on its business purpose and when these projects should be created. This section also covers project structuring and its components. Projects for the purpose of planning, execution, monitoring are broken into WBSEs (work breakdown structure elements) in a hierarchical manner. Activities are listed in a sequential fashion based on relationship or dependencies with each other. Within SAP EPPM, the Project System submodule has the following elements and components to fulfil the project management structure: • Project definition • Work breakdown structure • Network • Activity • Milestone • Activity element • Subnetwork or plant maintenance order Each of these structural object is discussed in detail in the subsequent sections. Project Definition This is a project header, where all the critical information related to the project and its WBS are stored. Information, such as the budget profile, planning profile, result analysis key, investment profile, interest profile, scheduling profile, partner determination procedure, and so on, is maintained. Other key project data such as the basic project start and end date, as well as organizational data such as the controlling area, company code, business area, profit center, and plant and functional area can be maintained here. What Is a Project? A project is a piece of work that is bound by time and resources to deliver outcomes by managing quality and safety. 4 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals • The reference to time indicates definite schedules with dates and milestones. Projects must have finite start and end date and cannot be left indefinitely open. • Resources refer to human, material, tool, and equipment needed to carry out the project. • Each project should have a defined set of deliverables and these deliverables should lead to the realization of benefits and utilization of outcomes. • Sometimes long-term, repeatable maintenance works or operations are considered projects for the purpose of funding, planning, and forecasting. In these cases, it is advisable to have annual maintenance or operational work be created as a project instead of creating one maintenance/operation project for multiple years without a definite end date. When Is a Project Created? Each enterprise should have a set of business rules about when a project should be created during the project lifecycle. Some enterprises choose to create projects when actual work related to the project has commenced. This allows them to plan, forecast, and monitor the project work to be performed. Other enterprises choose to create projects as part of their preparation to start projects in order to capture the whole of life (WOL) cost of the project. This can be done at the time of concept identification or when the idea is proposed or after the project goes through specific project identification stages and gates. What are the types of projects? Project types can be based on the following: 1. Project classifications: Classification based on the nature of project, whether it is external facing or internal and based on the treatment of the cost and revenue posted on the project. Projects can be classified as Capital Investment (Internal), Overhead (Internal), Production (Internal/External), Quality Assurance (Internal), Safety (Internal), Research and Development (Internal), Public/Health/ Community Service (External), and Profitability (External) 5 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals 2. Size of the project: Based on the cost, estimate, or revenue of the project each enterprise can set business rule to rate projects as follows: Tier 1 (low priority), Tier 2 (medium priority), Tier 3 (high priority ), and Tier 4 (very high priority). 3. Product or service line to which the project belongs: Depending on the industry there could be various examples. In heavy machinery, there could be Turbine, Engines, Pumps, Motors, Compressors, and so on; in IT, there could be Banking and Financial Service (BFS), Healthcare, Public Sector, Manufacturing, and so on; in construction, there could be Transportation, Energy, Homebuilding, Commercial Building, Ports, Airport, and so on. 4. Project type: This is the type of work performed, such as construction (building, plants, bridges, road, rail, airports, ports, jetties, wharfs, pylons, etc.), mining, production, and manufacturing, HT LT transformers, motors, turbines, ship building, oil and gas exploration upstream, midstream, and downstream, R&D pharmaceutical, engineering design, media job and advertisement campaigns, event management, maintenance and overhaul, waste management and treatment project, aerospace and space projects, engineered-to-order automobile manufacturing projects, information technology, business process outsourcing, communication, telecommunication, mobile, satellites, and so on. 5. Project safety and risk rating: Based on the project safety and risk rating, the project can be tiered and ranked as a Very High, High, Medium, and Low risk project, or as Tier 1 to Tier 4. 6. Project categories: Projects can also be categorized based on the revenue model, such as Time and Material, Fixed Price or Lump Sum, Item Rate or Billing of Quantities, Progress-based Billing or Measurement-based Billing, Time and Material with Milestones, Value-Based Billing, Outcome-based Billing, Output-based Billing, Rates, and so on. 6 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Work Breakdown Structure The Work Breakdown Structure (WBS) represents the work performed in a project. The WBS can be used to represent the functions, objects, or processes associated with the work. A function can be defined as mechanical, electrical, instrumentation, and civil work performed in an engineering procurement and construction (EPC) project. Objects can be drive systems, towers, roller batteries, ropes, control systems, drive electronics, stations of a ropeway maintenance, or erection and commissioning (E&C) projects. Processes can be searching for potential underground gas fields, drilling exploratory wells, and operating wells in an upstream project (or exploration and production: E&P). The SAP Project System can be used for project management purposes or for project/management accounting purposes. In the case of the former, the WBS of a project should be aligned to the project plan, with phases, activities, and milestones. In the case of the latter, the project structure is used to manage financials such as forecast and plan cost, revenue, and budgets. To do this, the WBS of a project should be aligned to the project’s divisions (profit centers) that are delivering the project. If the SAP PS Project is used in a customer project scenario (where revenue and billing are involved), the WBS can be used to represent the billing schedule or bill of quantities (BOQ), which has been agreed on with the customer. In order for the WBS element to receive revenue posting, it has to be flagged as a billing element. Project Network A project network provides an overview of activities, their duration, and their relationship with other activities. It also provides an overview of materials and production resource tools required for the activities and its schedule. Network in SAP PS holds key information about scheduling, costs, capacity, status management, confirmation, collective requisitioning, and default values. Network in SAP PS is equivalent to the project network diagram in MS Project and Oracle Primavera software, which show activities in the precedence diagram method (PDM). It includes a duration, early and latest dates, and float (slack) for each activity. This helps determine the critical path for the network and project: • CPM: Critical Path Method • PDM: Precedence Diagram Method • PERT: Program Evaluation Review Technique 7 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Activities In SAP PS, activities represent the tasks performed in the project. Activities can be performed internally or externally within the project organization. Internally Processed Activities Internally processed activities are work that’s performed in the organization or by another part of the establishment to which the project belongs. Examples of internal activity can be preparation of drawings, finalization of design, council approvals, finalization of sourcing agreement, preparation of rough cut estimates, preparation of bids, preparation of environment impact assessments, land acquisition, reconnaissance survey reports, FDA or TGA final approvals, and so on. They are performed by personnel within the project’s organization or establishment. Internal activities are costed based on the type of work (activity type) and the number of hours of effort required to complete the activity. Activity type is not directly entered into the internal activity, whereas the work center to which the activity type (type of work) corresponds to, is entered. The work center master holds the default activity type and cost center. For a combination of activity type and cost center, cost rate is captured for every period (month and fiscal year) in the SAP Controlling (CO) module using transaction code KP26. Cost rate multiplied by the effort reveals the total cost of the activity. Sometimes, an execution factor is entered into the internal activity if the activity is repeatable. Examples include repetitive manufacturing (assembly-to-order or engineerto-order scenarios) and recipe management (in the food and beverage industry). If the execution factor is entered, the cost of the internal activity is the cost rate times the effort and the execution factor (cost rate x effort x execution factor). Externally Processed Activities Externally processed activities are processed outside of the project’s organization or establishment. Some parts of the WBS are executed by external service providers or vendors for various reasons, such as for cost savings, reduced delivery times, business operating models, technical knowhow and expertise, and so on. Each externally processed activity can be delivered by one vendor or service provider. 8 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Externally processed activities can be subcontracted as a lump sum work with vendor delivery ownership or can be used to list services that are required to be provided by a service provider. Using an externally processed activity, the purchase requisition can be raised for lump sum subcontracted work or for the list of service required. These purchase requisitions can then be converted to purchase orders, as necessary. Cost Activities Cost activities can be used to capture other miscellaneous costs, such as overhead, admin, and other indirect costs of the network or project. In some cases, the project uses cost activities for estimation purposes only. The actual project execution, such as scheduling and schedule management, are performed using the WBS element. The advantage of using cost activities to estimate instead of WBS unit costing is that cost activities show the spread of cost by time (period). In the previous explanation, at least one cost activity has to be created for each period, when cost is likely to be incurred to show cost estimates spread out by period and fiscal year. Milestones Milestones represent key events of a project. Milestones can be internal or external, depending on their purpose or use. Internal and external milestones can be configured in the system using agreed naming conventions for internal and external purposes so that they can be reported separately. Milestones are separate data objects in SAP PS and are used to enhance the information available at the WBS element and activity level. • Some organizations choose to use external milestones for WBS elements and use internal milestones for activities. • Some organizations choose to use the WBSE milestone alone for both the external and internal milestones, when network and activities are not used. • Some organizations choose to use activity milestones when scheduling and confirmations are performed on a regular and diligent basis. 9 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals In some customer projects that are construction related, billing can be performed based on the percentage of completion of the milestones. In such cases, the WBS can be created to represent the different key work areas. For example, an Induced Draft Cooling Tower (IDCT) project in a fractional distillation plant has work areas such as the following: 1. Sump 2. IDC Tower 1 3. ICD Tower 2 4. IDC Tower 3 5. IDC Tower 4 6. Erection and Commissioning (E&C) 7. Handover These work areas represent the agreed-upon level 1 billing schedule and can be created as WBSE elements. Each of these work areas involves key milestone events, such as mobilization of team, excavation with POCs 30%, 50%, 90%, and 100%, delivery of materials at site with POCs 50% and 100%, construction of sump and IDCT with POCs 50%, 90% and 100%, Erection and Commissioning (E&C), and handover based on the customer’s level 2 billing schedule. The same can be created as WBS milestones. Activity Elements Activity elements represent further breakdown of the activities. Activity elements also have the same categories as activities—Internally Processed, Externally Processed, and Cost Activity Elements. Material components, milestones, and production resource tools (PRTs) cannot be attached to activity elements. Activity elements do not have relationships of their own; they get their start and finish date by way of an offset from the start or finish date of the activity. The project schedule is dependent on its parent activities and its relationship to other activities. The early and latest dates of the activity elements are determined by the parent activities’ dates. 10 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Subnetworks Subnetworks can be used to refine and detail network activity as planning progresses during the project’s lifecycle. Similar to networks, subnetworks can be used to plan dates, capacities, costs, materials, and production resource tools (PRT). Relationships can be established between subnetwork activities of the same project. The next section covers project management integration with other SAP modules. Integration with Other SAP Modules This section explains how project management integrates with other SAP modules. It covers fundamental and touch points on how SAP PS integrates with other SAP modules, including Plant Maintenance (PM), Sales Distribution (SD), Materials Management (MM), Production Planning (PP), Controlling (CO), and Finance (FI). Integration with Plant Maintenance When there is a major overhaul or a rejuvenation projects with a series of maintenance activities/work to be performed, such maintenance work can be captured as follows: • Plant maintenance orders as a subnetwork: When plant maintenance orders are linked to networks as subnetworks, the following data integration is possible: • The dates from the superior network activity are copied into the order for the PM order scheduling. • Plant maintenance orders as subnetworks can be displayed in project planning boards and in the SAP PS structure reports such as CN41n and CN41. • The cost of these subnetwork maintenance orders can be reported in the project report. Therefore, project budget control can have oversight of maintenance costs, in addition to procurement and labor costs for managing the overhaul or rejuvenation projects. 11 Chapter 1 • Enterprise Project, Program, and Portfolio Management Fundamentals Equipment and functional location as a WBS element: A WBS element can be used to capture equipment and functional location master data used in the plant maintenance module for maintenance projects. These fields can then be used to report in SAP PS to evaluate maintenance cost, budget, dates, and procurement carried out for the equipment or functional location. Integration with Sales and Distribution Project management integration with sales and distribution varies with respect to the different industries. In the following section, you read touch points about how SAP PS interacts with SD for the purpose of quotes, revenue planning, billing, and revenue recognition. Milestone Billing WBS elements and activity milestones can be referenced in a sales order when the respective WBS element is assigned to the sales order item. When the activity is confirmed or when the “Actual Date” is entered into the WBS element, the billing block is removed. In the next billing run, these sales order items will be due for billing. Quotation and Sales Pricing Based on the sales area (sales organization, distribution channel, and division) that’s entered in the project profile and inherited on the project definition, quotes are generated. They are based on the sales cost estimate captured on the project. The sales price of the quote is based on the cost plus a percentage margin or based on the revenue rate captured in the VK11 transaction. Revenue Recognition and Result Analysis The unbilled quantities of work completed can be valued based on the revenue it can generate or cost incurred to produce it using the local generally accepted accounting principles (GAAP). This can be valued using different revenue recognitions or result analysis methods, such as percentage of completion, cost or revenue proportionality, and so on. 12 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Revenue Rate Card Revenue rate is defined using different aspects, such as the following in contract, quotation, sales and billing request: 1. Sales area (sales organization, distribution channel, and division) 2. Sales office 3. Plant 4. Sales document (master sales agreement—contract and statement of work—sales order) 5. Project type or category 6. Other project attributes such as location (onshore, offshore, nearshore, or geography), and so on 7. Project or WBSE 8. Saleable material or service These revenue rates are used in the project sales documents, such as the contract, quotation, sales order, and billing request documents. The transaction codes to maintain the revenue rate card are VK11 (create), VK12 (change), and VK13 (display). Reporting Transaction for the Purpose of Integration Sales documents can be viewed using the following reports in SAP PS: • CN41n and CN41: Project structure overview reports • CN43n and CN43; WBS element overview reports (includes the sale document in the DB profile) • CN45n and CN45: Order overview reports (includes the sale document in the DB Profile) • VA03 (Sales Order), VA13 (Inquiry), VA23 (Quotation), and VA43 (Contract): Display sales document with a search based on the WBS element 13 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Integration with Material Management Material Management within SAP ERP covers materials and services. Capital projects rely heavily on procurement of materials and services. Similarly, customer projects, whether the enterprise is managing services partially or they are fully delivered by subcontractors, have many touch points with procurement. These touch points are related to requests, purchase orders, scheduling agreements, pricing, requirement grouping, and inventory (stock). In this section, these are all covered. Purchase Requisition If a material has to be procured externally, a purchase requisition is raised by the project team directly so that the next steps related to the sourcing and procurement can be actioned by the procurement team. For easy reference to the procurement team, purchase requisition can reference a purchasing info record of a previous purchase. It can also capture the estimated price and preferred vendor. If the organization chooses to process all material requirements from a project as a reservation, the material planning manager or the store manager has to action material reservation based on the current stock level. If the stock is available, it will be issued to the project reservation; otherwise, it will be converted to a purchase requisition and sent to the procurement team, if the materials procurement type is external. Based on the material master parameters, such as procurement type, planning strategy, and individual or collective requirements, the organization can control whether the purchase requisition is generated by the project team or by the planning or store/site manager. Collective Purchase Requisition When using networks for a project, based on the network type parameters for the plant, collective requisition can be created for every externally processed activity or non-stock component for a network. In a collective purchase requisition, the requisition will have multiple line items for every respective request created for each externally processed activity or material component that has an external procurement type defined in its material master. 14 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Project Commitment When purchase requisitions or purchase orders are created against the project structural objects such as the WBSE or network (in the case of a header assigned network) or network activity (in the case of an activity account assigned network), project commitments are created and can be reported via standard reports. These plan costs are considered as commitment due to their nature, as they are going to be incurred for the project until completion. Purchase requisition cost is an internal estimate, as no agreement with another external party has been made, whereas the purchase orders are a firm commitment and these monetary values have to be set aside. These costs will be incurred if the external service provider delivers the goods and services as detailed in the purchase order. Purchasing Info Record The purchasing info record stores information about the material and its supplier. This record can be maintained at the plant level or at the purchasing organization level. It stores information related to the material, and the vendor’s order processing time, price, and so on. Transaction codes relevant to info records are ME11 (Create Info Record), ME12 (Change Info Record), ME13 (Display Info Record), ME1L (Info Record List by Vendor), and ME1M (Info Record List by Material). Valuated and Non-Valuated Project Stock SAP PS offers options for special stock and one of them is project stock. In SAP, the materials are normally valued at a plant level. In some cases, a project uses specific material (special order) or involves a special price for the project, so it is recommended to use project stock, because the valuation of the material happens at the individual WBS element level. The moving average price applied to the procured material and assembly that takes place in the project happens individually on the specific WBSE that the material requirement or request was associated with. This way, the price of the product involved in the project is not largely altered, unlike moving average materials managed via the general plant stock. 15 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals At the time of creating the project, the type of stock for the project has to be chosen. The following options are available: • No project stock: Project will use material stock management via plant stock. No special stock is applicable. • Non-valuated project stock: In SAP MM, all stock materials go through good receipts and good issues. As the name signifies, good receipt is the action performed when the material is received and goods issue is the action performed when the same material is consumed or issued for the network activity or project. In the case of non-valuated project stock, quantity tracking is possible until the last step of goods issue, whereas the value of the material is posted to the project at the time of goods receipt itself. So the impact of the cost on the project is at the time of goods receipt and not at the time of goods issue. At the time of goods issue, only the quantity posting happens. No value posting happens, as it is already posted to the project at the time of goods receipt. Table 1-1 shows how the quantity update and value update are performed. Table 1-1. Non-Valuated Project Stock Non-Valuated Project Stock Quantity Update Value Update Goods Receipt ✓ Yes ✓ Yes Goods Issue ✓ Yes ✓ No • 16 Valuated project stock: As explained, the quantity and value update happen at each material movement such as the goods receipt and goods issue. In the case of valuated project stock, when the material is received, the cost of the material is accounted under the stock account and not as a project expense. At the time of goods issue, cost is posted as an expense to the projects and quantities are updated against the reservation for WBSE or network and project stock. Table 1-2 shows how the quantity update and value update are performed. Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Table 1-2. Valuated Project Stock Valuated Project Stock Quantity Update Value Update Goods Receipt ✓ Yes ✓ Yes Goods Issue ✓ Yes ✓ Yes Automatic Requirement Grouping In SAP Project Systems, material requirements can be grouped. Automatic requirement grouping allows you to automatically group material requirements in a project for the purpose of planning and procurement without manual intervention. The following are some of the key considerations for adopting automatic requirement grouping: • To group material requirements across projects and at the plant level, other requirement grouping procedures should be used. • Automatic requirement grouping works only with valuated project stock and not with non-valuated project stock. • The system uses the first WBS element on the highest level of the WBS as the grouping WBS element. All remaining WBS elements of the project are automatically assigned to this grouping WBS element. • Material requirements planning (MRP) groups the requirements and creates procurement elements that are assigned to the account of the WBS element. Project-Oriented Procurement (Proman: Procurement Manager) Project-oriented procurement is a specialized transaction (CNMM) that allows the procurement manager to view all project materials-related information on a single screen or console. In this transaction, the procurement manager can view information such as the components ordered or requisitioned, stock levels, key dates, and delivery documents, all in one place. 17 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Reporting The following are the key list of procurement reports that are relevant to project management: ME5J: List Purchasing Requisition per Project ME2J: List Purchasing Document per Project CNMM: Project Oriented Procurement ME1L: Info Record List by Vendor ME1M: Info Record List by Material The following are the most commonly used procurement transactions for project management: MBBS: Valuated Project Stock MB52: Warehouse or Plant Stock ME53n: Display Purchase Requisition ME23n: Display Purchase Order MB1A: Enter Goods Issue MB1B: Enter Transfer Posting MB1C: Enter Good Receipt MIGO: Good Receipt Purchase Order MD04: Stock/Requirement List MD01: MRP Run MD51: Project MRP MIRO: Vendor Invoice Verification ME13: Display Info Record XK03: Display Vendor 18 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Integration with Production Planning When you have engineered-to-order and made-to-order projects that involve in-house production of goods, integration of project material requirements and its fulfilment are very important. You read about these material reservation, material requirement planning and bill of materials in this section. Material Reservation Material reservation is a document that identifies the requirements for reserving an internally produced or externally procured stock material. Using a material reservation number, these requirements can be tracked, monitored, and issued. When a reservation is raised, the store manager reviews the stock and performs material issue, procures it (if externally sourced), or produces it (if internally sourced). Material Requirements Planning (MRP) Material requirement planning (MRP) can be performed at the plant or project level, depending on the organization and the business scenarios applicable to the organization. MRP at the plant level is adopted in made-to-order or made-to-stock business scenarios. With engineered-to-order or project-specific stock, project MRP can be performed to plan for materials that are internally and externally sourced. MRP can be performed on a regular basis (daily, weekly, etc.) to fulfil the requirements of the organization. Bill of Material (WBSE) With engineer-to-order (ETO) business scenarios, the bill of material (BOM) is multiple level or single level and can be created for WBSE. The components of the multiple- or single-level BOM can be transferred to the project structure using reference points detailed in the network activity and its mapping to the BOM components. Based on the BOM transfer profile, these components are transferred to the respective network activity, allowing them to be planned and managed. They can then meet the engineeredto-order target dates in a structured and sequential fashion. 19 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Here are the most commonly used production planning transactions for project management: MBBS: Valuated Project Stock MB52: Warehouse or Plant Stock MD04: Stock/Requirement List MD01: MRP Run MD51: Project MRP I ntegration with Controlling Cost estimation, control, and monitoring are key aspects of project management. In this section, you see how projects are valued and costed for estimation, planning, and forecasting purposes, as well as how they are reported and analyzed from a project profitability or project cost accounting perspective. C osting Variant Costing Variant holds information such as costing type, valuation variant, component structure, and other miscellaneous information (such as the default costing variants for the General Cost Activity and Material component). V aluation Variant Valuation Variant provides the details on how the cost of the material components, the internal and external activities, and overhead are computed. The Valuation Variant provides multiple options to compute the value of a material, service, or subcontracted work with its priority, so that the system can process the valuation when the condition of the preceding priority is not met. Figures 1-1 and 1-2 show Valuation Variants for materials and for externally processed activities, respectively. 20 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Figure 1-1. Valuation Variant for materials valuation 21 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Figure 1-2. Valuation Variant for an externally processed activity Cost Component Structure The cost component structure allows the planned and actual costs to be grouped and shown under cost buckets in a cost breakdown structure. This structure is called the cost component structure in SAP. Controlling Documents When actual costs are posted in SAP PS against network activities or a WBS element, a CO document is created that provides the credit and debit as a single line. This is used in management reporting. These documents are related to cost accounting and are generated even when dealing with internal distributions and even if there is no impact on finance. For example, time recording via Cross Application Timesheet (CATS) within SAP creates a CO document. For the purpose of easy reconciliation in finance, 22 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals a corresponding document is posted with credit and debit happening to the same General Ledger Account. This is an internal reposting of the labor cost from one cost object to another from a finance perspective. C ost Rates Every product and service delivery by the organization has to be costed. To cost an internal service delivery, such as preparation of drawing, design, estimation, and so on, there should be a cost rate card to charge the service to the appropriate project or network activity. In SAP Controlling, this cost rate is captured based on a combination of activity type and cost center. Activity type defines the type of activity performed. This type of activity can have different rates if performed by different cost centers. To capture this in SAP, cost rates are captured based on a combination of cost center and activity type. For example, project management is a type of activity that can be performed by the Construction department and the IT department. The project management rates are different for these two departments. (Transaction code KSBT Activity Type Price Report can be used for this purpose.) Figure 1-3 shows a report of the activity type price. Figure 1-3. Report on activity type price 23 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Costing Sheet and Overhead Key The costing sheet contains information about the cost base on which the overhead should be applied, as well as the overhead rate and the cost center that will receive the credit of the overhead cost. The cost base is a grouping of costs based on cost elements. Therefore, the costing sheet contains information about how the overhead should be computed for planning and actual purposes. The overhead rate maintained on the costing sheet is determined based on the overhead key. This way, different overhead rates can be determined using the same costing sheet. For example, for a project delivery by a professional service IT company, project implementation would have more overhead compared to the project run service delivery. To meet this requirement, SAP provides the following: Project Implementation (Concept to Implementation) • Base cost: • Cost Goods Sold (CoGS) + Cost of Services Sold (CoSS) = 1 million (CoGS in this case is the hardware and CoSS is the consulting service) • • Overhead rate – Type 1 • Sales and administration cost for project delivery = 10% of CoGS and CoSS • Sales and administration cost from COE = 5% of CoGS and CoSS Overhead rate – Type 2 • Corporate service cost (commercial, legal, and compliance) = 3% of base cost + overhead rate type – 1 Project Run (Post Go Live to Annual Maintenance) • Base cost: • Cost of Goods Sold (CoGS) + Cost of Services Sold (CoSS) = 3M (CoGS in this case is the hardware and CoSS is the consulting service) 24 Chapter 1 • • Enterprise Project, Program, and Portfolio Management Fundamentals Overhead rate – Type 1 • Sales and administration cost for project delivery = 7% of CoGS and COSS • Sales and administration cost from COE = 0% of CoGS and CoSS Overhead rate – Type 2 • Corporate service cost (commercial, legal, and compliance) = 1% of base cost + overhead rate type – 1 If project implementation and project run are on two different WBS elements in the project structure as detailed here, and the monetary values are planned revenue projections spread across multiple years based on a billing schedule, then two WBS elements can have the same costing sheet but two different overhead keys—one for project implementation and the other for project run. This way, the requirement related to the project implementation and run can be met with a minimum number of costing sheets. By using two different overhead keys, the project can determine different overhead percentages for implementation and run, for both overhead planning and actual overhead posting to the WBS elements. Result Analysis Result Analysis involves customer projects that involve computation of Work In Progress or Revenue in Excess of Billing and Revenue Surplus and Imminent Loss. Result Analysis is used to perform these computations for the customer projects. These Results are posted as part of the settlement process. Result Analysis values are posted using the controlling area currency at the time of settlement. • Work in Progress and Revenue in Excess of Billing is computed when more work has been performed compared to the actual billing. • Revenue Surplus and Imminent Loss is computed when actual billing is more than the work or goods produced. 25 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Settlement Settlement is a month-end process step in which the cost of the project is settled to Profitability Segments (PSG) in the case of customer (Opex) projects, and Asset Under Construction (AuC) or Fixed Asset (FXA) in the case of Capital Projects (Capex). There are other settlement receivers, such as cost center, general ledger account, materials, and WBS elements, that can also be used depending on the requirements. WBS element settlement can be used when there’s settlement from lower to superior WBS elements in a project and the top-level WBS element is settled to a PSG, AUC, or FXA. It can also be used when cost is settled from in-house production project to a customer project. Cost center settlement is used when the cost of the project cannot be capitalized in a Capex project. Such operational costs are collected in a cost center for cost center accounting (CO-CCA) purposes. Material settlement is chosen when the cost of goods produced has to be settled to finished goods for product costing purposes. Some project costs need a different treatment in terms of financial accounting and hence are settled directly to the general ledger account. Settlement happens in three steps: 1. Create the settlement rule. 2. Perform result analysis computation (applicable to customer projects). 3. Perform the settlement. In a settlement rule, the receiver object and the percentage of allocation of cost or amount depending on the settlement profile is provided. This information has to be maintained in the WBS element and network/activity. SAP PS provides options to create automatic settlement rule generation by using the settlement strategy defined for WBS elements and network/activity. 26 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Depending on the SAP modules and submodules (CO-PA, CO-CCA, FI, or PP) implemented in an enterprise, settlement profiles require customization with reference to the receivers. Settlement profiles also define how the project WBS element or network/activity have to settle actual costs. Depending on the following three settings, the WBS element or network/activity can be allowed to be closed with or without a cost balance. • Must be settled in full • Can be settled • Must not be settled The settlement profile contains information related to the following: • Allocation structure: Contains information about how cost assignments (cost grouping) can be allocated as part of the settlement. Assessment and settlement cost element to be used when processing assessment and settlement using the allocation structure. • Note: Settlement cost element configuration plays an important role in the cost model, to provide sufficient traceability of cost but also be able to report in detail and exclude the settlement cost from the original cost. If an enterprise wants to have the actuals posted on the original cost object and not credited with the same cost element but would like to have other forms of reporting such as CO-PA and FI-AA, settlement by original cost element should not be chosen. • Source structure: Source of cost and revenue to be considered for settlement is defined in the source structure. Cost/revenue assignments (grouping) are created as a source so that settlement can be performed on certain groupings by detailing it as part of the settlement rule. • Profitability (PA) transfer structure: Contains sources of cost and revenue that should be reported in CO-PA. In this structure, grouping of cost and values are created and assigned to the CO-PA value fields for reporting. Figure 1-4 shows settlement profile settings. 27 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Figure 1-4. Settlement profile settings Periodic Settlement vs. Full Settlement At the time of settlement rule creation for the WBS element or network/activity, it is necessary to indicate if the rule is applicable to a periodic settlement or full settlement. Periodic settlement, as the name indicates, collates the cost posted only during the selected period and then performs the settlement posting. Whereas, a full settlement, collates cost posted since the validity start date of the settlement rule or since creation of the WBS element (whichever is latest) until the selected settlement period and then performs the settlement posting. When you have long month-end closure cycle times, WBS settlement can happen on month-end day minus 1, such as the 29th or 30th of the month/period. If the corresponding period is not closed and additional costs can be posted after the periodic settlement of WBS elements or network/activity. These residual cost will be picked in the 28 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals full settlement run. However, full settlement is reliant on the FUL settlement rule and its validity dates. If the validity dates cover the lifespan of the WBSE or network/activity and when full settlement is performed, all the residual costs since the inception of the project cost object (WBS element or network/activity) are picked and posted in the current open period, which is selected as the settlement period. Month-End Assessment and Distribution Cycles Enterprises that are project delivery-based want the costs posted in other non-project based business areas/functions such as shared service, administration, and other back offices, to be apportioned to the projects. By apportioning these cost to the project, more reliable project profitability can be achieved. The resultant project profitability accurately shows the project’s performance from a bottom-line perspective and allows for meaningful decision making, future investments and future business cases, and business models. To transfer costs of non-project-based business areas/functions without impacting cost center reporting, planning, budgeting, and forecasting, it is necessary to apportion indirect project overhead based on weigtage of receiver WBS Elements. These weightage can be based on the actual postings of the receiver WBSEs or fixed weigtage as per the agreed cost model and cost flow design for the enterprise. At the end of the month, any residual cost in these cost centers can be assessed or distributed using the assessment and distribution cycle to the receiver WBS elements. Transaction codes to perform the assessment and distribution cycle are KSU5 and KSV5, respectively. Reporting Depending on their enterprise cost model, organizations perform month end procedures so that traceability of cost/revenue is not lost from the original cost object. At the same time, they do not want to undermine their enterprise’s ability to perform reporting based on various different perspectives, such as enterprise profitability analysis, product cost analysis, cost center, and project profitability reporting. The following are the list of reporting transactions and other useful transactions for project management with integration to controlling (CO). • KE24: Actual Profitability Analysis Line Item List • KE25: Plan Profitability Analysis Line Item List • S_ALR_87013611: Cost Centers: Actual/Plan/Variance 29 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals • S_ALR_87013623: Cost Centers: Quarterly Comparison • S_ALR_87013624: Cost Centers: Fiscal Year Comparison • S_ALR_87013625: Cost Centers: Actual/Target/Variance • S_ALR_87013542: Actual/Commitment/Total/Plan in CO Area Currency • S_ALR_87013555: Project Results • S_ALR_87013533: Plan/Actual/Commitment/Remaining Plan/ Assigned • S_ALR_87013544: Actual/Plan Comparison: Periods • S_ALR_87099930: Results of Costing Run • S_ALR_87099931: Price vs Cost Estimate • S_ALR_87099932: Variances Between Costing Runs • S_P99_41000111: Analyze/Compare Material Cost Estimates • CJ88: Project Settlement • CJ8G: Project Settlement – Collective processing • KO88: Order/Network Settlement • KO8G: Order/Network Settlement – Collective Settlement • CJB1/CJB2: Generate Settlement Rule (Collective/Individual processing) • KKA1/KKA2/KKAJ: Result Analysis for Order/Project/Project collective processing Integration with Finance With any ERP, the most important thing is the ability to report on actual and planned costs by company, strategic business units, division, portfolio, program, and projects. SAP Finance allows most Fortune 500 enterprises to report their monthly, quarterly, and annual balance sheet and profit and loss information at various organizational unit levels. Enterprises that manage projects as their main stream business and organizations 30 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals that manage projects for their internal work and for investment decisions have to comply with this statutory requirement. In this section, you learn about the touch points with the SAP Finance module and a seamless exchange of data. Investment Profile and Capitalization The investment profile in SAP IM (Investment Management) contains information related to the asset class for actual and simulation purposes, the type of settlement to the asset under construction (AuC) created from the investment measure (WBS element), the settlement distribution rule when settling to the AuC, information about how the AuC should be created (by object or based on the source structure— the source of cost), and whether the system should allow users to change the default class determine by the investment profile. Based on the conceptual cost model defined for the enterprise and also on the cost traceability requirements, line item settlement can be chosen over summary settlement. This allows you to know the original line item of the cost postings. Line item settlement also allows you to determine, at a line item level, the costs and revenue that can be capitalized. Investment profile has a default asset class defined for creation of asset under construction (AuC) and for simulation of capitalization and depreciation using the default asset class provided for simulation purposes. These default asset classes—one for AuC creation and another for simulation of capitalization and depreciation—can be fixed depending on the customization. If they are fixed, users cannot change them at the time of creation of AuC or at the time of simulation. Investment profile also defines whether the source cost in the WBS element is created as one AuC or number of AuC depending on the source cost structure. This provides the flexibility to create AuC based on the source of the cost for account assignment element WBSEs. If the treatment for a specific grouping of cost is not known or is different from the other types of cost, it is good to have AuCs created based on the source cost structure. This will define the treatment for the cost later or make a provision for a different treatment of cost. Expensing or early capitalization of certain types of cost can be referred to different handlings (treatments) of the cost. Refer to the investment profile settings shown in Figure 1-5. 31 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Figure 1-5. Investment profile settings Full Settlement to AuC and Fixed Asset (FXA) When asset under constructions are created at the time of releasing a WBS element with an investment profile, FUL settlement rules are created automatically. The number of AuCs per WBS element depends on the setting in the investment profile—you can have one AuC per WBSE or multiple, based on the Source Cost Structure defined in the settlement profile. 32 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals The following settlement processing types are possible for the capital WBS elements (WBS elements with an investment profile): 1. Automatic (#1): The system automatically determines processing type #1 or #8 depending on the current system status of the capital WBS element and the fixed asset (FXA) settlement rule. If the system status of the WBS element is released, a periodic settlement will be performed and if the WBS element status is technically closed (TECO), it will initiate FUL settlement for the capital WBS element. For an Opex WBS element or network/activity with only a periodic settlement rule, the period settlement will be performed. If the cost object (Opex WBS element or network/activity) has both periodic and FUL settlement rules defined, the system will perform periodic settlement and will check if the balance is zero. If it is not zero, it will perform FUL settlement of the cost object. 2. Periodic (#2): The system collates the cost posted during the settlement period for the settlement. 3. Partial capitalization (#3): Partial settlement is similar to the FUL settlement of the capital WBS element, but the status of the capital WBS element is not taken into consideration. This allows partial capitalization of the capital project and will not expect the full capital cost to be settled to a Fixed Asset (FXA). FXA settlement is necessary to perform partial capitalization. 4. Full (#8): As explained earlier, full settlement collates the sum total of all costs during the lifespan of the Opex WBS element or network/activity. It’s also based on the validity start date of the FUL settlement rule until the selected settlement period. This cumulative cost is then settled to the settlement receiver. Full settlement allows any residual costs that are not settled to be cleared and to keep the balance of the cost object as zero. 33 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals For capital WBS elements, the same process of collating the cumulative cost to be settled is determined. This cost is posted as a full and final settlement to the Fixed Asset (FXA) mentioned as a settlement rule in the capital WBSE. Figure 1-6 shows the actual project settlement for individual processing. Figure 1-6. Actual project settlement for individual processing A ccounting Documents Accounting documents are created when a posting is made to the WBS element, network/activity, or other cost objects such as cost center, order, and so on. In this manner, the SAP System can keep track of all financial postings made within an enterprise. This allows the SAP Financial module to generate balance sheets and profit 34 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals and loss statements for all the legal entities defined in the enterprise, as detailed in the organizational structure section of this chapter. An accounting document captures critical information that allows bookkeeping, such as the following (see Figure 1-7): 1. Debit and credit indicator 2. General ledger (G/L) account 3. Cost object for profit and loss G/L account, such as network/ activity, WBSE, or cost center 4. Applicable tax codes 5. Amount with currency 6. Organizational units such as company code, profit center, and business area (if applicable) 7. Document date 8. Posting date (posting period and fiscal year) 9. Reference document number 10. Document type 11. Entered by, date, and time Figure 1-7. Accounting document 35 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals General Ledger vs. Cost Element General Ledger is an account used in SAP Finance to capture actual cost, revenues, assets, and liability postings so the enterprise’s books can be managed. Profit and loss statements cover revenue and cost accounts. Balance sheets cover assets and liabilities. Subledgers such as asset accounting, accounts payable, and accounts receivable are managed by using the linked reconciliation general ledger accounts in the asset, vendor, and customer master data areas. Cost element is a cost head that is used for management reporting. All revenue and cost G/Ls are created as primary cost elements with a 1:1 relationship. In this way, any posting performed in Finance is captured in Controlling. Secondary cost elements are not represented in Finance or summarized and posted using one G/L account (FI-CO recon account) and this account balance will be zero. Therefore, there is no impact of secondary cost posting in Finance. Balance sheet and asset G/L accounts are not created as cost elements. They are only required for financial reporting and not for management reporting. Cost element types 1-Cost and 11-Revenue represent the primary cost element. Other cost element types are used for secondary costs. For each G/L account, a commitment item can be assigned. This way, the actual payments and planning can be performed based on the billing plan available per WBSE or on the invoicing plan available from the network activity. This combined with the terms of payment and actual invoicing allow project cost controllers to plan and forecast actual project payments. • 36 Reporting: The following is the list of finance reports that are applicable to project management. • FAGLL03: G/L Line Item Report (G/L View) • S_PL0_86000030: G/L Account Balances (New) • F.01 - G/L: Balance Sheet • F.08 - G/L: Account Balances • F.10 - G/L: Chart of Accounts • F.51 - G/L: Line Items • F.54 – G/L: Account Balance Structure Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals • F.20 – AR: Account List • F.21 – AR: Open Items • F.23 – AR: Account Balances • F.40 – AP: Account List • F.41 – AP: Open Items • F.42 – AP: Account Balances • AR01 – AA: Asset Values • AR02 – AA: Asset History Sheet • AR03 – AA: Depreciation Values • GR55: Run Report Group • FB03: Display Document So far you have learned about the touch points of project management with other SAP modules. In the next section, you learn more about the program and portfolio structures. Portfolio and Program Structures In this section, you learn about the different structural objects that are available in portfolio and program structures. You learn how these objects can be used to structure your enterprise portfolio and program structure. You also learn about the integration of project management with portfolio and program management. A portfolio is a group of projects/work or potential projects/work managed in a coordinated fashion to achieve an enterprise’s strategic objectives. Project oriented enterprises manage their projects as portfolios depending on geography, type of project, account/delivery managers, product lines, service types, and so on. The portfolio structure reflects how projects are grouped strategically in an enterprise. There could be one portfolio for the overall enterprise or multiple portfolios reflecting independently managed areas. One portfolio is a separate single entity and not related to other portfolios. A portfolio consists of one standard hierarchy of buckets. In addition, it can have classification hierarchies (alternative or secondary hierarchies for flexible reporting). 37 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Creating Portfolios The level at which a portfolio is created is determine differently in different enterprises and industries. Some enterprises tend to create one portfolio and have other grouping functionality such as review or collection for reporting and grouping purposes. To avoid too much administration and project movement from one portfolio to another during the lifecycle of the project, it is always good to have a portfolio structure that is more static. Determine the portfolio structure based on the following criteria: 1. Reporting: How the organization’s core reporting needs can be met via the creation of portfolios. 2. Sizing: Volume of projects that can be created under a portfolio. Too many projects under a portfolio means that the projects are not well managed from a portfolio perspective. Too few portfolios or a single portfolio implies that portfolio management is not performed at the appropriate level. 3. Usability: Users have to switch between portfolios to view projects in different portfolios unless the enterprise uses cross-portfolio classification hierarchies. Currently there are no multiple portfolio dashboards in SAP ECC 6.0. One workaround is to use the crossportfolio classification hierarchies. 4. Access and Control: Access restrictions are cascaded or inherited top-down from a portfolio. The portfolio level access control list based on user or role gets cascaded from the portfolio to the item (project). Therefore, before creating a portfolio, it is necessary to check if the newly conceptualized portfolio level will require additional business template roles to be created or existing business template roles to be broken down into detailed subordinate roles. Other structural objects in SAP PPM include the following, which are used to further detail the portfolio, program, and project management structure: • 38 Bucket: Allows PPM items and initiatives to be grouped and reported. Each portfolio can be broken down by bucket hierarchy. Buckets not only provide the ability to group objects and report on Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals them, but also to plan financial and capacity items, such as estimate, plan, budget, and forecast for a planning horizon. Enterprises that operate using a single portfolio will use the bucket structure to define their subportfolio structures. In doing so, project and initiatives can be viewed together based on buckets (sub portfolio) in the portfolio item dashboard and initiative dashboard. • Initiative: Represents a program of work or projects. For the purpose of program management, initiatives should be used. It allows grouping of PPM items (projects) under a program to be grouped and reported. It also provides planning, budgeting, forecasting and rollup of financials and resource capacity. Stage gates (phases and decision points) related to the program can be managed at the initiative. • Item: Represents a project or body of work performed for internal or external customers. Items can be project, proposal, annual maintenance plan, internal work, and concepts or proposals. These are created for the purpose of investment prioritization, customer proof of concepts, research and development, customer work, or internal work. For the purpose of project management, a SAP PPM item is created along with SAP PS Project for actual cost capture and procurement. SAP cProject is used for scheduling and resource management. Integration of Project Management with Portfolio and Program Management The SAP Project System has multiple integration scenarios with the SAP Portfolio and Project Management (PPM) application. Most enterprises except professional service and new product development organizations integrate the portfolio management structure directly into the SAP PS without invoking SAP Project Management (collaboration Project-cProject) within the SAP PPM application. With professional service or new product development organizations, the project management (collaboration Project-cProject) submodule in SAP PPM can be used for project management, resource management, and SAP PS for the purpose of actual cost capture and procurement. 39 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Financials posted in SAP PS—such as actual, planned (including baseline and forecast), commitment, and budget—can be rolled up into PPM Item, Initiative, Bucket (Primary and Classification Buckets), and Portfolio. The SAP PPM solution can be deployed in multiple variants on the same instance of the SAP ERP or SAP S/4 HANA system or as separate instances to the SAP ERP or SAP S/4 HANA system. In both scenarios, financial roll-up has to be performed in the receiver systems to view SAP PS data in SAP PPM. Top-down budgeting and capacity planning performed in SAP PPM can be transferred to SAP ERP (PS Project). In the case of SAP PPM deployment with cProject, capacity information can be transferred to cProject roles (resource type) for further staffing and resource management via multi-resource scheduling (MRS). In the next section, you learn more about how information is synchronized between the different project management applications or submodules (SAP PS <-> cProject <-> Portfolio Item) within enterprise portfolio and project management. ynchronizing Project, Program, S and Portfolio Structures SAP Portfolio and Project Management provides an opportunity to synchronize statuses, attributes, and authorization from initiative to item to PS Project or cProject and vice versa, in the form of vertical and horizontal synchronization. Vertical synchronization happens between initiatives to items and the respective decision points. Horizontal synchronization happens between item and PS Project or cProject and the decision points and the respective cProject phase or WBS elements. Figure 1-8 illustrates vertical and horizontal synchronization. 40 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Initiative cProject Item PS Project Vertical Synchronisation Horizontal Synchronisation Figure 1-8. Vertical vs. horizontal synchronization V ertical Synchronization The following table outlines objects in portfolio management that can be used to synchronize vertically. For these objects, the direction of synchronization can be set for attributes, statuses, and authorizations. Table 1-3 shows the vertical synchronization pairs. Table 1-3. Vertical Synchronization Pairs Portfolio Management Object Portfolio Management Object Initiative Item Initiative Decision Point Item Decision Point Item-Leading vs. Initiative-Leading It is possible to determine whether vertical synchronization is carried out based on changes in the portfolio item (item-leading scenario) or changes in the portfolio initiative (initiative-leading scenarios). In an item-leading scenario, any changes you make in the portfolio initiative are not transferred to the portfolio item. Thus the process is controlled only from the portfolio items. Similarly, in an initiative-leading scenario, changes you make in the portfolio item are not transferred to the portfolio initiative. Thus the process is controlled only from the portfolio initiative. 41 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Most enterprises use initiative-leading more often and rarely use item-leading scenarios, as the relationship between initiatives to item is 1:N. Table 1-4 shows the direction of vertical synchronization based on the field group. Table 1-4. Direction of Vertical Synchronization Based on Field Group Field Group Direction Exceptions Organization Units Initiative ➤ Item Internal Delivery Org. Units Basic Dates Initiative ➤ Item Actual Dates No Synchronization Forecast Dates No Synchronization System Status (Incl. Decision Points)* No Synchronization User Status No Synchronization Program Manager Initiative ➤ Item Project Director (Project Definition Level) No Synchronization Phase Level Manager No Synchronization Capital or Operational Initiative ➤ Item Service Line Initiative ➤ Item Product Line Initiative ➤ Item Other Classifications Initiative ➤ Item *Automation of System Status synchronization from item to initiative to close or complete the initiative can be achieved via enhancement or can be simply left to proactive reporting. H orizontal Synchronization Table 1-5 lists which objects in portfolio management can be synchronized with objects in cProject and PS Project. For these objects, direction of synchronization can be set for attributes, statuses, and authorizations. Table 1-5 shows the horizontal synchronization pairs. 42 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Table 1-5. Horizontal Synchronization Pairs Portfolio Management Object cProject or PS Project Item cProject Project Definition PS Project Definition Item Decision Point cProject Phase PS WBS Element Item-Leading vs. Project-Leading It is possible to determine whether horizontal synchronization is carried out based on changes in the portfolio item (item-leading scenario) or changes in the cProject or PS Project (project-leading scenarios). In an item-leading scenario, any changes you make in PS Project or cProject are not transferred to the portfolio item. Thus, the process is controlled only from the portfolio items. Similarly, in a project-leading scenario, changes you make in the portfolio item are not transferred to PS Project or cProject. Thus, the process is controlled only from PS Project or cProject. Most enterprises use both item-leading and project-leading scenarios at the same time for different attributes. Table 1-6 shows the direction of horizontal synchronization based on the field group. Table 1-6. Direction of Horizontal Synchronization Based on Field Group Field Group Direction Exceptions Organization Units Item ➤ PS Project or cProject Phase WBSE or cProject Phase Basic Dates Item ➤ PS Project or cProject Actual Dates PS Project or cProject ➤ Item Forecast Dates PS Project or cProject ➤ Item System Status PS Project or cProject ➤ Item CRTD or Created Status User Status (Aligned to CRTD, REL, TECO, and CLSD) PS Project or cProject ➤ Item CRTD or Created Status (continued) 43 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Table 1-6. (continued) Field Group Direction Exceptions User Status (to control financial No Synchronization posting: primary or secondary cost) Program Manager Item ➤ PS Project or cProject Project Director (Project Definition Level) Item ➤ PS Project or cProject and Vice Versa Phase Level Manager Item ➤ PS Project or cProject and Vice Versa SAP PPM goes a step further to provide the option to synchronize authorizations that are available in the form of Access Control Lists (ACLs). Depending on the portfolio, program, and project maturity of your enterprise, this option can be explored further. Most enterprises and organizations choose to inherit authorization as is from their superior object, with no changes, and choose to define authorization not by user but at the level of the role. This makes it is easy to maintain access and control over your enterprise. With the flexibility provided by SAP PPM, you can determine if your enterprise requires this kind of flexibility and agility based on your organization’s maturity and business requirements. So far you have learned on how information is exchanged or synchronized between the various submodules of SAP PPM. In the next section, you learn about another important functionality provided by SAP PPM—the prioritization framework. Prioritization Framework SAP Portfolio and Project Management provides questionnaires and scoring for the purpose of prioritizing items and initiatives. Prioritization is performed differently for different industries and project types. Some industries, especially in the public sector, are not only driven by commercial success and technical feasibility, but also by benefit to their citizens. Private industries are driven by commercial success and technical feasibility of these projects and programs. 44 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals A proper prioritization framework has to be devised and agreed-on by enterprise management so that one set of rules can be applied to all the projects and programs being evaluated. Some of the common drivers that can be used for customer work are as follows: 1. Strategic fit a. Alignment to strategic goals, missions, and visions b. Impact on market share c. Impact on competitive advantage 2. Solution validation a. Technical feasibility b. Technical complexity c. Technical risk (resources, on time availability, and quality) d. Safety risk e. Environmental risk 3. Client profile and contract terms a. Company’s credit rating b. Payment terms c. ISO compliance 4. Commercial success a. Financial viability b. Profitability c. Commercial risk (SLA, liquidated damages, and price escalations) Here are some of the common drivers used for investment or productivity improvement internal work: 1. Strategic fit a. Alignment to strategic plan b. Organizational impact 45 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals c. Productivity improvement d. Statutory compliance e. Safety improvement f. Environmental compliance 2. Solution validation a. Technical feasibility b. Technical complexity c. Technical risk (resources, on time availability, and quality) d. Safety risk e. Environmental risk 3. Benefit realization a. Impact on citizens b. Impact on quality of life c. Utilization 4. Commercial success a. Financial viability b. Land acquisition c. Import of goods and services d. ROI - Return of Investment and NPV - Net Present Value Prioritization is a process for comparing portfolio items or initiatives using a scoring model based on quantitative key performance indicators. This enables decision makers to make educated decisions about portfolio items or initiatives. The quantitative scores of a scoring model are retrieved from the portfolio item or initiative attributes or can be filled by results of questionnaires. Based on questionnaires, you can use qualitative criteria to get numerical scores for risk, strategic fit, feasibility, and other types of soft data. Questionnaires are designed with categories, questions, answer ranges, and weights assigned to answers. Figure 1-9 shows a sample questionnaire. The total sum of all the weights of all the questions should equal 100%. 46 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Figure 1-9. Sample questionnaire The administrator selects a scoring model for a particular review. When a scoring model is selected, all the items and initiatives participating in the review will be defaulted with the scoring model. They become part of a set. They are the set whose values are compared to each other to become the score values viewable in the pop-up window. Figure 1-10 shows a sample scoring model. 47 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Figure 1-10. Sample scoring model 48 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Activities for this Chapter 1. For your enterprise, try to define the different organizational units used for project management, such as controlling area, company code, and plant. If possible, try to conceptualize how the profit center, sales area, and purchasing organization units should be defined. ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ 2. For your enterprise, try to define the level at which the portfolio should be created and the bucket structure that suits the portfolio. If there are multiple options, might this be an alternative classification bucket hierarchy? ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ 3. For your enterprise, try to define the project work breakdown structure. Determine whether network activities are required for detailing the project in your enterprise. Decide whether a network is needed to detail the project. 49 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ Test your Learning: 1. What is the type of synchronization adopted between initiatives to item? a. Horizontal synchronization b. Vertical synchronization 2. ____________ and _____________provide the quantitative key performance indicators of Portfolio Item and Initiative. 3. Valued project stock allows you to update the quantity and value at the time goods are issued. a. True b. False 4. _________settlement type should be used to settle residual costs of the previous periods. 5. Activity elements do not have relationships of their own. They get their start and finish date by way of an offset from start or finish date of the activity. a. True b. False 50 Chapter 1 Enterprise Project, Program, and Portfolio Management Fundamentals Answers: 1. Vertical Synchronization 2. Questionnaire and scoring model 3. True 4. Full 5. True Summary In this chapter, you learned about the following fundamentals and how SAP EPPM is structured. • The enterprise and organizational structure that relates to project management in SAP • The Project Work Breakdown Structure (WBS) • • • All its structural objects • What a project is and when it is created Portfolio and program management structures • All its structural objects • What a portfolio is and at what level is a portfolio created Integration of project management with portfolio and program management • Roll up of financials (bottom up) • Transfer of capacity and budget to project management (top down) • Synchronization of attributes, status and authorization between project management applications and program management • Prioritization framework 51 Chapter 1 • Enterprise Project, Program, and Portfolio Management Fundamentals Integration touch points with other SAP modules • Plant Maintenance (PM) • Sales and Distribution (SD) • Material Management (MM) • Production Planning (PP) • Controlling (CO) • Finance (FI) You learn about the SAP EPPM project lifecycle functionalities and business process flows in the next chapter. 52 CHAPTER 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM In this chapter, you learn concepts related to project planning, forecasting, and budgeting, and you learn how planning, forecasting, and budgeting are performed for various industries. The chapter also provides some background on how the SAP PS product has evolved and the reasons for some of the planning, forecasting, and budgeting methods. Enhanced customization fills in the gaps in the standard SAP’s planning, budgeting, and forecasting business process. You also learn about the claims process for managing variation management. Once the variation is approved, you learn how to track and monitor the progress of these variations. Project commentary is used by various industries in different ways. This chapter focuses on project commentary requirements related to public and private sector enterprises. The chapter covers project commentary and its relationship to project Red Amber Green (RAG) status reports, as well as how overall project RAG status can be computed automatically or manually so that the project teams’ view can be reflected. Project procurement and resourcing can be performed discretely or seamlessly with better integration with SAP PS. Depending on the enterprise and how much integration is expected, three options are discussed. © Joseph Alexander Soosaimuthu 2022 J. A. Soosaimuthu, SAP Enterprise Portfolio and Project Management, https://doi.org/10.1007/978-1-4842-7863-5_2 53 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Depending on the charging model applicable to the project, different billing processes (such as resource related billing, milestones, billing plan-based billing, delivery-based, or order-based billing) can be adopted. These different billing processes and their applicability to different industries are discussed in this chapter. In project capitalization, business processes such as project structure, setting up assets under construction, settlement within the project structure, treatment of capex and operational (opex) costs, and partial and final settlement/capitalization are covered in this chapter. Project Planning and Forecasting SAP provides different ways of planning and forecasting and many times during implementation it is difficult to choose one method over another. Therefore, the following section discusses the different planning and forecasting methods. Different Planning and Forecasting Methods Project planning and forecasting can be performed in different ways in SAP PS. Some of the common methods of cost planning include the following: 1. Hierarchy planning, with distributed and distributable cost/ revenue (CJ40/CJ41/CJ42/CJ43/CJR2) With Overall and Annual Planning at WBS element level: A lump sum monetary value planning at the WBSE level and overall or annual level; is not period based. Using Primary Cost and Activity Input at the WBS element and Cost element levels: Primary cost planning is a lump sum monetary value planning at the WBSE level and primary cost element. Activity type planning is a quantity based planning for internal labor; both are period-based planning. 54 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Using unit costing: This is quantity and value based planning at the WBS element and overall or annual levels; it is not period based. It is recorded using a cost element but not reported on cost element in standard reports. Unit costing cannot be performed on integrated planning WBSEs. Integrated planning WBSEs detail the planning information not on the WBSE but on the associated cost center. Unit costing is also available at the network activity and it is covered under network costing. 2. Easy cost planning at the WBSE and Network activity level (CJ20N): It is a quantity and value-based planning at WBSE/ Network activity and cost element level; it is not period based. 3. Network costing (CJ20n) - Planning of quantity and cost based on scheduled dates: It is a quantity and value-based planning at the network activity and cost element level and it is date based. Hence, it can be reported as period based. H ierarchy Planning Hierarchy planning plans at the WBS element, overall (all year) level or on an annual basis. Hierarchy planning can branch into primary cost planning and secondary cost (labor – cost center x activity type) planning with quantities and into unit costing. Unit costing allows you to capture a bill of materials (BoM). Table 2-1 provides a comparison of different planning methods. When planning using hierarchy, planned values can be fully distributed to their subordinate WBS elements or some can be held for further distribution. This is captured in each respective WBS element, as a distributed and distributable plan. Further to planning monetary values across the WBS element hierarchy, monetary values can be planned based on the primary cost/revenue element (in other words, the general ledger account—G/L account). When planning using a primary cost element, project labor costs are not detailed. Therefore, if labor costs have to be split by resource type (activity type) and resource area (cost center), this can be accomplished using activity type planning (also called secondary cost planning). 55 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM For the purpose of planning detailed material costs, SAP provides unit costing, which is similar to the Bill of Material (BoM), where the BoM material can be expanded with additional overhead. Variables, subtotals, and totals can be added by using arithmetic formulas, but still linking these additional lines of planned cost to a cost element. Table 2-1 illustrates the first level comparison of the different hierarchical planning methods. Table 2-1. First Level Comparison of the Different Hierarchical Planning Methods Quantity Value Based Based Hierarchical Planning Cost Element Overall/Annual Object Level Based or Period or Date or NA WBS Hierarchical Planning N/A X N/A Overall/Annual WBSE WBS Hierarchy + Primary Cost/Revenue Planning N/A X X Period WBSE WBS Hierarchy + Activity Type Planning X X X Period WBSE WBS Hierarchy + Unit Costing X X X Overall/Annual WBSE • N/A: Not Applicable • X: Yes Figure 2-1 showcases the hierarchy planning at the WBSE level on an annual basis. You can see the project definition, overall or annual selection, and the WBSE. This is the level of information captured in hierarchical planning. 56 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-1. Hierarchical planning at the WBSE level on an annual basis Figure 2-2 shows planning by primary cost element. The lump sum dollar entered can be distributed by period, based on the distribution key provided or manual distribution can be performed. Figure 2-2 shows the version, periods, fiscal year, WBSE code, currency, and cost element. This is the kind of information captured in primary cost planning. Figure 2-2. Cost planning for a WBSE by primary cost element and then by period breakdown 57 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-3 shows activity input planning, which is based on quantity and value. Activity input planning requires a combination of cost center and activity type, which then allows a cost rate and cost element to be determined. Quantities distribution is automatically performed by the system based on the distribution key provided or manual distribution can be performed by period. In Figure 2-3, you see the version, period, fiscal year, WBS element, sender cost center, sender activity type, quantity, unit of measure (UoM), and cost element being captured. Figure 2-3. Activity input planning for a WBSE and then by period breakdown Figure 2-4 shows the unit costing functionality for WBSE hierarchical planning. In it, you can see the WBS element and list of items that are contained in the unit costing— internal labor, material, external service, arithmetic formulas, totals, quantity, unit price, monetary value, and cost element. 58 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-4. Unit costing for a WBSE (it is not period based but it is overall/ annual based) You have to weigh all of the following before finalizing the planning and forecasting method: • Business requirements related to integration of the schedule, resource, and procurement plan. • Benefits of maintaining and managing detailed planning and forecasting. • Effort and tools needed to maintain detailed planning and forecasting data. • Flexibility and agility for managing changes or variations. The first two items are driven top-down and the last two are driven from bottom-up, meaning project managers and coordinators should not be burdened to maintain details at a too granular level and they should also have the flexibility in the case of overruns and underruns by having easy variation management procedures. 59 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM The matrix in Table 2-2 can be used to choose the right planning and forecasting method for your organization. Table 2-2. Second Level Comparison Based on Detailed Criteria to Choose the Correct Planning Method Criteria Hierarchy Planning Easy Cost Planning (ECP) Network Costing Effort required for planning and Less forecasting Medium High Quantities can be planned or forecasted No* Yes Yes Date/period based planning is possible Yes (only monetary values) No (requires enhancement) Yes Integration with procurement No Yes (Execution Service) Yes Integration with resource management (MRS) No No Yes (MRS add-on is required) Cost element based Yes (Possible with primary and secondary planning) Yes Yes Level of detail At WBSEs only At WBSE and network At network activities only Integration with variation management via claims No No; enhancement possible Standard Benefits Low Medium High *No: Partially yes, in the case of activity type planning (internal labor) and unit costing. Unit costing is similar to ECP. Unit costing has more clicks before quantities can be entered when compared to ECP. 60 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM To choose the right planning and forecasting method, the following questions need to be answered: 1. What is the level at which planning or forecasting should be performed? –– Project level –– Lowest level WBSE –– Lowest level -1 or -2, and so on 2. How detailed should the planning and forecasting be? –– Annual, monthly, or based on dates –– As a lump sum monetary amount or as a detailed schedule of quantities 3. Should planning and forecasting be integrated with scheduling, resource management, and procurement? –– Fully integrated with scheduling, resource management, and procurement. When there is a change in date, labor effort schedule, material schedule, resource availability, in some cases effort has to be changed. 4. Is a change in schedule of supplies (date planning) and resources (capacity leveling and extension) expected as part of project scheduling and capacity planning respectively or do you expect some elements of scheduling and capacity planning as part of the forecast? a. Use SAP PS Cost Forecast: SAP PS allows the determination of estimate to complete (ETC) and estimate at completion (EAC) as part of the cost forecast based on the remaining quantities (work and open quantities of supplies). Managing capacity and date extension/reduction based on the remaining work and duration (without impacting project schedule) is handled separately as part of the capacity leveling and scheduling. Capacity leveling, scheduling, and variation process are prerequisites for the cost forecast (if remaining quantities are changing), but the cost forecast in SAP PS is not dependent 61 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM on capacity leveling, scheduling, or variation if the remaining quantities are unaltered. SAP PS Cost Forecast will not provide a new schedule of supplies (request) and resources (request or demand) for future periods or for the next period, as there is no new distribution/spread performed as part of the cost forecast process. These requests will need leveling with regard to capacity and allocated to the respective resources in workforce planning or capacity allocation (equipment and production resource tool) by resource managers and by procurement manager for external service and materials. b. Use Enhanced Cost Forecasting solution (custom solution): Construction Project Forecast is driven based on quantities and schedules of supplies and resources. Project Forecast provides project managers with a platform to indicate changes in spread/distribution of quantities. If there is a change in quantity due to internal or external variation, this has to be captured as part of the project variation process. The new remaining quantity spread or distribution will help in determining the ETC and then together, with actual, will allow the EAC to be computed. The Project Forecast process involves the management of the schedule of supplies and resources for the future period or for the next period. 5. Is the forecast for the external work, service, and material performed by the quantity of material/service/work being supplied/delivered or is it based on the amount that is required to be paid to the service provider/supplier? a. If a dollar value is chosen, all external work including material and services will be planned by the schedule of monetary value being spent. Only internal work and material will be planned by quantity times the unit rate to determine the monetary amount. In other words, the schedule of supplies and resources are only required for internal work. External work and services are based on the schedule of payment to be performed (invoicing plan). 62 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM b. If a quantity schedule is chosen, both internal and external work and materials will be managed via the quantity schedule of supplies and resources. 6. What is the currency in which planning and forecasting should be performed? a. Transaction, object, and controlling currencies b. Object and controlling currencies Standard SAP PS Capability and its Limitations SAP PS offers a cost forecast workbench that allows you to commute the ETC and EAC for a project. At a project level, it does not provide a schedule of internal work, external work, and material components by period. Standard SAP PS offers a schedule of internal work at the workcenter level but not at the project level. It also does not provide a schedule of external work and material components and these can only be captured at the purchase order level. SAP PS allows the determination of estimate to complete (ETC) and estimate at completion (EAC) as part of the cost forecast. Managing capacity and date extension/ reduction based on the remaining work and duration (without impacting project schedule) is handled separately as part of capacity leveling and scheduling. SAP PS is also heavily reliant on the distribution keys for the automatic distribution and provides less opportunity to perform custom or ad hoc manual distribution without enhancement. Resource managers have to perform capacity leveling, allocation, and workforce planning once the project forecast (request or demand) is finalized. Similarly, procurement managers have to deal with the external service and material by providing a revised schedule of supplies and by working on sourcing options if they are not sourced. Guidelines Related to Planning, Actual, and Forecast The following guidelines provide a framework on what needs to be performed as part of planning, actual, and forecast, so that maximum benefits can be achieved from the system. 63 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Planning and Cost Plan Budget Planning by dates (start, end, or delivery date) is a must for period breakdown of effort and quantities. • Planning internal work with effort by capturing the start and end date of each activity is required. • Planning external work or services with quantities and start, end, and due dates of each activity is required. • Planning material component quantities with reference to an activity with a due date for each material is required. • Capturing distribution profiles for the different types of effort/ quantity allocations is required for automatic allocation. Actuals Actuals with dates (start, end, or delivery date) is a must for period breakdown of actual effort and quantities. • Actuals for internal work with effort, start, and end date for each activity are required. • Actuals for external work or services with quantities, start and end dates, and service/external work receipt dates for each activity are required. • Actuals for material components with quantities and goods receipt dates are required. • Distribution key chosen should be able to capture effort and quantities based on actuals. Forecast Forecasting as a business process encompasses quantity forecasting, cost forecasting, and date/schedule forecasting. • 64 Forecasting requires user decisions for changing end dates, changing activity relationships for scheduling, inclusion of variations, and so on. Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM • Forecasting framework or workbench should propose the remaining quantities or effort and Percentage of Completion (POC), perform automatic distribution of effort and quantities based on the available information, and flag items that require project managers or coordinators’ attention. • The forecast workbench should also replace the previous period planned quantities with actual quantities as part of the distribution key. • If baseline plan vs. actual comparison is required, forecasting should be performed in the current version (version 0) so that updated forecast can be used for integration with procurement (MM) and resource management (MRS). Once the baseline is completed, the baseline information should be snapshotted via PS version for comparison purposes. • Project managers or coordinators should review the schedule/date, quantity, and value forecast before finalizing the same. • Review and approval of variation and automatic scheduling are prerequisite processes to forecasting performed as part of the month end pre-close business process. • Project forecasting process will end in the generation of request/ demand (new/update) for the resource managers and procurement managers to feed on. Resource managers have to perform capacity leveling, allocation, and workforce planning once the project forecast (request or demand) is finalized. Similarly, procurement managers have to deal with the external service and material by providing the revised schedule of supplies and by working on sourcing options if they are not sourced. Network Costing In network costing, all planning objects—such as internal work, in-house material components, external work, external subcontracting, miscellaneous expenses, external services, and external materials—that require detailing and planning are represented as separate activities, activity elements, or material components and can be directly 65 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM influenced by project scheduling, automatic distribution of effort, and quantities by period. Other costs or miscellaneous costs can also be planned as separate cost activities. If cost activities are linked via relationships to the direct project activities, cost planned under the cost activity can also be influenced by scheduling and automatic distribution of cost by period. In the case of SAP PS being interfaced with external project management applications such as MS Project or Oracle Primavera (or any other third-party application via Enterprise Project Connector), a 1:1 interface relationship between the external project application object and the network costing objects such as activity, activity element, and material, provides an easy and elegant integration option between both applications. No information is lost in transit, if 1:1 interface relationship is followed. Any kind of summarization will only result in loss of functionality in SAP PS. The summarization will also result in dual data entry, when some of the procurement and in-house material planning has to be performed in the SAP ERP central component. Any approved variation will create additional activities and material for the project as part of the approval process. These variations in quantities can be monitored throughout their lifecycles, as they appear as individual objects in the project hierarchy and structure. Although network costing is the preferred approach, standard SAP PS provides the network planning framework but still requires some adaptation or enhancement. You can see this as a gap or as open ended for customer-specific requirements. Enhancement Considerations for Network Costing 1. Module pool enhancement performs a project forecast (a place to capture quantity and value forecast for the project). Similar to the project planning board, the project forecast workbench shows all the network activities and material components of the projects in a single workbench. Figure 2-5A shows the wireframe of the project forecast workbench’s planning horizon covering 10-years. 66 • Periodic breakdown for current fiscal year (CFY) and next year (CFY+1) • Quarterly breakdown for Current Fiscal Year +2 to 3 (CFY+2 to CFY+3) • Annual breakdown for Current Fiscal Year + 4 to 9 (CFY+4 to CFY+9) SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-5A. Wireframe of the Project Forecast Workbench’s planning horizon Chapter 2 67 68 Figure 2-5B. Wireframe of the project forecast workbench using network costing Figure 2-5B shows the wireframe of the project forecast workbench using network costing. Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM 2. Enhancement to the distribution keys (determination of remaining quantity and automatic distribution – past and future). Internal work and in-house material: Perform the remaining quantity distribution or allocation based on the planned start (basic) and forecast finish dates (forecast). The distribution key should determine closed month quantity based on the actual quantities and the open months (for each specific item) are used for distributing the remaining work or quantity, taking into consideration the full capacity of the resource (workcenter, person, and equipment), project calendar, work schedule of the individual resource (optional), and so on. Distribution key (D2) performs the quantity distribution or allocation starting from the next open period to the period that belongs to the forecast finish date. If work remains after the automatic distribution or allocation based on the number of days available and the capacity, this residual quantity is captured in the remaining work/quantity field for manual distribution or extension of the forecast finish date, which requires the user’s decision and input. Similarly to the distribution key (D2), there can be other variants of D2 with equal distribution between the remaining open periods (D1). Actual quantity updates for the previous periods should happen irrespective of the network activity, the WBSE, or the project status. 3. Optional enhancement to MRS and production planning (using the quantity forecast for in-house material and labor): Multiresource scheduling integration with SAP PS using the network activity should be enhanced to pick the resource demand from the project forecast. Similarly, in-house material components are required to be delivered based on the project schedule, due to the critical nature of components and due to the erection and commissioning challenges that arise, if all the material components arrive at the site at the same time. Therefore, these material components have to be staggered and this information is held in the schedule of quantities. This information can be passed to the production as part of the main reservation, which can create separate requirements depending on the schedule of 69 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM quantities prepared by the project manager. Alternatively, for inhouse material components that are less complex, reservations triggered from the project will hold the latest delivery date and the production planning should be able to handle the rest. For any other specific scenario or material that has to be delivered in batches, it is prudent to create separate material components, if this enhancement is not performed. 4. Optional enhancement to procurement (using the quantity forecast for external material and service): The delivery schedule of external material components, external work, or services should update the purchase requisition delivery schedule (including project reservations that are converted into purchase requisitions in MD04). When this purchase requisition is converted to a purchase order, the delivery schedule should be captured as part of the purchase order delivery schedule. Once the purchase order is placed, if there are changes to the delivery schedule, these changes can be passed along to the service provider using the new project forecast schedule. Alternate Solution • 70 Using SAP Commercial Project management’s (CPM) analysis office integration with SAP PS, CO, SD, MM, and HR modules, project cost/revenue planning and forecast can be performed. This solution is an alternative to the previous enhanced network costing forecast workbench. Remember, this solution should also leverage the network activity structure and include all the activities, activity elements, and material components for seamless integration with procurement and resource planning, as well as scheduling and capacity leveling. This solution also involves the enhancements related to the distribution key, so that the remaining quantity computation and its distribution based on the distribution key can be achieved. Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM This option only takes away the need for the module pool screen development. In this option, forecasting is performed using analysis office (Excel worksheet with an add-on) instead. • Other solutions, such as ECP or hierarchical planning with SKF for quantity planning, can also be considered for various other needs or due to other constraints related to the existing solution, change impacts, and budget constraints. Do keep the guiding principle as a reference before making any decision and be sure to analyze all the pros and cons. Easy Cost Planning with Planning Form Easy cost planning allows you to perform estimates and forecasts using planning forms. A planning form (costing model) is made up of a collection of questions that must be specified for planning or forecasting based on the CO version. The planning form can be enhanced to have a customer-specific data entry screen that contains control parameters such as planned start and end dates, forecast start and end dates, effort or quantities, time distribution keys, and resource types. By answering a number of questions or by entering values for the characteristics defined in the planning form, it can be translated to a cost estimate based on the derivation rules, the time distribution key, and the calculation formulas stored behind it. The system calculates the required quantities of materials and services from the data entered by the users and determines the prices and rates based on the valuation date/period determined via the time distribution key. The costing result is displayed as a tree in accordance with the costing structure and period determined by the time distribution key. The data entry screen for recording characteristics is generated as a freely designable HTML page, which you can enhance by adding any utilities you want to include for the users. The screen is intuitive and can, for example, be used in the web portal to allow external partners to enter specifications for project materials and services, which are then valuated by the system using the costing models defined. As this method uses a 1 to N relationship between the project structural object and the items costed for the project structural object and because it is independent of project scheduling, it not necessary to plan at the lower-most object such as activity or material component. Rather this planning can be performed on the planning WBSEs, which are again not the lowest level of WBSE. If the planning and execution of the work is 71 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM happening at two different levels (WBSE for planning and execution of work at network activity), this approach will involve duplication of data such as start and end dates, effort, and quantity data. A mapping of the network activity where execution of work happens to the planning WBSE should also exist, so that the actual quantity can be summarized as part of the automatic distribution when the remaining quantity is computed. Constraints • Transferring ECP from an appropriation request to a project or WBS element always occurs in the leading CO version. • You can carry out easy execution services in the leading CO version only. • Sales pricing (created in easy cost planning) always reads the relevant costs from the leading CO version. • If you want to copy the itemization, you must use the Copy Version function in the Edit Costing dialog box in the Project Builder. The following constraints apply copying in other transactions: • The transactions Copy WBS Plan to Plan (Collective/Individual) (CJ9B/CJ9BS) do not copy easy cost planning. • The transaction Copy Project Costing (Collective/Individual) (CJ9F/CJ9FS) copies only the CO’s total records. Enhancement Considerations for Easy Cost Planning (ECP) 1. Easy cost planning enhancement to perform project forecasts: ECP provides a place to capture forecasted quantities. It includes manual redistribution of quantities by period, so each individual item value by period is possible. 2. Enhancement to the time distribution keys (determination of the remaining quantity and automatic distribution – past and future): The system should be able to distribute remaining quantities based on the planned dates provided—equally by period, all in the next open period, or equally by the number of quarters and 72 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM years pending for the item by allocating equal quantities in the last period of the quarter or year. If the project is in progress, actual quantities should be considered for the completed month. 3. Custom report to show plan vs. forecast, ETC and EAC based on the quantities and values planned in ECP: Multiple CO versions should have been enabled for ECP so that estimate (E01), plan, or budget (B01) and forecast (F01) can be captured separately and compared if required. Once the baseline plan (B01) is finalized, the baseline ECP plan should be copied to the forecast version F01 (Use CO Version ‘0’ for forecasting if using execution service for actuals). Then the baseline plan (B01) should be locked. Thereafter only the forecast version (F01) should be used for revaluation and redistribution of the quantities and values. The custom report should be able to fetch quantities and values from versions B01 and F01. Based on the actual quantities consumed until the reference period, the remaining quantities should be computed for each of the items costed using ECP. For each individually costed item, you can then perform remaining quantity x unit price and this will provide the Estimate Cost to Complete (ETC) for the item. Add the ETC to the actual cost to get the Estimated Cost at Completion (EAC) for the item. The sum total of the estimated cost at completion (EAC) for all the items in the project leads to the EAC of the project. In addition to this, plan and actual quantities can be completed for the past period. Similarly, the forecast quantities can be used to prepare resource and procurement schedules and this information can be shared with the resource manager and procurement manager for their detailed planning so that both resources and material are available on time. This activity can only be performed if the project manager reviews the remaining quantities and performs the manual distribution. Unlike network costing, capacity leveling is not part of the automatic distribution. Scheduling the projects does influence the planned start and forecast end dates defined in the planning form. Figure 2-6 shows the wireframe of the project forecast workbench using Easy Cost Planning (ECP). 73 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-6. Wireframe of the project forecast workbench using Easy Cost Planning (ECP) Based on the organization’s project management maturity and adoption levels, the industry, and whether your organization is managing projects as a client or delivering projects as a service provider, the following recommendations are provided. Tables 2-3 and 2-3 show the recommended planning methods for different types of planning, industry sectors, delivery approach (managing or delivering projects), and project management adoption levels (innovators, early adopters, early majority, late majority, and slow adopters). 74 hydro-electric, power station, regional development maturity level) P90 estimates) value) at project managed is smaller) of persons being contracts, number of procurement delivery. volume in the project direct involvement level Estimate (P50, ECP (quantity and (mostly outsourced level value) at project level value) at project ECP (quantity and ECP (quantity and Advertising, Event Management, Machinery –Defense Equipment, Turbines and Pumps, etc.) ECP (Quantity project level Value) at project level and Value) at ECP (Quantity and Media – Ship Building, Heavy etc.) Audit Firms, buildings, etc.) Airplane Assembly, Systems, Wind Farms, Management, home and Property service, Legal, (IT), IT enabled Technology etc.) Projects – Sewer, Commissioning and Erection, gas, electricity, projects) Waste Management Managing projects with minimum Professional Projects (Engineering, Services Other Turnkey water (Infrastructure Design, Procurement (Information gas, electricity and Utilities –telecom, authorities, water, tunnels, airports, offshore oil rig, infrastructure, project management (road, rail, plant, (councils, transport, mining Construction and department of planning adopters, and early Public sector majority (with higher Type of Innovators, early and Project Management Adoption Levels (Innovators, Early Adopters, and Early Majority) (continued) at project level ECP (Quantity and Value) Administrations, etc.) Therapeutic Goods & Drug Administrations, R&D, Pharma R&D, Food Pharmaceutical (Paint Chemical and Table 2-3. Recommended Planning Methods for Different Types of Planning, Industry Sectors, Delivery Approaches (Managing or Delivering Projects) Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM 75 76 value) at WBSE level (Baseline versions or value) at WBSE level. Approved internal and external variation claims should update ECP (quantity and (estimate to complete— ETC) = Remaining cost + Approved and unapproved level. Approved value) at WBSE ECP (quantity and update ECP claims should external variation ECP (Quantity WBSE Level. update ECP claims should variation External Value)* Value)* ECP (Quantity and claims should update Internal and and External variation Approved Approved Internal (Quantity and value)* ECP (Quantity Value) at WBSE Level. and Value) at ECP (Quantity and WBSE Level external) value)* ECP (quantity and (quantity and should update variation claims and external ECP (Quantity and value) at WBSE level Value) at WBSE Level and Value) at Approved internal internal and WBSE level. and value) at ECP (quantity level value) at WBSE ECP (quantity and ECP (quantity and (internal and variation’s cost value)* ECP (quantity and Forecast budget) planned approved ECP (quantity and Planning Table 2-3. (continued) Value)* update ECP (Quantity and variation claims should Internal and External at WBSE Level. Approved ECP (Quantity and Value) at WBSE Level ECP (Quantity and Value) Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM WBSE level – Approved internal and external variation, internal and value). value). external) (internal and variation’s cost unapproved Approved and cost + Remaining level value) at WBSE (quantity and value in reports WBSE level ECP (quantity and ECP (quantity and EAC) = do not update do not update and value) at variation claims variation claims reports (quantity Unapproved Unapproved completion— and value)*. and value)*. (estimate at ECP (quantity ECP (quantity Computed value in Computed should update Forecast variation claims should update variations) and external external scope variation claims Actual cost + Approved internal at WBSE level – Claim management value)*. Unapproved do not update ECP level and value) at WBSE reports (quantity Computed value in (quantity and value) and value)*. Unapproved update ECP (quantity variation claims should Internal and External Computed value in value) update ECP (quantity and Level value) at WBSE (continued) value) at WBSE Level value in reports reports (quantity and Computed and value) ECP (quantity do not update variation claims Unapproved and value)*. ECP (quantity should update variation claims variation claims do not External value) at WBSE Level (quantity and reports (quantity and Computed value in doe not update ECP (quantity and value) variation claims WBSE Level – claims should update Internal and ECP (quantity and Claim Management at Management at WBSE Level – Approved Claim and External variation Approved Approved Internal at WBSE Level – Claim Management value)*. Unapproved variation claims ECP (quantity and should update variation claims Approved internal and external management at WBSE level – Claim unapproved Claim (approved and management at Variations Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM 77 78 (quantity, value, and date) at network activity level (baseline versions or approved planned network activities, network activities, activities, using using forecast workbench. Approved internal and external ETC = Remaining cost + Approved and unapproved Approved internal activities, using date) of network network (quantity, date)* value, and date)* (quantity, value, and date)* network (quantity, create new variation claims should (quantity, value, and Network Costing at project level ECP (quantity and value) (quantity, value, and Remaining work using Forecast activities, of network and date)* (quantity, value, network new variation should create variation claims External Internal and Approved and date)* network (quantity, value, create new variation variation claims should Internal and External workbench. Approved activities, using forecast value, and date) date) of network work (quantity, Remaining and date) (quantity, value, date) Costing Network project level and External variation Workbench. Approved Internal (quantity, value, and value, and date)* new variation variation network external) variation network should create new variation claims should create new should create variation claims and external Remaining work date) forecast workbench. forecast workbench. Approved internal and external workbench. using forecast date) of network (internal and variation’s cost variation claims and date) of complete— managed is large) and date) of Network Costing (quantity, value, and (quantity, value, and (quantity, value, (quantity, value, Remaining work Remaining work date) ECP (quantity value) at project level and value) at ECP (quantity and (quantity, value, and (quantity, value, and Network costing (estimate to Remaining work and date) (quantity, value, Network costing level value) at project Forecast budget) Network costing Planning level value) at project ECP (quantity and ECP (quantity and of persons being contracts, number procurement Volume of or subcontractors. Main contractors the project delivery. direct involvement in level P90 estimates) value) at project (Mostly delivered in-house with higher Estimate (P50, ECP (quantity and Delivering projects Table 2-3. (continued) Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM and external variation claims internal and (quantity, value, and date) (quantity, value, and date) *Enhancement required external) (internal and variation’s cost unapproved + Approved and Remaining cost Actual cost + EAC) = and date) (quantity, value, value in reports value, and date) new networks new networks reports (quantity, do not create do not create completion— variation claims variation claims (estimate at Unapproved Unapproved Computed value in Computed and date)*. and date)*. Forecast (quantity, value, (quantity, value, date)*. Unapproved (quantity, value, and variation network claims should create value, and Date) reports (quantity, Computed value in value, and date) network (quantity, do not create new variation claims date)*. Unapproved value, and date) reports (quantity, Computed value in value, and date) network (quantity, do not create new Claim Management – variation claims do not and date)*. Unapproved network (quantity, value, should create variation (quantity, value, and Computed value in and date) (quantity, value, and date) value in reports reports (quantity, value, Computed and date) (quantity, value, new network do not create variation claims Unapproved and date)*. (quantity, value, date) network create variation create new network claims should variation External Internal and External variation claims Management – Approved Internal and and External variation Approved Approved Internal Claim Management – Claim (quantity, value, and variation claims variation network variation network should create should create variation network variations) variation claims and External management – external scope should create variation claims variation, both and external Approved internal Approved internal Approved Internal Claim management – Claim unapproved Claim (approved and management – Variations Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM 79 80 Regional maturity level) Gas, Electricity, etc.) Authorities, Water, Development Infrastructure, management Buildings, etc.) Airports, Home and Station, tunnels, Hydro-electric, Power offshore Oil Rig, (Road, Rail, Plant, Department of Construction and (Councils, Transport, Mining Public Sector (with lower project Type of Planning slow adopters Late majority and Projects Other Turnkey Projects) Therapeutic Goods Legal, Property Advertising, Event Management, etc.) Management Pumps, etc.) Turbines and Equipment, –defense Machinery Building, Heavy Assembly, Ship Farms, Airplane Systems, Wind Firms, Media – Sewer, Waste Management, Audit Administrations, etc.) Administrations, R&D, Food and Drug (Paint R&D, Pharma Pharmaceutical Chemical and enabled service, Technology (IT), IT (Information Services Professional Projects – Commissioning and Erection, Procurement Design, Water (Infrastructure (Engineering, Gas, Electricity and Utilities –Telecom, and Project Management Adoption Levels (Late Majority and Slow Adopters) Table 2-4. Recommended Planning Methods for Different Types of Planning, Industry Sector, Delivery Approach (Managing or Delivering Projects) Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM planning using SKF (Using standard (Using standard functionality but both are not interconnected, giving flexibility to project managers). in the project delivery. Volume of procurement contracts, number of persons being managed is small) (Using standard functionality planning using SKF (Using standard functionality but both are not interconnected, giving flexibility to project managers). (value); Quantity (Using standard functionality but both are not interconnected, giving flexibility to approved planned budget) planning using SKF project managers). giving flexibility to interconnected, but both are not planning using SKF (value); Quantity cost element (CE) planning using WBSE cost planning using SKF (CE) (value); Quantity using cost element WBSE cost planning managers). to project giving flexibility interconnected, but both are not functionality (Using standard using SKF planning using (value); Quantity planning using SKF (CE) (value); Quantity using cost element WBSE cost planning project managers). giving flexibility to interconnected, but both are not functionality managers). to project giving flexibility interconnected, but both are not functionality (Using standard using SKF project managers). giving flexibility to interconnected, but both are not functionality (Using standard (continued) project managers). giving flexibility to interconnected, but both are not functionality Quantity planning planning using SKF (Using standard (CE) (value); cost element (CE) planning using WBSE cost project managers). giving flexibility to interconnected, but both are not functionality (Using standard Quantity planning planning using SKF (Using standard (CE) (value); (CE) (value); Quantity (CE) (value); Quantity cost element using cost element cost element (CE) versions or using cost element planning using (baseline project managers). planning using WBSE cost planning WBSE cost WBSE cost project managers). giving flexibility to interconnected, but both are not functionality (Using standard planning using SKF Planning WBSE cost planning project managers). giving flexibility to interconnected, but both are not functionality planning using SKF involvement using cost element WBSE cost planning WBSE cost (CE) (value); Quantity (CE) (value); Quantity cost element (value); Quantity using cost element WBSE cost planning cost element (CE) planning using WBSE cost minimum direct P90 Estimates) projects (mostly outsourced with Estimate (P50, Managing Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM 81 82 cost element (CE) (value); Quantity planning using SKF (Using standard (Using standard functionality but both are not interconnected, giving flexibility to to complete (ETC) = Remaining cost + Approved and unapproved Variation’s cost (Internal and External)) using cost element planning using WBSE cost Planning WBSE cost variation claims to update WBSE CE value and WBSE SKF value and WBSE SKF and external quantity and External variation claims to update WBSE CE value and WBSE SKF quantity and external and external Approved Internal quantity update WBSE CE and external Approved internal project managers). giving flexibility to interconnected, but both are not functionality (Using standard quantity WBSE SKF CE value and to update WBSE variation claims SKF quantity value and WBSE update WBSE CE Approved internal variation claims to managers). to project giving flexibility Approved internal interconnected, but both are not functionality (Using standard using SKF project managers). variation claims to (value); Quantity cost element (CE) planning using WBSE cost planning using SKF (CE) (value); Quantity using cost element WBSE cost planning WBSE SKF quantity WBSE CE value and claims to update and external variation Approved internal project managers). giving flexibility to interconnected, but both are not functionality Quantity planning planning using SKF (Using standard (CE) (value); project managers). giving flexibility to interconnected, but both are not functionality (Using standard planning using SKF project managers). Approved internal giving flexibility to interconnected, but both are not functionality planning using SKF (CE) (value); Quantity (CE) (value); Quantity cost element using cost element planning using (Estimate WBSE cost planning WBSE cost Forecast Table 2-4. (continued) Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM management – Approved internal and external variation claims to update WBSE CE value and WBSE (Approved and Unapproved Variation – both internal and external scope variations) reports (Estimate at external)) (internal and Variation’s cost and unapproved cost + Approved Remaining cost + (EAC) = Actual Completion Computed value in Forecast SKF quantity Claim Variations variation claims to and external Approved internal management – reports Computed value in quantity reports Computed value in quantity management – Claim to update WBSE variation claims and external in reports Computed value quantity WBSE SKF reports Computed value in SKF quantity value and WBSE update WBSE CE variation claims to and external Approved internal Approved internal management – Claim value and WBSE SKF CE value and value and WBSE SKF update WBSE CE update WBSE CE variation claims to and external Approved internal Claim management – Claim reports (continued) Computed value in WBSE SKF quantity WBSE CE value and claims to update and external variation Approved internal Claim management – Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM 83 84 Planning Approved ECP (quantity and value)* Variation’s cost (internal and external)) should update and unapproved should update ECP variation claims and external should update variation claims and external value)* value)* ECP (quantity and ECP (quantity and (quantity and value)* (quantity and value)* should update should update ECP variation claims variation claims and value). ECP (quantity managed is large) cost + Approved and value). ECP (Quantity value) variation claims value). Approved ECP (Quantity and value) ECP (quantity and ECP (quantity and value) internal and external internal and external Approved internal Approved Internal value). Approved ECP (quantity and value) ECP (quantity and value) ECP (quantity and ECP (quantity and and external and value). ECP (quantity value) ECP (quantity and value) ECP (quantity and Approved internal (estimate to Forecast Value) value) ECP (quantity and contracts, number complete (ETC) of persons being = Remaining procurement Volume of or subcontractors. Planned Budget) Main contractors involvement in the (Baseline project delivery – Versions or higher direct ECP (Quantity and value) P90 estimates) (Mostly delivered in-house with ECP (quantity and Delivering projects Estimate (P50, Table 2-4. (continued) (quantity and value)* should update ECP variation claims internal and external value). Approved ECP (quantity and value) ECP (quantity and value) ECP (quantity and Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM claims do not update value)*. Unapproved and value)*. ECP (quantity and value) variation claims should update ECP (quantity and value)*. Unapproved variation claims external scope variations) reports (quantity (Estimate At *Enhancement required. external)) (internal and Variation’s cost and unapproved cost + Approved + Remaining = Actual cost Completion (EAC) and value) Computed value in Forecast (quantity and value) do not update ECP Unapproved variation ECP (quantity and and External internal and variation claims and External Computed value in value) value) management – Claim do not update ECP variation claims Unapproved and value)*. ECP (quantity should update variation claims and External Computed value) value) (quantity and and value) reports (quantity Computed value in ECP (quantity and (quantity and value) do not update variation claims Unapproved ECP (quantity should update variation claims and External Approved Internal Approved Internal reports (quantity and reports (quantity and value in reports Computed value in (quantity and value) do not update ECP variation claims (quantity and value)*. should update should update ECP variation claims Approved Internal management – Variation - both and External management – Approved Internal Approved Internal management – unapproved Claim (approved and Claim management – Claim Claim Variations value) reports (quantity and Computed value in (quantity and value) do not update ECP variation claims value)*. Unapproved ECP (quantity and claims should update and External variation Approved Internal Claim management – Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM 85 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Note Recommended methods of estimating, planning, and forecasting, and variation are interrelated and go hand in hand with other types of planning, so that comparison of estimates, planning/planned budgets, and forecasts can be achieved. Definitions: • Estimate to complete (ETC) is a forecast of how much more money will be needed to complete the project. • Estimate at completion (EAC) is the forecasted cost to deliver the whole project, as the project progresses. • P50 is the project cost with sufficient contingency to provide 50% likelihood that this cost would not be exceeded. • P90 cost is the Project cost with sufficient contingency to provide 90% likelihood that this cost will not be exceeded. Project Budgeting Project budgeting in SAP PS is not based on quantity but on the lump sum value of the WBS element. It is also not based on cost element. This determines the tolerance control based on the cumulative values. Tolerance control can be set to 95% for a warning and 100% for an error, depending on the enterprise’s requirements. Before this, the enterprise has to assess its project management process maturity. This tolerance check is a hard stop when raising a purchase requisition, a purchase order, a timesheet transfer to project, FI journals, goods receipts, and goods issues. The tolerance control limit and its availability control can put a hold on actual posting and commitments until the budget supplement or budget release is provisioned. Project budgeting is not at the level of cost elements and budgeting can be performed at an overall level (cumulative for all years) or at an annual level. Period level budgeting involves a lot of governance and administration. Therefore this functionality is not available as part of budget control.If period level budgeting is required, one of the project CO versions can be used for budgeting purposes. There won’t be any control but reporting can be done using the CO version. 86 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM It is always good to start with warnings for all kinds of tolerance checks. Once all the processes and next steps are well understood and with proper change communication, changing a tolerance check to an error is the next step. The following SAP Project budgeting customization options are available: • Overall or annual budget • Release or current budget SAP Project budgeting provides the following functionalities: 1. Availability control 2. Tolerance control Limit 3. Distributable and distributed budget 4. Budget return 5. Budget supplement 6. Budget transfer 7. Year End – budget carry forward Overall vs. Annual Budget Using Overall Budget, the budget availability control and tolerance control limit is applicable to the overall WBSE budget value. Here, overall signifies the sum total of all annual values for the WBS element and should also be entered as an overall budget value for the WBS element. The annual budget is the budget entered for the WBS element each year. The availability control and tolerance control limit are no longer at the overall budget but are based on the annual budget values for the respective year for the WBS element. If there are left over budgets for a previous year, the budget has to be carried forward to the next year (until current fiscal year), if not the leftover budget cannot be used. Figure 2-7 shows the Budget Profile configuration settings for different project budgeting parameters. 87 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-7. Budget Profile configuration setting for different project budgeting parameters Release vs. Current Budget With the current budget, any budget amount entered into annual or overall is considered allocated and approved for the scope of the work being performed. The full amount allocated is also approved for the execution of the work. There is no concept of partial approval in the case of the current budget. Table 2-5 provides an example of a current overall and annual budget. In this example, project work is to design, procure, erect, and commission 12 concrete volute pumps at a major dam in Australia. The overall budget for this project is AUD 450 million and the annual budget for FY2021 is AUD 335 million. These amounts are fully 88 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM allocated and approved for the execution of the work. For the enterprise managing this project, this budget is allocated and approved for execution of the project work by the vendor or service provider delivering this project. There is no real need for the managing enterprise to assess the progress and approve further funding, as it is a lump sum or turnkey project. Table 2-5. Concrete Volute Pump Project Showing Its Current Overall and Annual Budget Project Structure Current Overall Budget Amount in AUD Current Annual Budget Amount in AUD for FY 2021 C-00001 (concrete volute pumps) 450,000,000.00 335,000,000.00 C-00001.PIPN (piping work) 75,000,000.00 75,000,000.00 C-00001.ELEC (electrical work) 75,000,000.00 50,000,000.00 C-00001.CIVL (civil work) 250,000,000.00 200,000,000.00 C-00001.INST (instrumentation) 50,000,000.00 10,000,000.00 With a release budget, any budget value entered into annual or overall is considered allocated but not yet approved for the scope of the work being performed. Only when the budget is released (T.Code CJ32), is the released amount considered approved for the execution of the work. When using a release budget, the release budget need not be the full budget amount that has been allocated. A management team wanting to assess the progress of the project before approving further money should opt for release budget. In the following example, the project work is to design, procure, erect, and commission 12 concrete volute pumps at a major dam in Australia. The service provider has taken this project on a lump sum turnkey basis. State of the art technology is being used in the project, so the service provider wants to monitor its cost and has a contingency of 20%. The service provider has a margin of 30% of the price mentioned in Table 2-5 for the managing enterprise. The resultant value is captured in the current budget with an overall value as AUD 315 million and an annual budget as AUD 234.5 million for FY 2021. The service provider enterprise wants to have 20% contingency, so the resultant value is captured as the released budget with an overall value as AUD 252 million and an annual budget as AUD 187.6 million for FY 2021. The project team has to manage its turnkey project expenses and commitments, which includes labor, material, 89 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM plant and equipment, IT, royalty, and so on within the released budget amounts. If the availability control is at the annual level, their total expense and commitment is checked for tolerance against an annual released budget for the respective WBSEs. If the availability control is at the overall level, their total expense and commitment is checked for tolerance against overall released budget for the respective WBSEs. Table 2-6 provides examples of the current overall and annual budget. Table 2-7 provides an example of the released overall and annual budget for the same project. Table 2-6. Current Overall and Annual Budget for the Turnkey Project Project Structure Current Overall Budget Amount in AUD Current Budget Amount in AUD for FY 2021 C-00001 (concrete volute pumps) 315,000,000.00 234,500,000.00 C-00001.PIPN (piping work) 52,500,000.00 52,500,000.00 C-00001.ELEC (electrical work) 52,500,000.00 35,000,000.00 C-00001.CIVL (civil work) 175,000,000.00 140,000,000.00 C-00001.INST (instrumentation) 35,000,000.00 7,000,000.00 Table 2-7. Released Overall and Annual Budget for the Turnkey Project Project Structure Released Overall Budget Amount in AUD Released Annual Budget Amount in AUD for FY 2021 C-00001 (concrete volute pumps) 252,000,000.00 187,600,000.00 C-00001.PIPN (piping work) 42,000,000.00 42,000,000.00 C-00001.ELEC (electrical work) 42,000,000.00 28,000,000.00 C-00001.CIVL (civil work) 140,000,000.00 112,000,000.00 C-00001.INST (instrumentation) 28,000,000.00 5,600,000.00 SAP Project Budgeting Fundamentals SAP Project budgeting provides the functionalities covered in the following sections. 90 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Availability Control The availability control is a mechanism to check if there is budget availability for further project expense and commitment. The availability control can be configured in the system to check against released or current budget. The availability control is initiated by the SAP system at the following places: 1. When actual costs are posted to WBSEs or its network or its network activity—timesheet transfer to accounting, travel and expenses, FI journal, Vendor posting, actual overhead, allocation, assessment and distribution cycles, reposting, activity allocation, goods receipt and issue, and vendor payment with differences and settlement from maintenance orders. 2. When commitments are created against WBSEs or their network or their network activity—purchase requisition, purchase order, and funds commitment. 3. When orders are created that have a setting to update assigned values for their respective account assigned WBSEs or their network or their network activity—network and network activities, maintenance orders, internal orders, production orders, process orders, accrual orders, and so on Availability control by SAP does the following: it checks the value of the transaction being performed and the remaining budget values of the WBSE and tolerance limit setting for the project. Based on these parameters, the availability control issues a warning or error message to the user performing the transaction. If the budget availability is configured to check against the released budget (Transaction Code CJ32), then the system will use the posting WBSE or derive the WBSE associated with the posting network or network activity to check if the transaction posting will overrun the budget tolerance limit set under the configuration. If the tolerance limit is violated, the system issues a warning or error depending on the tolerance limit configuration. Similarly, if the budget availability is configured to check against the current budget (Transaction Code CJ30), the system will use the posting WBSE or derive the WBSE associated with the posting network or network activity to check if the transaction 91 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM posting will overrun the budget tolerance limit set under the configuration. If the tolerance limit is violated, the system issues a warning or error depending on the tolerance limit configuration. For both released and current budget, the availability check can further be configured to check for an overall or annual budget. The overall budget is the budget value for all fiscal years put together, whereas the annual budget is the budget value for a specific fiscal year. What is the formula that availability control uses to check the remaining budget value of a WBSE? • Remaining Budget Value = WBSE Budget Value* - WBSE Assigned Value *WBSE’s Distributable release/current or overall/annual budget value • WBSE Assigned Value = {WBSE and its network** open PR commitment that are not converted to PO + WBSE and its network** open PO commitment (for the open quantities) + WBS’s open network** plan values (excludes open PR/PO value for PR/PO created via the network** and already posted actual which were planned via the network **) + WBSE actual cost (costs that are already posted directly on WBSE)} **network and network activity Table 2-8 shows how assigned values and remaining budget values are computed for a WBSE. 92 112,000,000.00 ➔C-00001.CIVL (civil work) 10,840,000.00 28,000,000.00 ➔C-00001.ELEC (electrical work) 10000002 Detailed Planning network for civil work for AUD 111.5 million – N 42,000,000.00 ➔C-00001.PIPN (piping work) 0.00 187,600,000.00 C-00001 (concrete volute pumps) Open PR Commitment Assigned Value Open PO Open Network Actual Commitment Plan Values Posting 10000001 Prem. planning network for civil work for AUD 112 million Released Annual Budget Amount in AUD for FY 2021 Project Structure Table 2-8. Assigned Values and Remaining Budget Values Computation for Project/WBSE (continued) 111,500,000(55,000,000+ 15,000,000+ 10,000,000+ 20,000,000+ 100,000+560,000) =10,840,000 = N-(A+B+C+D+E). Preliminary planning network is not considered for the assigned values Comments Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM 93 94 PR2 of value AUD 16 million (converted to PO1 of value AUD 15 million and no service has been rendered) – B PR1 (open and not converted to PO) –A Project Structure Released Annual Budget Amount in AUD for FY 2021 Table 2-8. (continued) 55,000,000.00 Open PR Commitment 15,000,000.00 Assigned Value Open PO Open Network Actual Commitment Plan Values Posting Network Activity purchase requisition (PR) and purchase order (PO). Although PR commitment is for AUD 16m and the subsequent PO document is created for AUD 15m, the latest value for that piece of work is AUD 15m Network activity purchase requisition (PR) Comments Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM 560,000.00 Other overhead via costing sheet and overhead key planned via network 10000002) – E (continued) Design work was planned as network internal activity and T&E was planned as network general cost activity 20,000,000.00 Network activity purchase requisition (PR) and purchase order (PO) 100,000.00 10,000,000.00 Other labor timesheet and T&E expense (planned via network 10000002) – D PR3 (converted to PO2 of value AUD 30 million and partial service (AUD worth 20 million has been rendered) –C Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM 95 96 112,000,000.00 = 112,000,000.00 – 111,800,000.00 = 200,000.00 (200K AUD) for WBSE C-00001.CIVL 5,600,000.00 -------Total by budget vs. assigned value----------- --------Remaining value for the WBSE -------------------- ➔C-00001.INST (instrumentation) 111,800,000.00 20,960,000.00 55,000,000.00 25,000,000.00 10,840,000.00 112,000,000.00 ---------Total-------- Open PR Commitment Assigned Value Open PO Open Network Actual Commitment Plan Values Posting 300,000.00 Released Annual Budget Amount in AUD for FY 2021 Other unplanned expenses and overhead allocations actual postings performed directly on the WBSEs Project Structure Table 2-8. (continued) These costs were not planned and hence have to be accounted for, separate from the network Comments Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM These transactions are useful when working with availability control: • CJBN: Transaction to reconstruct availability control for projects • CJBW: Transaction to deactivate availability control for projects Tolerance Control Limit Availability control by SAP does the following: it checks the value of the transaction being performed and the remaining budget values of the WBSE and tolerance limit setting for the project. Based on these parameters, the availability control issues a warning or error message to the user performing the transaction. Tolerance limit is used to define the budget availability control tolerance. This setting allows you to define the kind of system response when the transaction value, together with the current WBSE’s assigned values, is more than the allocated or approved budget value for the WBSE. The system response is defined as a percentage of the budget value and is reported as an error or warning message. The system response can be defined by excluding certain types of cost (cost elements) and transaction types. This way, enterprises don’t have to wait if they choose to do workaround postings on the excluded cost element until the budget supplements or additional budgets are released or allocated. Figure 2-8 shows the different control parameters for the tolerance limit. 97 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-8. Tolerance limit control parameters for the project availability control check It is better to set the tolerance limit to warning with an email to the person responsible for those enterprises that do not have a robust planning, budgeting, and forecasting business processes, so that this does not stop the business process from proceeding with actual cost posting transactions and does not create temporary blocks in assembly lines, construction sites, and so on. Distributable and Distributed Budget SAP PS uses a hierarchy of WBSE elements that are linked to their superior WBSEs and to their subordinate WBS elements. While budgets are allocated to a superior WBS element, it is possible that a full or partial budget amount can be fully or partially distributed to its subordinate WBS elements, leaving no budget for allocation at the superior WBS element for direct posting in the case of fully distributed budget or partial budget for allocation at the superior WBS element level in the case of a partial distributed budget. 98 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM In a fully distributed budget scenario of a superior WBS element, the distributable budget for further allocation is zero. In the following example, the superior WBS elements (C.00001 and C.00001.0#) have no distributable budget to further allocate. The lowest level subordinates (C.00001.0#.0#) have the full budget amount as a distributable budget. If a budget tolerance limit is set to error at 100%, no actuals and no commitments or network/activity can be posted or assigned to the superior WBSEs. Actual postings and commitments/network/activity assignations are possible only to the lowest WBS elements. Figure 2-9 shows the distributable and distributed budget values for a fully distributed project budget scenario. The budget value in Figure 2-9 can be interpreted as overall/annual or current/release budget amounts, depending on the availability control check system setting for the enterprise. Figure 2-9. Distributable and distributed budget values for a fully distributed project budget scenario In the case of a partially distributed budget scenario of a superior WBS element, the distributable budget is the residual budget amount available at the superior WBS element after distributing partial budget amounts to all its subordinate WBS elements. 99 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM In a partially distributed budget scenario of a superior WBS element, the distributable budget is the difference between the budget amount and minus the distributed budget amount of the respective WBS element. The distributed amount is computed by adding the budget values of the subordinate WBSEs. In the following example, the superior WBS elements (C.00001 and C.00001.0#) have a distributable budget to further allocate. The lowest-level subordinates (C.00001.0#.0#) have the full budget amount as a distributable budget. Actual postings and commitments/ network/activity assignments are possible not only to the lowest WBS elements but also to the superior WBS elements, as all the WBS elements in the project hierarchy have distributable budgets. Figure 2-10 shows the distributable and distributed budget values for a partially distributed project budget scenario. The budget value in Figure 2-10 can be interpreted as overall/annual or current/release budget amounts, depending on the availability control check system setting for the enterprise. Figure 2-10. Distributable and distributed budget values for a partially distributed project budget scenario 100 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Budget Updates In this section, you learn about budget updates—supplements, returns, and transfers (within projects and from other project scenarios). Budget Return The SAP Budget return transaction codes CJ35 and CJ38 allow you to return the budget and reduce the current budget amount. Budget return can be performed for annual or overall budgets, depending on where the budget amount was entered—annually or both (annual and overall)—and on where the availability control check is defined for the project. Budget returns can be performed in two ways, as follows. Budget Return In Project (CJ38) As the name signifies, this transaction is used to return a budget from a lower level WBSE to a higher level within the project hierarchy. Budget return is performed bottom-up in the project, from a lower-level WBS element to the next one level up and so on until reaching the top-level WBS element. The budget return amount cannot be more than the remaining budget amount for the respective WBS element in controlling area currency. The remaining budget amount in controlling area currency = current distributable budget amount in controlling area currency*(CDB) for the WBSE C.00001.01 – Assigned Values** (AV-O) for the WBSE C.00001.01 in controlling area currency. Where • Current Budget Value for WBSE C.00001.01 (A) = Original budget + supplements + transfer in – transfer out – returns for the WBSE • Current Budget Value for C.00001.01’s subordinate WBSEs (C.00001.01.01 and ”.01 .02) (B) = Original budget + supplements + transfer in – transfer out – returns for the WBSEs *CDB is the Current Distributable Budget value for WBSE C.00001.01 = A – B **AV-O is Assigned Values (Optional) and is considered in the formula only if availability control is activated 101 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM The system determines the remaining amount in the Controlling area and object currency, including budget line items that were entered in different currencies. The system compares the returned budget and remaining budget amounts in the controlling area currency before processing the transaction. Figures 2-11 and 2-12 show the budget return in a project transaction. Figure 2-11. Budget return in a project before capturing the budget return Figure 2-12. Budget return in a project while performing budget return of 200K for C.00001.02.01 and after performing the total up Budget Return From Project (CJ35) Budget return is submitted on a WBS element directly from the project. The hierarchical distribution of the budget return is performed by the system, unlike the previous transaction, where it has to be entered by the user. You submit the remaining budget on a WBS element from the project. The system then updates the returns within the project, meaning that the total budget is reduced accordingly. 102 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-13 shows the screenshot of the budget return from a project transaction. Figure 2-13. Budget return from a project Budget Supplement If the current budget is not sufficient, it can be increased by creating a budget update document called a budget supplement. The system enables you to perform budget supplement in two different ways or with two different transactions. 103 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Budget Supplement In Project (CJ37) Budget supplements in project (within projects) are performed top-down, from a higher level WBS element to the one below it. The budget supplement value on a WBS element can only be equal to the remaining budget value contained in the higher level. The remaining budget value is the difference between the distributable and assigned values, as explained in budget returns. The system determines these values in the Controlling area currency or object currency and includes budget line items that were entered in different currencies. Figures 2-14 and 2-15 show how a 50k supplement formed for WBSE C.00001.01.02 by withdrawing 50K out of 400K distributable budget for WBSE C.00001.01 Figure 2-14. Budget values before performing the budget supplement Figure 2-15. Budget value while performing the budget supplement with no total up (total up not to be performed before a save, otherwise it is the scenario of an external budget) 104 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Budget Supplement to Project (CJ36) Budget supplements to projects are performed when there is an external budget boost or an increase from outside of the project. This is independent of the remaining budget on the higher level. The system updates the supplemented budget on the WBS hierarchy bottom up. Figure 2-16 shows a supplement to a project using Transaction Code CJ36. If more than one currency is used for budgeting, the system always translates a supplement with the current exchange rate into the controlling area currency or object currency. If the exchange rate for the supplement is different from what it was when you entered the original budget, the new current budget is determined using an average rate. The availability check and negative current budget are always performed using controlling area currency. Figure 2-16. Project supplement to a project (CJ36) transaction screen 105 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Budget Transfer Budget Transfer enables you to transfer a budget from one surplus project to another deficit project if it’s being managed under the same management control. Budget transfer can also be performed from a subtree of a project (Subtree A) that has budget surplus to another subtree of the same project (Subtree B) that has a budget deficit, as long as it’s being managed under the same management control. Prerequisites • The currency used for the budget transfer must be permitted by both the sender and the receiver WBSE if the transfer is happening between projects or between subtrees of the same project. • The sender and the recipient WBSEs cannot belong to the same subtree. In Figure 2-17, C.00001.01 and C.00001.01.01 or C.00001.02 are of the same subtree, whereas C.00001.01 and C.00001.02 are of different subtrees. The subtree for the purpose of budget transfer is a hierarchical tree with the sender or receiver WBSE as the top node. Figure 2-17. Project hierarchy with two subtrees—A and B 106 Chapter 2 • SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Budget transfers can be performed if the WBSE’s status allows the business transactions shown in Figure 2-18. Figure 2-18. WBSE status business processes that are linked to budget transfers 107 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-19 shows WBSE status business processes that are linked to all budget updates. Figure 2-19. WBSE status business processes that are linked to all budget updates 108 Chapter 2 • • SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM The sender WBS elements must have a status that permits one of the following business transactions. • Budget Transfer Sender: If the WBS element has a status that allows this business transaction, then the WBS element can send the budget during a transfer. • Budget Transfer (Transfer): If the WBS element has a status that allows this business transaction, then the WBS element can send and receive budget during a transfer. The recipient WBS elements must have a status that permits one of the following business transactions. • Budget Transfer Recipient: If the WBS element has a status that allows this business transaction, the WBS element can receive the budget during a transfer. • Budget Transfer (Transfer): If the WBS element has a status that allows this business transaction, the WBS element can send and receive the budget during a transfer. Procedure • The procedure for budget transfer is the same as supplement for a project or return from a project, except that you specify a sender or recipient WBS element (or year). • The system also maps transfers between objects of lower hierarchy levels to the objects on higher hierarchy levels. • The following actions can be performed using budget transfer: • Transfers between different WBS elements in the same year. • Transfers between different WBS elements in different years • Transfers between different WBS elements at overall/total level • Transfers between the same WBS element in different years (also recourse or carry forward) 109 Chapter 2 • SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-20 shows a budget transfer between different WBSEs of the same project at an overall level. Figure 2-20. Budget transfer between different WBSEs of the same project at overall level • 110 If budgeting is performed using object currency, the system only includes budget line items in the relevant object currency for the entered budget amount. Transfers performed in other currencies are not displayed as entered values in objects from higher hierarchy levels. The system includes all budget items in the current budget. Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM The following budget values are entered in a project structure plan with two subtrees with different object currencies. You now make a transfer between two WBS elements of the lowest hierarchy level— AUD 130K from WBS element C.00001.01.01 to WBS element C.00001.02.01. The WBS elements C.00001.01 and C.00001.02 have the object currency USD. The transferred AUD 130k is displayed in the line item report. The entered value of WBS element C.00001.01 is still 1M USD and the entered value of WBS element C.00001.02 is still 2M USD, as the system only includes budget items entered in USD. The budget values in the project structure are shown in Figures 2-21 and 2-22. Figure 2-21 shows the project before the budget transfer and Figure 2-22 shows the project after the budget transfer. Figure 2-21. Budget values in a project structure with two subtrees and different object currencies before a budget transfer is performed. Exchange rate is AUD/ USD =0.75 111 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-22. Budget values in a project structure with two subtrees and with different object currencies after a budget transfer (different exchange rate at the time of transfer AUD/USD = 0.78) • To display the budget line items for a WBS element, use transaction code CJI8. Year End Budget Carry Forward The budget carry forward feature enables you to carry forward unused budget from a project to the next fiscal year. Budget carried forward to the next year can also be posted to the previous year in certain circumstances. The unused carry forward budget is defined as the difference between the current budget and the incurred actual costs. It does not include commitments and planned cost. The unused budget for a WBS element is calculated as follows: Annual budget - Distributed value - Actual costs 112 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM The actual costs comprise the cost of the budget-bearing WBS element, and the actual costs of all the assigned orders, networks, and network activities, plus the actual costs for WBS elements subordinate to it without the budget. However, actual costs determined in this way are only included if the amount is greater than zero. Revenues and commitments are not included in the calculation. Unlike availability control, the planned costs for apportioned orders and networks are not included in the carry forward calculation either. Credits from settlements are only included if the relevant WBS element (or order, network, or network activity) was settled to another order, WBS element, network, or network activity (elimination of internal business). The system includes actual costs for exempt cost elements (which are defined in customizing for availability control), if you choose activation type 1 (automatic activation for budget allocation),or 2 (background activation) in the budget profile. If the calculated value is negative, the program checks whether there has already been a carry forward run. If so, it carries the existing carry forward amount back to the previous year (same amount as the calculated value). This means that only the budget already carried forward is retrieved. Newly allocated budget amounts cannot be transferred in this way, so “true” negative budget carry forwards are not possible. Prerequisites Commitments Commitments are not taken into account when the unused budget is calculated. Therefore carry forward commitment is needed before carry forward of unused budget is performed. Commitment carry forward can be performed from the following navigation path: Logistics or Accounting ➤ Project System ➤ Financials ➤ Year-End Closing ➤ CJCF ➤ Carry Forward Commitment Selection Variant and Carry Forward Re-Run As part of the year end close, unused budgets are carried forward generally by project or project interval. To do this, selection variants are required. Selection variants are used to specify which projects are to be selected and included in the carry forward run. If unused budget carry forward is performed more than once because the corresponding WBS elements were locked, each time budgets are carried forward, only the unused budget that was not included in the previous runs is considered. 113 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM If for some reason after a carry forward is performed, the follow-up actual postings were posted in the current year, the system posts back the budget that was carried forward to the next year, when the carry forward was re-run. WBSE Status that Allow Carry Forward Budget carry forward can be performed when the WBSE status is created, released, or technically completed. Budget carry forward is not possible for closed WBSs or those that have a deletion flag. Availability Control Check and Negative Carry Forward Carry forward cannot be performed for negative unused budget into the following year. There is no availability control during a budget carry forward. Budget Carry Forward Currencies The budget is carried forward on the basis of the values in the controlling area currency (provided that it is the budgeting currency in the budget profile or that a freely defined transaction currency is permitted as the budgeting currency and the Object Currency as Default indicator is not set). The budget is carried forward on the basis of the values in the object currency (provided that it is the budgeting currency in the budget profile or that a freely defined transaction currency is permitted as the budgeting currency and the object currency as default indicator is set). The system also carries forward budget-line items that were entered in different currencies. Transaction CJCO: Budget Carry Forward Transaction CJCO is used to carry unused budget from a closed fiscal year forward to the next year. Carry budget forward can be performed more than one at a time. Each run carries forward the differences between this run and the last. Projects are selected using the logical database in the Project System. Dynamic selections can be used to limit the selection criteria as appropriate. For technical reasons, the database profile is prescribed and cannot be changed. 114 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Output: If the program finds errors, it displays an error log. No values are carried forward for WBS elements with errors. The program can also display a detailed list, showing the following for each WBS element with a budget (in the sender or receiver year): 1. Carry forward 2. Budget 3. Distributed budget 4. Calculated actual value 5. Amounts already carried forward to the receiver year Example: Table 2-9 shows the values entered for a WBS element. Table 2-9. Budget Carry Forward for WBSE Working Example Date Actions Performed Amount in USD 01.08.2020 Original annual budget for WBSE A (2020) 1250.00 31.08.2020 Actual posted on WBSE A 200.00 31.08.2020 Distributed budget to lower WBSE A.1 500.00 01.09.2020 Annual budget carry forward from 2020 to 2021 for WBSE A 250.00 01.09.2020 Current annual budget for WBSE A (2020) available budget 1000.00 300.00 30.09.2020 Actual posted on assigned plant maintenance order – account assigned to WBSE A 400.00 30.09.2020 Perform carry forward budget again from 2020 to 2021 for WBSE A -100.00 After the carry forward of budget from 2020 to 2021 performed on 30.09.2020, the following are the budget values for WBSE A: • Current budget in 2020 for WBSE A = 1100 USD • Available budget for WBSE A in 2020 = 0 USD 115 Chapter 2 • SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Current budget in 2021 for WBSE A = 150 USD • Available budget for WBSE A in 2021 = 150 USD (250-100 USD) Useful Transactions in Budgeting • CJBN: Transaction to Reconstruct Availability Control for Projects • CJBW: Transaction to Deactivate Availability Control for Projects • CJBV: Transaction to Activate Availability Control for Projects • CJ30/31: Original Budget – Change/Display • CJ32/33: Release Budget - Change/Display • CJ35/38: Budget Return – From Project/In Project • CJ36/37: Budget Supplement – To Project/In Project • CJ34: Budget Transfer • CJI8: Budget Line Items • CJ3B: Display Budget Document • S_ALR_87013558: Budget/Actual/Commitment/Rem Plan/Assigned • S_ALR_87013557: Budget/Actual/Variance • S_ALR_87013559: Budget/Distributed/Plan/Distributed • S_ALR_87013561: Availability Control • S_ALR_87013560: Budget Updates Project Variation Management Project variation is a common concept in project management. It is considered one of the major uncertainties that project managers need to monitor and deal with. Project variations are used to capture external and internal variations related to scope, time, cost, and quality. 116 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Project external variation can be due to a change in scope or design initiated by the client/customer or by the vendor/service provider. Project internal variation can be due to inadequate or incorrect detailing of the site condition or due to incorrect design or quality issues. This requires additional effort and duration (time), resources (labor and material), change in performance levels (quality), and cost (monetary value). In SAP PS, the claim management process supports project variation management. The following business process can be adopted to capture internal and external variation claims, as shown in Figure 2-23. Figure 2-23. Project variation process for internal and external variation/change Figure 2-24 shows the information captured in project variation at the time of creation of an external claim. The figure shows the different tabs, such as Subject, Assignment, Costs, Tasks, Activities, and Document Management System (DMS). Refer to the “Subject” tab, which provides details such as the name/description of the variation, the cause/reason for the variation, subject, priority, and dates. 117 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-24. Project variation, Subject tab Figure 2-25 shows the assignment details, assignment of the variation to a project/ WBSE in the case of internal and external variations, and sales document/client PO number reference, in the case of client/customer relevant external claims. It also provides the ability to capture a purchasing document, if it is a claim raised against a vendor/service provider. You can also capture useful information such as the responsible person and the coordinator of the claim. Claim also allows you to capture contact information (client/customer/vendor/service provider contact person information). 118 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-25. Project variation, Assignment tab Figure 2-26 shows the cost estimate for the project variation. On this tab, the cost estimate relevant to the project variation is captured in the form of labor, service, material, and variable items. An external claim for an information technology project is raised when additional scope is requested to be delivered. 119 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-26. Project Variation. Costs tab Tasks that are required to be performed are captured on the Task tab. A task allows you to plan the cooperation of various persons during the variation process and ensures that the activities connected to the task are completed within a given timeframe. And the activities associated with the task are captured in the Activities tab. The task receives a status depending on its degree of completion. Changes to project variation are documented in the action log. You can use the action log to track: • Which data or statuses were changed for selected fields • Who made the changes • When the changes were made Any relevant document can be attached to the Document Management System (DMS) tab for future reference. 120 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Project RAG Status Commentary SAP PS provides the ability to capture textual comment in the form of name, description, long text, PS text, and documents via the Document Management System (DMS) at the master data (portfolio, bucket, initiative, item, PS Project or cProject, and so on). It can also do this when the transaction data (sales document, variation, estimate, plan, budget, forecast, and so on) are created in PPM and PS. Textual comments are used to record the following: 1. Business rationale for the project attribute change 2. Business reason for a value or date or document entered (variation – scope or internal) 3. To provide a quick status summary of a topic or heading based on key figures, such as actual vs. budget or plan, actual vs. plan dates, actual vs. plan effort and quantities, risk, issues and change/ variation management, and so on. SAP PPM and CPM provide other capabilities to automatically determine Red, Amber, and Green (RAG) traffic light status on topics such as financials, schedules, and resources (staffing) as part of PPM Dashboard and CPM Project Workspace. This is also part of the individual object header overview (refer to SPRO ➤ Define Object Header and Portfolio Structure Graphic Attributes). SAP BI provides a commentary application solution that works based on BW reports and the comments can be captured at different levels, such as BW report, key figures, or detail/line level. This solution also has different roles such as reader, editor, reviewer, period admin, and administrator, and it uses standard authorization. This solution can be period based and it also has workflow, comment status (new, release and approved), change log, commentary templates, and formatting (to enhance and highlight key items among other) capabilities. Use the following link or keywords to search the SAP BI BO commentary solution or the SAP BI commentary application. Link 121 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM The following commentary management solution was put in place in one of the major Australian public sector enterprise to overcome solution complexity challenges. The enterprise had simple business requirements but wanted to rapidly prototype a solution in SAP so that their enterprise-wide SAP portfolio and project management was not being compromised to other discrete (not enterprise-wide) Excel-based tools. This enterprise had the following requirements: 1. To capture commentary at the project, item, initiative, bucket, and portfolio level, based on five main headings that can be different for different objects. 2. To capture Red Amber Green (RAG) traffic based on the user’s decision. 3. Solution to be period based so that comments entered for each period can be compared with the previous or past period. 4. Report should automatically show latest comments based on the time line reference selected and this will allow project managers not to repeat commentary if there are no changes to the commentary for a particular topic or heading. 5. Operation report for reviewing and amending the commentary captured. 6. BW report with all key figures included for c-level reporting. 7. Period locking or roll over of period by company code. 8. Standard authorization and roles. 9. Ability to review previous comments before capturing the current period’s comment. 10. Ease of use, mass upload, and reporting. 122 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM In addition to this, other enterprises wanted the following: 1. Automatically determine RAG status based on risk, issues, change/variations, and key figures such as baseline plan, budget, actual, forecast quantity (staff and other metrics), and value (monetary value). 2. Automatic aggregation of comments from project/item, initiative, bucket hierarchy, and portfolio. 3. Status management for the commentary review and approval (new, for review, approved, and approved with revision). 4. Workflow approval based on the status of the RAG commentary for the different objects. 5. This concept to be invoked in other screens where master data changes are being invoked, variations documented, risk and issues are documented, forecasts are being performed, and so on for any other forms of commentary solution other than RAG status reporting. The solution shown in Figure 2-27 uses a standard text solution—the text type and text ID and a screen module pool enhancement to capture commentary and RAG status. Screen enhancement uses standard function modules such as READ_TEXT and WRITE_ TEXT to address business needs. 123 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-27. Wireframe of project commentary management solution for RAG status reporting Project Risk, Issue, and Change Request Registers In this section, you learn about risks, issues, and change requests. You also learn how these three components are interconnected and how they can be captured in SAP EPPM. Figure 2-28 illustrates the relationship between the three components at a high 124 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM level before proceeding to discuss each topic. Figure 2-28 shows that, during the project lifecycle, risks that are identified can end up as project issues if the risk mitigation is not possible. This is when risks can eventuate to project issues. Figure 2-28. Project risk, issue, and change management lifecycle There are multiple scenarios for project issues: • There are many instances when project issues are identified for which there is no risk captured in the system. • It is also possible that one risk can lead to multiple issues or multiple risks can lead to one issue. Similarly, during the issue management lifecycle, resolution of the project issue could involve additional work or scope increase for the project team or for external stakeholders such as the client or service provider or another interdependent project. All the business scenarios are covered in SAP CPM’s Project Risk Management and Project Issue and Change Management submodules within SAP EPPM. Project Risk Management is used to address risks that occur in the area of project management. The risk management application of SAP Commercial Project Management allows you to identify, analyze, and respond to risks across the lifecycle 125 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM of a project, contributing to the final goal of achieving project objectives. Project Risk Management allows you to create, edit, analyze, and review system entries of risks on the Risk Register screen. Risk Matrix is used to analyze the details of the impact and probability of risks within a master project. While creating and defining a risk impact, define impact-specific values. For instance, when the cost impact is greater than 5%, the impact is considered as a high impact. The matrix reflects the number of risks corresponding to a specific impact and probability. Figure 2-29 shows the Risk Impact and Probability Matrix in SAP CPM. Figure 2-29. Risk Impact and Probability Matrix in SAP CPM Project Issues and Change Management (PICM) is used to identify project issues and to evaluate and prioritize based on priority, delay (work, duration, dependency with other activities), estimated monetary value, impact to the overall project scope, quality, safety, and environmental impact. In SAP CPM, issues have to be tagged to a master project irrespective of where the issues are created. SAP CPM’s PICM allows you to identify responsible persons and other relevant business partners for these issues. 126 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM It also allows you to create activities to these assigned partners, so that next steps related to the issue can be progressed. Based on the progress and status update of these activities, more accurate details can be obtained for informed decision making. The lifecycle of project issues is managed using the issue status and progress made on the various activities linked to it. During the Issue Management lifecycle, if it is decided to create a change (variation) request to overcome the issue (defect, bug, quality, safety, environment issue, and so on), a similar process to identify, document, evaluate, and prioritize the change request will be performed in the SAP CPM PICM submodule. For a project change request, financial planning can be used to capture the details of the change request in the form of alternative cost estimates. The same can be transferred to the operational project for further execution. Figure 2-30 shows the features and functionalities available in the SAP CPM PICM submodule and its integration with project cost and revenue planning. Figure 2-30. Features and functionalities in SAP CPM PICM 127 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-31 shows the SAP app tile for a Project Issue and Change Request. Figure 2-31. SAP Fiori app tile for SAP CPM (including PICM) Figure 2-32 shows the graphical representation of the project issue and change request and its underlying data. Figure 2-32. PICM graphical presentation and tabular view 128 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figures 2-33 and 2-34 show the project issue and change request detail screens. Figure 2-33. Reporting a project issue via PICM Figure 2-34. Project change request detailed view Check out this useful link about the commercial project management issue and change request by a good friend, Ramandeep Goyal (SAP): Link 129 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Project Procurement and Project Execution When easy cost planning is used for planning costs in a project/WBS/network activity, execution services can be used to trigger the following subsequent processes: • Purchase requisitions • Purchase orders • Reservations • Goods issues • Backflush confirmations • Internal activity allocation with or without a workflow To initiate these activities, the system utilizes the planned cost estimate data created as part of easy cost planning. Execution services leverage application components such as Purchasing (MM-PUR), Inventory Management (MM-IM), Cost Center Accounting (CO-OM-CCA), Activity-Based Costing (CO-OM-ABC), and SAP Business Workflow. P rerequisites Execution services work only in the leading CO version when alternate ECP versions have been configured. Figure 2-35 shows a chevron diagram of baseline planning to change request to execution service. Figure 2-35. Process flow diagram from baseline planning to change request to execution service 130 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Choose the leading ECP CO version to perform the execution services and then choose Show Execution Screen. The execution services screen is shown in Figure 2-36. Figure 2-36. Execution service screen in Project Builder Different actions of “execution services,” such as the following, are offered and are possible for the object planned: • Reservation • Purchase Requisition • Purchase Order • Goods Issue • Backflush confirmation Before selecting an execution service, it is possible to obtain an overview of all the existing purchase requisitions, purchase orders, and so on for the costing items that have been created through the Execution Service. Click the costing item in the Costing . Structure screen area and choose document flow button The items relevant to the execution service should be selected to the trigger execution service. You can also change the items by entering a different quantity (if needed). 131 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM By using document overview button , you can also display a document overview for the execution service and the object in question, enabling you to avoid a double posting. Once a posting is made using the execution service in the system, choose refresh in the document overview to display the document posted. button Network Planning and Execution Network planning allows you to plan activities, activity elements, and material components based on the dates, relationships, and constraints provided. These scheduled dates can be used for executing the following: 132 • Timesheet (CAT2 for Timesheet; CATSXT for Service Provider Timesheet; CATS_APPR_LITE - Approve Working Times; CAT5 – Timesheet Transfer to PS; CATM – Timesheet Transfer to MM-SRV External Service; CATA – Timesheet Transfer to all Components including HR) • Activity Confirmation (CJ20n – To perform activity confirmation and WBSE confirmation of Dates, CN25 – Activity Confirmation, CN29 – Reverse or Cancel, CN28 – Display Confirmation) • Activity Allocation (KB21n – Controlling Activity Allocation of cost) • Reservation (CJ20n – To create a reservation; MR21/22/23 – Create, Change, and Display Reservation) • Purchase Requisition (CJ20n – To create a purchase requisition; ME51n/52n/53n – Create, Change and Display of Purchase Requisition) • Purchase Order (ME21n/22n/23n – Create, Change, and Display Purchase Order) • Goods Receipt (MIRO – Good Receipt) • Goods Issue (MIRO – Goods Issue) • Service Entry (ML81n/82n/83n – Create, Change, and Display service entry sheet) Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM • Service Acceptance (ML82n/83N – Enter and Display Service Acceptance) • Invoice Verification (MIRO – Invoice Verification) • Material Movement (MB1B – Transfer Posting; MB1A- Goods Issue; MB1C – Goods Receipt) Note Some of these transactions may not be available in the latest version of S/4 HANA. All network planning and other execution activities can be integrated with other applications such Material Management (MM), Material Management – External Service (MM-SRV), Human Resource (HR), Cross Application Timesheet (CATS), Controlling (Activity Allocation and Controlling Documents), and Finance (FI Accounting Document, Profit Center Document and Asset Accounting Document). Project Resource Planning Project resourcing allows you to perform workforce planning and any other capacity leveling within SAP PS. Workforce planning, capacity leveling and scheduling are performed multiple times (iteratively) along with forecast updates by scheduler, project manager and resource managers, in order to finalise the project forecast, so that new requests and demands can be created or updated for the forcasted future period/s. Within SAP EPPM, SAP Project Systems and Project Management (PPM Project) provide two different ways of performing project resource and workforce planning. 133 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM In SAP PS, when an internal activity is created and updated with details such as work, workcenter, and execution factor, capacity requirements are generated based on the network profile setting and workcenter settings. Figure 2-37 shows an internal network activity, where work and workcenter information has been captured by the user. The other information are the default values from the network profile. When the project is saved, it creates capacity requirements. Figure 2-37. Project internal activity entry screen with workcenter and effort details 134 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-38 shows the network profile settings that generate capacity requirements when the network is saved. Figure 2-38. Network profile with flag switched on to generate capacity requirements at save Figure 2-39 shows the workcenter setting related to the capacity and its link to HR. Using the HRMS link, people can be assigned to the workcenter capacity or to the workcenter. The figure shows the assignment of persons to the labor capacity. 135 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-39. Workcenter capacity header and assignment to HRMS details 136 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM These requested capacities or demands can be evaluated and planned or leveled using the project planning board. Leveling would allow peaks and troughs to be ironed out, so that demand is not more than the available capacity for the planning horizon. Due to project specific requirements, if the demand cannot be redistributed, then additional capacities have to be hired or transferred from other workcenters/ departments, if possible. The capacity leveling functionality can be performed not only for human resources but also for other plant and equipment capacities. In the case of human resources, project assignments can be performed at network activities by performing the person assignment and defining the required qualifications and capacity category to which the required qualification applies. Figure 2-40 shows the qualification for the internal network activity has been defined for the labor capacity category. Figure 2-40. Required qualification details for the network internal activity Once requirements are generated if the workcenter has labor capacity assigned, then the Person Assignment tab appears so that the project manager or project lead can perform a person assignment in the network activity. Figure 2-41 shows a person assignment at network activity, where persons from the workcenter can be listed and selected to perform work on this network activity. If other personnel from other workcenters or workplace are required, the “Only from w/p” flag has to be ticked in order to select personnel from other workplaces. 137 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-41. Person assignment at network activity If a project manager or workcenter manager wants to perform workforce planning for a list of projects and networks or using a list of workcenters they are responsible for, it can be performed using workforce planning. Workforce planning allows the project manager and workcenter manager to plan within a planning horizon. Figure 2-42 shows the workforce planning profile, which provides details such as planning periods, how information should be displayed, and exceptions for work distribution and resource load. It also determines if resources can be assigned from other workplaces. 138 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-42. Workforce planning profile for project and project management workcenter categories Figure 2-43 shows workforce planning being performed at the project or network level. 139 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-43. Project view of workforce planning and person assignment by ranking individuals 140 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-44 shows a screenshot of workforce planning performed at the workcenter level. In the figure, the workcenter manager can look at all the capacity requirements or demands for their workcenter. Then, based on the person assigned to the workcenter, they will try to fulfill the demand. If that’s not possible, they can search for personnel assigned to other HR organizational units. Figure 2-44. Workcenter view of workforce planning For professional service companies that perform workforce planning and fulfilment with the help of a resource management team, the PPM Project Management solution (cProjects) will suit them better. Figure 2-45 shows the process flow associated with the resource request and its fulfilment. Once the project is set up in PPM Project 141 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Management with all its details such phases and tasks, the project role and its details such as required qualification, effort or work, and start and end date will be captured by the project manager. These resource requests will now be available to the resource manager once endorsed and approved by the project manager. The resource manager can perform resource searches and the system proposes suitable resources for the role based on the required qualification. The resource manager can then initiate staffing processes for the suitable process resources. Staffing processes include soft booking or hard booking. Soft booking allows project managers and resource managers to book a resource until a final decision from the client or client project manager is received. Once confirmation from the client is received, the resource is hard-booked or staffed to the project task and role. The resource request can be closed and the project resource can start booking the time to the project task or role. Figure 2-45. Workforce planning process flow for professional service industry 142 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-46 shows the PPM project definition and its delivery phase details. Figure 2-46. PPM project definition and its phases Figure 2-47 shows the PPM Project Role with details such as dates, work (total demand, soft booked component, hard booked component, and confirmations so far), and a description of the role. Figure 2-47. PPM project role detailed view 143 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-48 shows details of the project role’s qualification requirement, which can be picked from the HR qualification catalog. A resource search will be performed by the resource manager using this role’s qualification profile. Figure 2-48. Required qualification for the project manager role Figure 2-49 shows the staffing performed for a project role. This figure shows the total demand for the project manager role and how the demand has been fulfilled by the project manager resource (Julian) over a period of the role (Sep to Dec, 2022). Figure 2-49. Staffing overview: project manager role staffing details 144 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-50 shows the detailed view of the project role once staffing is completed. The project manager still has the opportunity to indicate that the resource is soft booked until confirmation is received from the client side. The resource Julian has 512 hours of availability as against the project effort requirement of 200 hours during the same period. Julian still has a remaining availability of 312 hours during this period, which can be allocated to another project by the resource manager. Figure 2-50. Project role detailed view after staffing is completed P roject Billing In this section of this chapter, you learn about the different project billing methods, depending on the charging model. You also learn about intercompany billing (to bill goods and services provided to other companies within your enterprise). Project billing can be categorized into the following groups. 145 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Progress or Milestone Based Billing Project milestones can be invoiced to the client or customer depending on the percentage of completion (POC) of the milestone accomplished using milestone billing. This type of billing is used in construction, professional services (IT, engineering consultancy, and so on), and turnkey projects. Milestones for a piping-related construction project can be site mobilization, delivery of pumps/pipes/valves, construction of pumping station, erection of pipe in Zone1 (canal to pumping station) and Zone 2 (pumping station to smelter plant), final pressure testing, and handover. These milestones can be captured as WBS elements or activity milestones. If these are captured as activity milestones, with the change in schedule, the milestone dates also get changed without the need to manually update them. These milestones can be cross-referenced in the sales document and therefore inherit the invoicing percentage from the project milestone. Depending on how the sales document has been created, one line item for each milestone or one line item for different actual percentage of completion of the respective milestone, the invoice percentage value will differ. In the case of the latter, the invoice percentage will always be 100%; this model is used for construction projects that have flexibility in the milestone or progress based billing. Sometimes partial billing can be negotiated with the client based on the progress achieved so far, which would necessitate splitting of the current milestone, so that current actual progress (POC) can be invoiced for an amount that corresponds to the progress achieved for the billing milestone. For example, Erection of pipe (Zone 1 and 2: total of 10 KM) is one the billing milestones with a value of 20 million AUD. Current progress as of 31st Jan 2021 is 4 KM. Milestone billing was agreed to be performed previously at 5 KM (10 million AUD) and 10 KM (10 million USD). Based on the negotiated milestone billing plan, it has been agreed to have milestone billing performed at 4 KM (8 million AUD), 8 KM (8 million AUD), and 10 KM (4 million USD). Corresponding updates have to be performed to the sales document and milestone to initiate partial billing on the milestone achieved so far. Once the project WBSE or network activity milestone reaches the desired actual completion (Actual POC), it can be confirmed in SAP PS. This then removes the billing block for the sale document line item, thereby allowing this item to be picked in the billing due list to be processed by the central billing team or the respective billing team within your business unit. 146 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM In SAP SD and PS, the invoice percentage holds two decimals, so it is prudent to choose the latter approach, where the invoice percentage is 100 and the invoice amount is entered based on the following billing schedule. If the down payment process is not applicable, there is more control in billing the correct invoice amount. Figure 2-51 shows the original milestone billing plan and the revised milestone billing plan due to in situ condition changes and progress made so far. Figure 2-51. Original and revised milestone billing plan due to in situ condition changes Resource Related Billing (RRB) Another important billing method is resource related billing. It is used for billing based on work performed by the actual resource (human resource) working in your project. This billing method is used to recover cost (cost transfer) or bill with margin (cost plus margin). You can also bill based on rate card for services, time, output, outcome, value created, time, expense, and associated materials delivered. It’s also provided as part of information technology (IT), media, other consultancy services (legal, engineering, architectural, and so on), business process outsourcing (BPO), and professional service work or projects. Key characteristics are captured while human resources work in the project. Work here refers to timesheets (time recording), travel, and expenses, statistical key figures, material receipts, service confirmations, activity confirmations, cost allocation, and finance journals. Key characteristics are cost elements, activity types, materials, and statistical key figure. SAP PS has a dynamic line item processing capability, based on 147 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM which these key characteristics can be summarized, grouped, and represented as billable or cost transfer or cost plus item in a sales document called a billing request (it is a sales order). This sales document has the ability to pick different billing rates based on volume, location, billing dates, customer, service, resource type, material, expense type, and so on. SAP provides expenditure and sales price view to postpone, block, and allow items to be further processed for billing. As the name denotes, the expenditure view shows costs associated with the work performed in a structure similar to the billing request line item with quantities, cost rates, and values for each of the postings lines when further expanded. In the sale price, billing information, sales material determined to be shown in the billing request, summarized quantities, billing rate, conditions applicable to the service or material delivered are shown with a structure that of the billing request. These billing documents can be edited using the billing request editor to update with regard to quantity and price being billed. Additional items can be added or created on the billing request. Additional texts can be maintained and billable items can still be moved back to Work In Progress for later billing if it is not clear. Similar to the billing to the end customer, the dynamic line item processing uses additional details to identify intercompany posting (plan and actual) like the cost center associated with the employee or resource type (activity type) of time recording and expense. The system compare the company code linked to the resource cost centre and the company code of the receiver WBSE or network activity and identifies intercompany posting. These posting lines are then picked for intercompany billing by the respective resources’ cost center organization. The customer is the company code of the project WBSE or network activity who is receiving the services. Resource Related Dynamic Item Processor is a functionality that is used for billing but can also be used for the purpose of creating quotations for any future work. In this case, the plan or estimation that was prepared to deliver the goods and services is used by the dynamic line item processor to create line items in the quotation. Most enterprises keep the information in the quotation (number of line items in the quotation) to a high level (preferably single digit) so that not too much information is shared, but at the same time relevant details that customers will be looking for are shared. 148 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-52 shows the configuration related to the Dynamic Line Item Processor (DIP profile) that’s used for the purpose of converting actual or planned posting details or characteristics such as activity type, cost element, material, service master, statistical key figure, or object (WBSE or network activity), where the actual or planning has happened into billable lines in the billing request. The details are summarized and shown as line items in the billing request using DIP parameters like relevant characteristics, material determination, and structuring. Figure 2-52. Dynamic line item processor (DIP profile) 149 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM P eriodic Billing Projects that involve annual maintenance contracts where periodic billing is required can be accomplished by using SAP SD contracts with a billing plan referencing the SAP PS WBS element. In this scenario, the project billing is expected to happen on a periodic basis—weekly, monthly, quarterly, and annually—with a requirement to have billing performed on a particular day of the month for a defined cycle start and end date. Depending on the sales material captured in the contract and the contract document type, an item category is determined. This item category determines if a billing plan is relevant and if it’s allowed, what the billing plan type is, the date category, and the billing rule to be used in the billing plan. Figure 2-53 shows the control parameter for periodic-, progress-, and delivery-based billing. In the case of periodic billing, the system will determine the billing date based on the billing plan and date category. It will allow the billing block to be removed when the billing date is in the past. The central billing team or your respective business unit billing team can process the billing due list so that the end customer is billed for the service delivered between the start and end date of the period. The billed amount will be an equal installment of the total contract line item amount for the contract period. 150 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-53. Control parameter for periodic-, progress-, and delivery-based billing 151 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Project Delivery-Based Billing In industries like aerospace, shipbuilding, heavy machinery such as pumps, turbines, elevators, defense equipment, boilers, energy sector equipment, and so on, engineer-to-order (ETO) scenarios are common. Product enterprise provides the engineering capability and the customer works with the product enterprise on the design, manufacturing, and assembly of the product. When the project work starts, the product enterprise is provided with high-level requirements, which the product enterprise picks as the base. They then work out the details based on norms and standards to come up with a design specification that is agreeable to the customer. There is a considerable amount of engineering that goes into the process before the design is finalized. In the process flow diagram shown in Figure 2-54, you can see that the quotation (proposal) put forward by the product company has been accepted by the customer. Based on the acceptance, the sales order is created for the engineering and design work and erection and commissioning work. These parts of the project, where the specialists are involved, are being charged to the customer based on milestone billing. The finalized engineering product will be billed based on the project delivery once the in-house production and assembly is completed and delivered from the project. In the following example, once the vertical turbine (VT) pump manufacturing company receives a project order from the public sector power corporation, a project is created with a detailed project WBS and network activities related to engineering design, production, assembly, erection, commissioning, performance testing, and handover to the client. The sales team will work with the customer to agree on the billing milestone for the ETO project work. Based on the agreed billing schedule, a down payment request will be sent to the customer, in this case 10% of the project value. This down payment will be progressively adjusted when future milestone and project delivery-based billing are performed. In the meantime, the project manager and coordinator will progress the engineering and design so that production can start as early as possible. The product to be delivered to the customer is added to the project as a material component so as to plan long lead time items from vendors and in-house production. For better planning and design, the finished product VT pump’s Bill of Material (BoM) will be created as a WBS element Bill of Material (BoM). Based on the evolving BoM, preliminary procurement planning activities such as purchase requisitions and reservations for in-house material components for long lead items will be initiated by the project or procurement 152 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM coordinator. In ETO scenarios, vendors, production planners, and procurement coordinators collaborate to finalize the engineering and design. In this case, the VT pump manufacturing company, along with its vendors, will engineer and design the various aspects of the VT pump, such as water head, water salinity, water quality, metallurgy, controls, and so on, to finalize the production version of the BoM. Once the engineering design is finalized, based on the milestone confirmation, progress or milestone-based billing will be performed, as detailed earlier in this chapter. Design finalization would trigger release of the production phase WBS element (WBSE) and closure of the design phase WBSE. Once the production phase has commenced, the latest version of the Bill of Material and its specifications will be converted to the final production version. This final production version is used as the basis for procurement and in-house production. All the advance procurement planning activities, such as purchase requisition, will be converted to purchase orders and reservations into planned order and then to production order. Store managers will receive long lead time items and other semi-finished goods into the project stock and other raw materials into the plant stock for consumption. These material components are issued to the production order’s reservations by the store manager based on the production plan. Once finished and all the goods and operations related to the VT pumps have been issued, performed, and assembled, the final product (VT pump) can be confirmed against the original reservation. The final product is now available under the project stock to be delivered from the project. The project coordinator will perform the delivery from the project, which the store or shipping manager will take as reference for delivery information purposes and then perform picking, packing, and post goods issue. The cost of goods sold will be posted to the SAP PS project WBSE or network activity. This outbound project delivery document will be used to invoice the customer. Other project activities and milestones (related to goods receipt at the customer’s construction site, erection, commissioning, performance testing, and handover) will be captured as activity confirmation, time recording, and milestone actual date confirmation. Progress related milestones will be used for the purpose of reporting and other billing milestones will be used for the purpose of milestone based billing. The project phases WBSE—such as engineering and design, production, erection, commissioning and performance testing, and handover—will be progressively released and then closed as work progresses from one phase to another, until project closure. 153 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Note: In the case of complex ETO projects where delivery of the semi-finished assemblies happen to the construction site for erection and commissioning and in some cases to other client’s vendor location for further assembly and fabrication, the delivery information is captured by the project coordinator at various levels of the project hierarchy. The most specific delivery information is picked by the system while creating delivery from the project. If the delivery information is different at different levels of the project hierarchy, multiple delivery documents are created based on the delivery information held at the subordinate object level for the respective material components, when delivery from the project is performed at a higher-level object of the project hierarchy. Figure 2-54 shows the delivered-based billing for an engineer-to-order scenario. 154 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-54. Delivered based billing for an engineer-to-order scenario Chapter 2 155 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM There are other forms of delivery-based billing that are adopted using SAP PS for the purpose of an assembly-to-order (ATO) scenario. Assembly-to-order is used by product manufacturing enterprises to deliver finished products by assembling subassemblies or variants. Assembly-to-order business processes are adopted when there is a requirement to produce products that are repeatedly ordered with limited variations (similar constellations). The variants are modular in nature and can be assembled and delivered, provided the assembly line technician can get all the different subassemblies. In assembly-to-order (ATO) business processes, design, purchasing, fabrication, or production of the modules is performed based on sales forecasts, historic data, and predictive analytics. Therefore the subassemblies that are widely used should be available. Otherwise, stock for non critical subassemblies or components can be replenished in a reasonable timeframe. If the variant is too specific or unique, the customer order has to use the made-to-order (MTO) scenario, where the components related to the customer order are produced, assembled, and delivered to the customer. In the following example, one of the leading pump manufacturing companies delivers multi-stage centrifugal pumps to its customer based on assembly-to-order (ATO). In the process flow diagram, the sales manager knows the customer’s basic requirements, such as the industry for which the pump is required, its use, and its application from the customer inquiry and quotation that has been provided earlier. The dealer’s sales manager has to create the sales order for the assembly-to-order (ATO) based on the detailed specifications of the customer, such as the number of stages, delivery size, capacity, head, temperature, working pressure, type of drive, mounting, horizontal or vertical configuration, coupling, and base plate. Once this detailed information is provided, the system will create an operational network and operational WBSE/Project based on the sales material selected. The SAP PS system has a mapping configuration between the sales material and standard network/standard WBSE/Project. Using this mapping, the sales order schedule line is linked to a network that includes activities and material components with its link to a WBSE and project. Depending on the variant characteristic chosen by the dealer on behalf of the customer, there can be minor changes to the material components (subassembly) and the activities to assemble the components. In doing so, 156 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM the requirement date entered in the sales order will be transferred to the network basic finish date so that activities linked to the network can be scheduled backward based on the activity dependencies and duration. This integration will allow the dealer to know if the finished final assembly can be delivered on the promised requested date. If there are conflicts when the order is processed, this allows the sales manager or dealer to set the right expectation on the requirement dates. Assembly to order process also allows the sales manager or dealer to choose the correct product selling price (if they are working on a margin) by applying the appropriate margin to the updated or accurate plan cost of the final finished assembly order by the customer. Once the final finished assembly is ordered, the delivery coordinator checks if all the required subassemblies are available and if there is capacity on the assembly line. If there are constraints on one or both of these variables, the assembly will be scheduled to a different planned date. This is captured on the project network activities as a constraint and, when scheduled, provides the revised delivery date. The sales manager or dealer can now know the latest delivery date for the final finished assembly in the system. This tight integration is critical to the assembly-to-order scenario, as customers could have opted for assembly-to-order by picking most commonly used models so that the ordered assembly (fully finished product) is available to them early, which is crucial to their business operation, instead of the customer having to wait for days and months before receiving the specific order (made-to-order). On the day of the assembly, the subassemblies, such as the pumps, motor drives, base plates, couplings, and so on, will be issued to the network. The work confirmation will be performed by the assembly line technician and the final finished product will be transferred to the sales order stock. This stock item will now be delivered to the shipping address mentioned in the order by picking, packing, and dispatching the final multistage centrifugal pump with an electric motor and coupling with horizontal alignment on the base plate. Once the delivery is completed, the WBSE will be technically completed. Once this delivery is billed to the customer, the WBSE will be set to final billing and both the WBSE and project will be closed. Figure 2-55 shows the process flow diagram of the assemble-to-order example explained here. 157 Figure 2-55. Assemble-to-order scenario of multistage centrifugal pump with motor drive and coupling on a base plate Chapter 2 158 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Order-Based Billing in Assembly Processing Some service industries also adopt assembly processing solutions offered by SAP PS as they provide tight integration between project networks costing and scheduling with SAP SD. Here again, SAP PS is used to plan services that are carried out several times with limited variations (similar constellation). For example, one of the world’s leading medicine agencies uses assembly processing to plan, service, and bill the services rendered by them using SAP PS Assembly processing. In this case, the government agency has a list of services that are required to be performed by their different departments depending on the type of service requested by the pharmaceutical companies (applicants) for marketing authorization (different application types) and post authorization (different service product types). The government agency was able to capture the applicant’s service requirements in a SAP SD sales order based on which PS project and network activities were created using standard network and standard WBSE/Project. The material used in the sales order is linked to a standard network and WBSE/Project. The assembly processing allows the sales order item category to determine a requirement class and a type that allows the creation of an operational network and WBSE/project based on a mapping table. Assembly processing is not only about the seamless creation of PS Project, but also about its ability to transfer the requirement date from SAP SD to the network basic finish date, thereby allowing all the activities related to the service or task requested by the applicant to be performed by the requested date. The system picks the network basic finish date, and relationship of different activities for the service requested, and its duration so that backward scheduling can be performed. If there are conflicts, it will let the person creating the order know that this is not feasible so a revised requirement date can be chosen. In addition to the schedule integration, the assembly processing allows you to calculate the cost of the service if there are changes to service cost. This allows you to charge the applicant appropriately based on the cost plus margin or standard service rates depending on the service. If assembly processing is used for service industry, order based billing is performed. Sales order is created for the billing value of the service with account assignment to the WBSE/ Project and invoiced (billing document) subsequently when the service is completed/ rendered. When the billing document is generated, the actual revenue will be posted to the account assigned WBSE/project to which the service belongs. 159 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Bill of Service (BoS) Based Billing In the construction industry, not all projects are delivered based on milestones. Many contractors and subcontractors perform work based on item rate or unit price contracts. When engineering and design are not heavily required and the construction work is an extension (copying or mirroring) of already performed work or on the basis of already completed work in a nearby location, item rate contracts or unit price contracts are used. In the unit price contract, the customer defines a unit price for the different service rendered by the service provider, in this case your enterprise. Based on the work or service delivered and measured by the customer, billing can be performed. In construction projects, the term M-book (M-Measurement) is widely used. These measurements, are the basis on which the services delivered are paid to the service provider by the customer. If there are back-to-back unit price contracts with your subcontractor to provide services to the end customer, these M-book measurements will be the basis for the billing and payment of your subcontractors. In SAP, unit price contract billing is captured using the Bill of Services (BoS) functionality in SAP SD. Unlike milestone billing functionality, this process is mostly driven in SAP SD (Sales and Distribution) and MM-SRV (Materials Management External Service) and projects will be used to capture plan and actual cost and revenue. In the following example, a reputed Indian construction company performs road work which consists of four main components: • Cutting and clearing trees and earth work excavation and leveling for 150 KM • Rest areas every 50 KM (three) • Road laying work for 150 KM, which has four lanes on each dual carriageway • Mobile client site office (rental) (Three) For the construction company to perform road laying work, heavy machineries and equipments are required. In the business process diagram shown in Figure 2-56, the business process starts when the construction company responds to the customer inquiry with a quotation. The customer reviews the quotation details—quantity, unit rate, and amount (value). If they find it competitive, an order is placed. This customer order (unit rate contract) is captured in the construction company’s SAP SD system as a Billing of Services (BoS) 160 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM order with reference to the quotation. The different work packages are created in SAP PS as Billing WBS elements of the project. Further detailing of the PS Project with activities may not be required, as the BoS service line will capture the nuances and details that are required for logistical purposes. In this example of the customer’s unit rate contract, the initial scope of work did not include the rest areas, as the customer was in the process of finalizing the details for the rest areas and their facilities. Therefore the construction company’s Bill of Services included all the details of three work packages except the rest area to begin with. Since the work package related to cutting and clearing of trees and excavation and leveling of earthwork was provided by one of their trusted subcontractors, the construction company used the subcontractor’s Bill of Services for the purpose of detailing the work/services at the time of quotation. Hence the customer’s unit rate contract is aligned with the subcontractors’ Bill of Services. The work package for laying the road will be performed by the construction company using their plant and machinery and by procuring raw materials and other traded goods that are required. The Bill of Service line will be detailed using internal services referenced from the quotation and by preparing estimates for additional items. For the mobile client office equipment, a requisitioning note will be created in ETM (Equipment and Tools Management). In order to detail the Bill of Services for the rest area, the customer will be involved collaboratively to provide the necessary details and specifications. Based on the finalized details and specifications for the rest area, the construction company will initiate their procurement process by creating purchase requisitions and RFQs (request for quotations) for their trusted subcontractors to bid for this new Bill of Services. Based on the review, evaluation, selection, and approval of the subcontractor’s quote, the now agreed Bill of Services with the customer will be transferred to the customer unit rate contract/order. During the execution phase of the project, the subcontractors will perform their work and make progress with reference to their work packages and Bill of Services. The construction company, using SAP ETM, will confirm the requisitioning note created previously. The construction company’s equipment planner or manager will review the requirements in the planning board and create a shipping document to ship the equipment package to the construction site (including the client’s rented mobile office). This shipping document will include owner and recipient information. Once all the equipment reaches the construction site, based on the equipment type (performance 161 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM based or time based), different settlement calendars are created. The construction company will also be performing their internal work and the same will be captured via execution services as activity allocation, reservation for stock materials, purchase requisition for raw material and traded goods, converting purchase requisition to purchase order, releasing purchase order, performing goods receipt, performing goods issue, and so on. As part of the method end and billing process for each of the agencies involved and to determine actual progress, the customer, the construction company, and its subcontractor will be involved in the measurement of the services completed so far. This information will be recorded in the measurement book (M-book). Based on the measurement entered (work completed), the subcontractors and the construction company will raise the service entry sheet for their respective Bill of Services. The subcontractor will perform service entries using the Internet interface and the customer using the same technology will be able to review, compare with M-Book values, and approve all the service entries created by the subcontractors and the construction company. For equipment rental and internal usage of the plant and machinery, settlement will be performed and this will create a sales order for the purpose of billing the mobile client office rental to the customer. For the internal usage of plant and machinery, this mechanism will be used to perform cost transfer to the respective project/WBSE. This Service Entry Approval will not only trigger the billing process to the customer but also the subcontractor’s service acceptance and payment process for their respective services on a back-to-back basis. This seamless integration between customer billing and subcontractor payments processes is a big advantage of Bill of Services (BoS) and it avoids unnecessary comparison, reconciliations, and approval of the subcontractor’s service rendered. The Service Entry Approval Process can be scaled up and down depending on the requirements. Figure 2-56 shows the process flow diagram of Bill of Services billing and equipment and tools management billing processes. 162 Figure 2-56. Process flow diagram of Bill of Services billing and equipment and tools management billing processes Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM 163 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM For the purpose of project forecasting using WBSE and statistical key figures, a few enhancements can be considered. When the Bill of Services are captured for the Work Package (WBSEs), the same can be transferred to the WBSE statistical key figures by using mapping between BoS service line and statistical figure. The same mapping can be used to update the actual quantities of the statistical key figures. Using a custom report, the BoS service line or the work package structure can be replicated in the report with plan and actual quantities from the SKF and BoS entry sheet approvals respectively. Calculations can be applied to find the remaining quantity and apply it evenly over the remaining period of Bill of Service/work package dates. The project managers can then provide their projection based on the in situ conditions. Project Settlement and Capitalization In this section, you learn about settlement, including its significance and the different components of the settlement process. You also learn about the capitalization process, which includes how the project cost and capital expense is transferred to the Asset Accounting module as Asset Under Construction and Fixed Asset. Project Settlement and Capitalization Projects are temporary collectors of costs and revenues. Therefore, they should be settled to one or more receivers as part of month/period-end processing. Settlement processing allows you to the transfer/allocate the results of the project, the actual costs incurred, and the revenues generated in whole or in part to receivers such as the Profitability Analysis Segment (CO-PA), Other Projects (WBSE), Cost Center (CO-CC), General Ledger (G/L Account), Material (MAT), Real Estate Object (RE), Asset Under Construction (AUC), Fixed Asset (AA), and so on. When costs are settled from sender to receiver, the sender’s cost is credited and debited to the receiver object. When revenues are settled from sender to receiver, the sender’s revenue is debited and credited to the receiver object. Depending on the settlement sender and receiver objects defined in the settlement rule, different financial 164 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM documents are generated during settlement and they are accounting document (FI), controlling document (CO), profitability analysis document (CO-PA), and asset accounting document (AA). These documents can be viewed on the sender and receiver object using the document relationship browser. During settlement of investment projects, costs are transferred from project to Asset Under Construction (AUC), which were posted from the concept to closure phases. Once the project is completed and operational, the cost of the investment is settled from the project to Asset Under Construction (AUC) to the Final Fixed Asset (FXA). This process is called project capitalization. S ettlement Rule To perform a settlement, a settlement rule has to be defined in the sender object. This settlement rule can have multiple distribution rules for the sender object depending on the various receivers, periods, fiscal years, source of the costs, or allocation percentages. Users can maintain the settlement rule for WBS elements or networks and activities in an overview screen. Use the distribution rules to specify the proportion of costs that should be settled to the receivers. Costs can be distributed based on one of the following: • Percentages • Equivalence numbers • Fixed amounts Figure 2-57 shows the WBSE settlement rule overview screen with one distribution rule. This distribution rule mentions that the cost WBSE C-0000111 is settled to the superior WBSE C-00011 as a whole (100%). This distribution rule is a periodic settlement type and is valid between 01.2022 to 12.2022 to transfer or allocate costs associated with source group 10 (cost and expense) to the superior WBSE. Figure 2-57 shows the other settlement receivers (account assignment category) for this WBSE. 165 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-57. Settlement rule overview—other possible receivers are also shown S ettlement Profile In addition to the settlement distribution rule, the settlement rule contains the settlement profile. This settlement profile defaults the other settlement parameters such as Cost/Revenue Source Groups (structure), Allocation Groups (structure), and Profitability Transfer Groups (structure). The settlement profile, as covered in Chapter 1, also stores the permissible settlement receivers, treatment of actual or cost of sales (to be settled in full, can be settled, and not for settlement), default settlement document type, and retention period for the settlement documents. S ettlement Strategy To have the settlement rules auto-created, the settlement strategy has to be defined for WBSEs and network activities. Settlement strategies are then assigned to the WBSEs and network activities using default project profile and network type parameters. When the automatic generation of a settlement rule transaction (CJB1 or CJB2) is run, it checks the WBSE and the network activity assignment to these strategies and then creates a specific settlement rule based on the attribute of the master data. In the case of WBSE, attributes 166 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM of WBSE, such as account assignment element, billing element, and organization unit change (company code or profit center change within the WBS hierarchy) determine the settlement profile, the account assignment category, the result analysis key, and the characteristic values for the settlement. Note that enhancements to the standard settlement rule generation program are possible using BADIs (business add-ins). The default settlement profile for the WBSE is determined based on the WBSE attributes defined in the strategy. The Account Assignment Category is determined based on the strategy and stipulates the settlement receiver to be used in the settlement rule. The Result Analysis Key is determined based on the strategy and ensures that the correct RA key is defaulted on the customer project’s WBSE. SD-PD relationship determines if common characteristics should be copied to the profitability segments (PSG) when more than one sales order item references the same WBSE. If the flag is not ticked, no characteristics are copied based on the strategy. Figure 2-58 shows the settlement strategy for WBSE for a customer project. This strategy will be assigned to the project profile. Figure 2-58. WBSE settlement strategy configuration setting Similarly, the network settlement rule strategy defines details about automatic or manual settlement rule creation. It also determines if the settlement rule is created to perform settlement to the superior WBSE or root WBSE. It provides scalability in terms of 167 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM copying settlement rules from a superior WBSE or project definition. Figure 2-59 shows the settlement rule strategy for network; this strategy is assigned to the Network Type parameter (for a combination of network and plant). Figure 2-59. Network settlement rule configuration setting In a direct settlement, each object (WBS elements, networks, orders, and activities) in a project is settled directly to a receiver cost object that’s not included in the project, such as a profitability segment. In multi-level settlement, activities, orders, and WBS elements are first settled to the top WBS element in the project. The top element then settles the costs collected. Users have to specify which of these to use when they maintain or determine the settlement rule. Settlement Types in the Settlement Rule 168 • PER (periodic settlement): Settlement rule with this settlement type covers only the costs/revenues for the relevant settlement period. • FUL (full settlement): Full settlement, which settles all the costs/ revenues that have occurred for a sender object for all the periods prior to the settlement (and are not yet settled). If PER rules exist, they take precedence over the FUL rule. Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM • AUC (Capitalization with Asset under Construction): This settlement rule is automatically generated at the time of the actual settlement if you enter a capital investment profile with an AUC as its capital investment measure in the WBSE control data. Settlement is conducted periodically and in full to the AUC. • PRE (Periodic Preliminary settlement): PRE settlement rules are used in capital investment measures (WBSE with investment profile), so that costs/revenues are settled to the CO receivers or to a G/L account before the periodic settlement to AUC. Table 2-10 provides a matrix of the permissible settlement types for the settlement rule depending on the operative indicators (billing element and account assignment element) and settlement receivers. Table 2-10. Permissible Settlement Type Matrix for the Settlement Rule depending on the WBSE Operative Indicators and Settlement Receivers Sender Sender WBSE: Sender WBSE: WBSE: Billing Account Investment Measure Element Assignment (Investment Profile) or Not X X Receiver Settlement Settlement Type 1 Type 2 X Does not have an investment profile FXA PER FUL X Does not have an investment profile GL PER FUL X Does not have an investment profile WBS PER FUL X Does not have an investment profile PSG PER FUL X Has an investment profile FXA NA FUL X Has an investment profile GL PRE FUL X Has an investment profile PSG PRE FUL X Has an investment profile WBS PRE FUL 169 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM • PRE: Preliminary Periodic Settlement • PER: Periodic Settlement • FUL: Full Settlement Settlement Processing Type Most enterprises use periodic and full as the main settlement processing type. There are other settlement processing types which are as follows: Automatic (1) All distribution rules for a sender are selected. If a sender only has distribution rules with PER settlement types, then only the settlement period costs are selected and settled. If a sender has distribution rules with PER settlement types (PER rules) and distribution rules with the FUL settlement type (FUL rules), the PER rules are used first for the costs in the settlement period. If there are still costs leftover, the FUL rules are used. For investment measures, the system only uses the FUL rules first if the measure is technically completed. Settlement to assets under construction is always made regardless of the status. Periodic (2) All distribution rules with the settlement type PRE, PER, and AUC are selected. The PER rules are applied first (except for investment measures). The PRE rules are applied first for investment measures, and the remaining amount is settled with the automatically generated AUC rules to the asset under construction. Partial Capitalization (3) This processing type is used to partially capitalize an investment measure that is not technically completed (TECO), so that part of the total cost of the investment measure is settled to complete assets. For investment measures, the partial capitalization and the full settlement processing types are the same except for the TECO status of the WBSE. 170 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Full Settlement (8) This type of processing type is used if a sender only contains distribution rules with the PER settlement type, and if a balance check is to be made before settlement. The Full Settlement (8) checks if the previous period has any residual balance. If there are residual balances, the settlement results in an error. If not, the FUL settlement type should be defined for the sender object for the specific period (if a balance is shown in one period) or for all periods (blank validity periods). A full settlement (8) or automatic settlement (1) can be processed to settle balances from previous periods and the current period are settled/posted in the current period. S ettlement Processing Settlement within SAP is performed using a separate transaction (CJ88 and CJ8G) when the actual transfer or allocation of costs, revenue, and results of the project are performed. Costs and revenue are posted when actual work is performed in the project via timesheet, activity allocation, goods receipts, goods issue, assessments to WBSEs, finance journal, vendor invoice, customer billing/invoice, settlement from order or other projects, and so on. Results of the project are calculated as part of the result analysis process and performed via transaction KKAJ or KKA2, where the cost of goods sold, revenue, work in progress/inventory, reserves for imminent loss, revenue surplus, and revenue in excess of billing are computed for customer projects. The results of the project are computed based on the contractual obligations and actual percentage of completion and so they reflect the actual results of the project. Hence these values will be transferred or allocated to finance and profitability analysis. In the case of cost and investment projects, where there is no revenue involvement, the result analysis is not performed, so the actual cost and revenue posted on the post (as is) will be transferred or allocated to the receivers—in this case, cost center, asset under construction, fixed asset, real estate objects, and so on. The settlement (allocation) can be performed by using the settlement cost element or the original cost element. If the original cost element is used, the cost element report for the project will show a zero balance once settled in FUL. If the settlement is performed using a settlement cost element then, by excluding these settlement cost elements, the project profitability or project plan vs. actual variance reporting can still be achieved via standard cost element reports. Figure 2-60 shows an A1 allocation structure (cost/revenue allocation groups) used for the purposes of settlement cost/revenue allocation from the sender object to the receiver objects. 171 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Figure 2-60. Allocation structure configuration setting—use the settlement cost element or the original cost element Settlement Scenarios This section details the different settlement scenarios that are applicable to the different type of projects—customer projects, cost/overhead projects, and investment projects. Customer Projects Results analysis is usually performed for billing elements in sales/customer projects. The resulting analysis data includes the costs of sale (COS) and revenues of lower-level WBS elements and activities/orders. For this reason, only the results analysis elements are settled. When the system derives settlement rules, it generates profitability segments that contain the characteristic values of WBS elements and sales orders assigned to them. Settlement rules and results analysis keys are only assigned to billing elements. All other objects are assigned the settlement profile “Do Not Settle”. 172 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM C ost Projects In the case of cost projects, the system can derive the settlement rule for WBS elements from the responsible cost center or the requesting cost center. Figure 2-61 shows a WBS element with a responsible cost center. Based on the settlement strategy for WBSE, this cost center can be the default settlement rule receiver in the case of a cost project. Figure 2-61. WBSE’s responsible cost center—settlement receiver in the case of cost projects A settlement rule can also be passed from a higher-level WBS element to its lowerlevel WBS elements. This can occur over several levels, but the rule can only be inherited by WBS elements that do not have a settlement rule of their own. 173 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Investment/Capital Projects The WBS elements with investment profiles in an investment project are settled to assets under construction (AUC). The AUCs are created automatically when the WBS elements are released (this is controlled by the investment profile). Rules prescribing settlement to AUC can be generated automatically when the WBS elements are settled for the first time. When the project is technically closed, the WBS elements are settled to an asset master record and the values are transferred from the AUC to the asset provided the final fixed asset is defined in the settlement distribution rule of the WBSE as a separate line. Project Closure The project has to be closed once all the deliverables related to the project are completed and all financial postings related to the project are completed. Project closure should be covered in the month end pre-close business process, as some enterprises want all the required financial posting such as overhead, allocations, assessment cost, and so on, to be posted. Some of the planning, forecasting, and budgeting information needs to be reversed before closing the project. The following project checklist provides the indicative steps to be covered in order to successfully close the project. Controlling and cross application: • Check if the actual overhead for the period has been posted for CO receiver objects. • Check if the activity allocation or timesheet posting has been transferred successfully to all CO receiver objects. • Check if the assessment cost for the period has been posted successfully to all CO receiver objects. Sales and distribution: 174 • List sales order or sales order item that linked to the project: T.Code CN54N or CN55N. • Linked sales order and items should be delivered, completed, and invoiced. Chapter 2 • SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Linked open sale orders and items to be fully settled to the project (FUL Settlement: both settlement rule and settlement type as FUL): T.Code KO8G or KO88. Plant maintenance: • List PM WO and PM WO operations for the project: T.Code IW38 and IW37. • Linked open PM work orders (WO) or PM WO operations are technically closed (TECO): T.Code IW38 and IW37. • Linked open PM WO and PM WO operations to be fully settled to the project (FUL settlement: Both settlement rule and settlement type as FUL): T.Code KO8G or KO88. • Linked open PM WO to be business completion (CLSD): T.Code IW38 and IW37. Controlling and production (process) planning: • List orders linked to the project: T.Code CN45N. • Linked open orders to be technically closed: T.Code CN45N. • Linked open orders to be fully settled to the project (FUL settlement: Both settlement rule and settlement type as FUL): T.Code KO8G or KO88. • Linked open orders to be closed (CLSD): T.Code CN45N. Materials management: • List open purchase requisition for project: T.Code ME5J. • Open purchase requisition items to be closed by ticking the flag Closed under the Quantities/Dates detailed tab. T.Code ME5J or ME52n. • List purchase order (PO) for the project that have pending quantities: T.Code ME2J. • Pending quantities of linked purchase orders to be delivery completed. This is flagged in the Purchase Order Item Delivery tab. T.Code ME2J and ME22n. 175 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Project system planning, forecasting, and budgeting: • Copy actual to forecast for past months: T.Code CJ9FS and CJ9F, or CJ20n ECP Copy, or CJ9CS and CJ9C, or CJ9BS and CJ9B. • Zero or blank-out the forward estimates for the project- Budget, revised budget and forecast: T.Code CJR2, CJ40, CJ42, CJ20n, CJ30, or CJ32, CJ35, or CJ34. • Check the project actuals, baseline, and budget forecast using S_ALR_87013542 with Cost Element Group as blank. • Check if the project actual = forecast (month on month): S_ALR_87013544. • Check the WBSE that has the monetary balance and maintain FUL settlement rules for the same. Project System Workforce planning and Capacity planning (Request, Demand and Pending Workflow Approvals for custom solutions): • Check for open request or demand from the project with respect to resource request, equipment request, production resource tool request, and workflow. • If Project team is used for resource assignment, delimit the resource from the project team. • Zero or blank out any ad hoc forecasting solution request so that this does not show as a request to the resource manager. • Check all open workflow requests that are related to the project. Project structure: 176 • Technically close the project structure Network Activity, Element, WBSE, and Project Definition: T.Code CNMASSSTATUS. • Perform results analysis in the case of customer projects to zero out WIP, Reserves, Revenue Surplus, and Imminent Loss: T.Code KKA2 or KKAJ. • Check AUC values, create pending final assets (if any), and assign the final settlement rule in the case of investment projects. Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM • Perform full settlement of the project: T.Code CJ88 and CJ8G. • Check the project actuals, baseline, and budget forecast using S_ALR_87013542 with Cost Element Group as blank. • • Check if the project actual = forecast (month on month): S_ALR_87013544. • Check if project structure (Network Activity, Element, WBSE, and Project Definition) sum total is zero. If not, repeat project planning, forecast, and budgeting checklist steps and project structure checklist steps. Close the project structure: Network Activity, Element, WBSE, and Project Definition: T.Code CNMASSSTATUS. Portfolio management structure: • Complete the corresponding PPM item and its decision point: T.Code RPM_DX_ITEM (Change). • Complete the corresponding PPM initiative and its decision point (if it is the only item linked to the initiative or if all items liked to the initiative are already completed including this item; otherwise leave the initiative as released): T.Code RPM_DX_INITIATIVE (change). Note Each enterprise can add any additional business checks before closing the project. Some of the mandatory, prerequisite checklist items can be included as an enhancement at the time of project save with status CLSD, in addition to the checks related to PR, PO, and project balance that are already covered as part of the standard SAP. Other useful transactions related this chapter: • CJEN: Transaction to reconstruct the project info database • CNMASS: Transaction to perform mass change of project, WBSE, network, and milestone fields 177 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM • CNMASSSTATUS: Transaction to perform mass status update for project, WBSE, and network • CNSTATUS: Program to analyze and correct inconsistencies in operational project structure • DPR_GUID_ANALYZE: Breadcrumb program to identify GUID in various tables • DPR_GET_BY_GUID: Program to get the list entries in a table based on GUID • DPR_GET_TREE: Program to get DPR tree • DPR_DX_PROJECT: Program to upload cProject from Excel • RPM_DX: Transaction for PPM upload utility Activities for this Chapter 1. For your enterprise, try to define the process flow related to project planning, budgeting, scheduling, forecasting, and workforce/capacity/procurement planning as part of the project month end when the project is active and it is in the execution phase. What is the sequence in which scheduling, forecasting, workforce/capacity/procurement planning happen for the projects in your enterprise? 178 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM 179 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM 2. For your enterprise, try to choose your preferred forecasting method based on the suggestions provided in this chapter. Also list the current forecasting method or practice used in your enterprise. Why is that the current forecasting method is used? Is the current forecasting method defined by the current practice or tools or is it due to the nature of business and project management practices in your organization? ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ ___________________________________________________________ 3. Choose which of the following capabilities or functionalities your enterprise should adopt. • Project Variation Management • Project RAG Status Reporting • Project Issue and Risk Management • Project Forecasting • Project Budgeting (with Control) Test Your Learning 1. When budgeting, what are the two things that provide an error when the budget is exceeded? a. Tolerance and Availability Check b. Assigned Value and Remaining Budget 180 Chapter 2 SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM 2. In a ____________ budget scenario of a superior WBS element, the distributable budget for further allocation is zero. 3. Execution services can only performed on the leading ECP CO version. a. True b. False 4. ____settlement should be used to settle residual costs of the previous periods. 5. An investment profile determines the Asset class of the asset under construction. a. True b. False Answers: 1. Tolerance and Availability Check 2. Fully distributed 3. True 4. Full 5. True Summary In this chapter, you learned about the project lifecycle functionalities and business process flows with detailed examples in the SAP EPPM solutions (PPM, CPM, and PS). • Different project planning and forecasting methods used by various industries, depending on the planning and delivery approach (whether the project is managed or delivered by your enterprise) • Guidelines for project forecasting and its integration with procurement, production, maintenance, and resource management • Enhancements that are required in network costing and easy cost planning for an integrated project forecasting experience 181 Chapter 2 • SAP Enterprise Portfolio and Project Management Using SAP PS, PPM, and CPM Project budgeting, availability control checks, and tolerance limits • Project distributable and distributed budgets • Project release and current budget • Project budget updates, such as supplements, returns, and transfer • Available budget and budget carry forward • Project variation management using SAP ECC • Project Red, Amber, and Green (RAG) status and commentary used in the public sector • Project risk, issue, and change request (variation) using S/4 HANA CPM • Project procurement and execution using network activities or execution services • Project resource planning (resource request to fulfilment/staffing) • Project billing based on resources, milestones, periods, delivery, orders, bills of service, equipment, and tools. • Project process flows related to engineer-to-order (ETO), assemblyto-order (ATO), billing of services (BoS), and equipment and tools management (ETM) • Project settlement and capitalization and its key components • • Settlement rule for different settlement types • Settlement profile and strategy • Settlement processing types and settlement process • Settlement scenarios, including investment capitalization Project closure checklist You learn about interfacing the SAP EPPM solution with other third-party estimation, costing, forecasting, and scheduling applications and its integration with other SAP modules in the next chapter. 182 CHAPTER 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications In this chapter, you learn about the critical touch points of estimating, forecasting, and scheduling using third-party applications with EPPM. You also learn about the interface touch point with other SAP process streams such as human resource management, plant and equipment management, and procurement and contracts management. Detailed date planning and its integration with procurement and resource management is also covered in this chapter. The prerequisites for scheduling, such as project calendars, time units, relationship between activities, offset dates for milestone and activity elements, basic dates, constraints, and so on, are also covered in this chapter. Scheduling scenarios are also covered. Confirmation of work, remaining work, forecast dates, and computation of duration based on scheduling formulas in the work center are also covered in this chapter. When scheduling happens in third-party applications such as MS Project or Oracle Primavera, different types of integration options can be enabled using Enterprise Project Connector (EPC), so that the respective application performs what it is good at and a single application is used for the different subsets of data. That way, there is no duplication of effort or reconciliation issues in the long run. © Joseph Alexander Soosaimuthu 2022 J. A. Soosaimuthu, SAP Enterprise Portfolio and Project Management, https://doi.org/10.1007/978-1-4842-7863-5_3 183 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Some enterprises perform scheduling and estimations in external third-party solutions (a SAP partner application or other home grown applications). In this case, there are important considerations to ensure that SAP can still be the enterprise resource management application, yet allows other applications to perform certain specialized services (such as scheduling, estimation based on design drawings, etc.). The previous chapter discussed the gap related to forecasting and looked at the design considerations and solution concepts for custom development. There are other SAP modules—such as SAP Business Planning & Consolidation (BPC), Business Intelligence (BI), Commercial Project Management (CPM), or Excel integration—that can enable this custom development. Solution architecture related to the solution is covered in this chapter. Finally, this chapter also covers important design considerations when integrating estimation and costing applications. F undamentals of Scheduling In this section, you learn about the project calendar, scheduling types, scheduling scenarios, network diagrams, recording actual work, project variations, and the impact on forecasting. P roject Calendar In SAP, the project calendar is created as a factory calendar. A factory calendar is a customizing setting that includes a factory calendar definition, which includes work days, any special rules, and a public holiday calendar, similar to MS Project and Oracle Primavera. All projects are linked to this calendar and it’s used for scheduling. Figure 3-1 shows a SAP factory calendar and Figure 3-2 shows an MS Project calendar for comparison. 184 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Figure 3-1. SAP factory calendar and holiday calendar Chapter 3 185 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Figure 3-2. MS Project calendar and exceptions Chapter 3 186 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Scheduling Type and Scenarios The Critical Path Method is a project management technique that’s useful for planning, scheduling, and controls. It allows the project manager to visualize critical tasks and activities. If these critical activities are delayed, the overall project schedule is also delayed. SAP PS uses the critical path method for its scheduling. Scheduling in SAP PS depends on various parameters. One of the key parameters involves the scheduling scenarios—Bottom Up or Top Down (whether network activities determine the dates or projects/WBSEs determine the dates). This can be chosen depending on the project requirements and settings based on the default WBSE/network scheduling profiles. They can be altered before performing the scheduling function. Figure 3-3 shows the different scheduling parameters at the network and WBS element level. Figure 3-3. WBSE and network scheduling parameters 187 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications The scheduling scenario should be chosen based on the project’s situation. If the project has defined start and end dates set by the key stakeholders, choose the top-down scheduling scenario with the backward scheduling type. If the project work is the first of its kind and requires proof of concept and development/research, choose bottom-up scheduling with the forward scheduling type to determine the end date of the project. In a top-down scheduling scenario, project/superior WBSEs determine the date and the network basic dates can be adjusted to align with the WBSE dates. These network basic dates (start and end) along with the activity’s work, the scheduling formula for the work center, the activity duration if not determined from the work, and the relationship and offsets set in the system—allow the system to compute the scheduled (early - start and finish; latest - start and finsh) dates and float for the activities. It also allows the scheduled dates to be extrapolated to the superior WBSEs. The latest dates are determined by backward scheduling and the early dates are determined by forward scheduling. Both backward and forward scheduling happen for all scheduling types, but which one happens first is decided by the scheduling type. Whether the basic dates can be altered by the scheduling date is determined by the Adjust Basic Date setting. In a bottom-up scenario, network/activities determine the date and network basic dates (start and end) along with the activity’s work, the scheduling formula for the work center, the activity duration if not determined from the work, and the relationship and offsets set in the system—allow the system to compute the scheduled (early - start and finish; latest - start and finsh) dates and float for the activities. This allows the scheduled dates to be extrapolated to the superior WBSEs. The early dates are determined by forward scheduling and the latest dates are determined by backward scheduling. Both forward and backward scheduling happen for all scheduling types, but which one happens first is decided by the scheduling type. Whether the basic dates can be altered by the scheduling is determined by the Adjust Basic Date setting. When the project uses network activity and activity elements, the user defines the basic dates for the network in the network header. This is picked by the system to perform scheduling. • 188 Forward scheduling uses the Basic Start Date (mandatory) and generates the early dates based on the activity duration/work, relationship between activities, and offset between activities or activity element/milestone and activity to which they belong. Once forward scheduling is completed, the system performs backward scheduling to determine the latest dates and uses the basic finish Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications date (not mandatory for forward scheduling) if provided. If that date is not provided, it will use the early finish date of the last activity of the network to perform backward scheduling. • Backward scheduling uses the Basic Finish Date (mandatory) and generates the latest finish dates based on the activity duration/work, relationship between activities, and offset between activities or activity element/milestone and activity to which they belong. Once backward scheduling is completed, the system performs forward scheduling to determine the early dates and uses the basic start date (not mandatory for backward scheduling) if provided. If it’s not provided, it will use the latest start date of the first activity of the network to perform forward scheduling. N etwork Diagram Figure 3-4 A shows a network diagram with six activities on how forward and backward scheduling are performed when the network basic start and end dates are provided. Figure 3-4 B shows the SAP factory calendar setting for the year 2022 and Windows Calendar for the month of August 2022 as a reference. This network diagram is the same for forward and backward scheduling, as it has a basic start and end date and this network is shown in isolation (no influence of the superior WBSE/project). The diagram also shows the critical path activities in red and the float for each activity. Note that the floats for the critical path activities are zero. This diagram also shows how the public holiday in India on August 15, 2022 (India’s Independence Day) is factored into the computation of the early and latest dates when activities fall around it. 189 Figure 3-4A. A network diagram with six activities: forward and backward scheduling using network basic start and end dates Chapter 3 190 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Figure 3-4B. SAP factory calendar setting for 2022 and Windows Calendar for the month of August 2022 as a reference Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications 191 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Recording Actual Work Actual work can be recorded in the system via timesheets, activity confirmations, or date confirmations at WBSEs when network activities are not used. The most common way is the timesheet in the case of service industries. It is recommended not to capture forecast dates and remaining work as part of the confirmation process. It is better to route these through the project manager/scheduler or the person responsible for the work package/work package scheduler, so that the responsible person can perform change requests or reassign additional effort where contingency was already built in. Timesheets only allow you to book time for the stipulated resource assignment duration and do not allow to capture forecast dates or remaining work/effort. The WBSE date confirmation allows you to capture the actual dates and forecast dates, but as the WBSE date changes are managed by the project manager or the person responsible for the work package, it is better to have the forecast dates changed or adjusted as part of the forecasting process in the forecasting workbench with the full view of the project. Figures 3-5A through 3-5C show the different methods by which actual work can be recorded in the system. Figure 3-5A. Time Recording 192 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Figure 3-5B. Activity confirmation 193 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Figure 3-5C. WBS element date confirmation Project Variations and Their Impact on Scheduling Capturing actual work via timesheets or confirmations is a prerequisite for the determination of remaining work, as well as for scheduling and forecasting remaining work. Based on the work carried out so far and if the remaining work is more than the original planned work, this has to be dealt with through a change request or variation process. The following are reasons that dates change: 194 • Additional effort is required due incorrect planning/due diligence (internal variation) • Additional effort is required due to in situ conditions (internal variation) • Rework and additional effort is required due to quality issues (internal variation) • Rework and additional effort is required due to safety issues (internal variation) • Additional effort is required due to incorrect plan/due diligence (external variation - vendor) • Additional effort is required due to in situ conditions (external variation – vendor) Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications • Rework and additional effort is required due to quality issues (external variation – vendor) • Rework and additional effort is required due to safety issues (external variation – vendor) • Additional effort is required due to change in scope (external variation - client) • Additional effort is required due to incorrect specification/in situ condition (external variation - client) All of these variations have an impact on cost, schedules, and quality. In some cases, the cost impact could be borne by the vendor/supplier or client/customer. Variations such as these often have an impact on quality, as they are unplanned work and sometimes can be linked to safety issues. All external variations require more lead time before they are formally approved and hence have to be initiated as soon as they are identified. They must also be updated throughout their lifecycles so that these items are fully tracked and monitored until approved or rejected. When the external variations are approved, they (along with minor internal variations that relate to reallocation of work/effort from other parts of the work package/ projects) should be performed before the scheduling and forecasting processes for each period. Scheduling and Its Impact on Forecasting This section assumes that scheduling is performed at least once per scheduling forecasting period in your enterprise (Few enterprise does it everyday or once a week). Every time an external/internal change request is approved and incorporated into the project plan, scheduling and forecasting are required. For internal variations, based on the situation, the project manager may choose to manage the situation by diverting any effort saved from other activities to the activities that require additional effort or consume the contingency effort that was planned for this work area by creating an internal transfer variation. Some enterprises, because of the additional effort needed to manage internal transfer and administration involved in the tracking of these internal transfer variations, fail to capture and document these. This leads to lack of transparency and ineffective tracking and monitoring of quantities. 195 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Project managers (this can be work package owners or schedulers) see this as a hassle, because more tracking and monitoring leads to more scrutiny. This is a change management issue. As the variation process matures in the enterprise, there will be more transparency, more accuracy, and more trust of the planned, forecasted, and delivered (actual) numbers. As part of the forecasting process, you should perform the following, as discussed in the previous chapter. 1. After actual work has been recorded and after incorporating quantity updates for the already approved external variation and minor internal (transfer) variations, scheduling should be performed. This scheduling will evaluate the actual work performed and any newly approved external/internal transfer variations. This scheduling process will reassess the remaining work/duration to generate new schedule dates. The forecasting workbench can then compute updated remaining work based on the prerequisite activities. 2. Capture the forecasted remaining work based on input from the project team. 3. Capture the forecasted finish date (based on input from the project team) if it is different from the latest finish date determined by scheduling. The new forecast finish date can be earlier or later than the latest finish date determined by the system. If it is earlier, additional resources might be required or work is easier than expected. If it is later, the activity is expected to hit unforeseen delays, resource availability issues, and so on. 4. Capture the new spread or distribution of quantity or effort based on input from the project team, site conditions, previous delays or resource constraints, and so on. 5. Check if the forecasted remaining work is in excess of the updated planned remaining work, at an activity level and/or summarized at a project level based on resource types, different types of materials, services, and subcontracting services. 196 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications a. If the forecasted remaining work is more than the updated plan remaining work at project level (based on resource types, different types of materials, services, and subcontracting services), then internal variation for the excess work has to be raised for management approval. b. If the forecasted remaining work is more than the updated plan remaining work at the activity level but less than or equal to it at the project level (based on resource types, different types of materials, services, and subcontracting services), then internal transfer variation to drawn down excess work from surplus activity to the deficit activity has to be performed. This process should not involve management approval. Note Scheduling before forecasting allows the system to indicate the latest finish date with reference to the progress performed so far and that of the updated remaining work. Therefore, it is recommended to have the activity’s effort or work determine the activity’s duration and hence the scheduled dates (the latest finish date). Detailed Date and Schedule Planning This section covers how forecasting (scheduled dates) impacts other project management substreams such as procurement, production, and resource management. It also covers how the SAP forecasting workbench should share the information with the internal and external stakeholders. Once scheduling and forecasting is completed, the program generates the schedule of quantities by date/period, in the form of demand, reservation, purchase requisition, and purchase orders. This can be fed into the respective module and submodule via integration so that all the resources of the project can be planned, forecasted, and requested. 197 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Integration with Procurement and Production Once scheduling and forecasting is completed for the planning/forecasting cycle in your enterprise, the distribution of quantities for external services, subcontract services, and external materials (long lead items and engineered to-order items) will be available for each project. This information is useful for the procurement managers, store managers, and production managers. For example, in the construction industry, where the enterprise is involved in home and commercial building, this schedule of quantities will be shared as demand forecasts with suppliers, subcontractors, and production plants. Following suppliers, subcontractors and production plants are required in this project: Suppliers: 1. Raw materials suppliers for bricks, tiles, timber, reinforcement bar, steel truss and channels 2. Shuttering and scaffolding supplier 3. Labour hire agencies 4. Plant & Equipment hire agencies for construction and safety equipment Subcontractors: 1. Carpentor 2. Air Conditioning & Air Handling 3. Electrician & Instrumentation 4. Piping 5. Roofing specialist Production plant: 1. Ready mix concrete plant 2. Asphalt mix plant This is in addition to the internal resource planning for design, planning, project management, and client/stakeholder management. 198 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Now, let’s see how this process can be mapped within SAP. The example of construction and home/commercial building is used so that most readers can relate. Within SAP, this construction of 20 homes has been defined as a project for a development plan. This project has the following phases based on the PMP methodology followed by its enterprise” • Pre-project phase (initiation) • Planning and design phase (planning and design) • Contractor selection phase (procurement) • Project mobilization and build phase (execution) • Project operations phase (operation and defect liability period) • Project closeout and termination phase (financial closure) Scenario 1: Project Specific Material – External Procurement In the procurement phase, most of the purchase requisitions and purchase orders for the project specific components (bespoke items) will be released to the suppliers, subcontractors, plant and equipment hires, and production plants with the overall quantity, value, and desired delivery date (completion date). But these documents do not provide the schedule of quantities to the suppliers and service providers. Scenario 2: Common Materials – External Procurement There will also be other common materials (with other concurrent construction project happening in a construction zone/district), such as the raw material, safety equipment, shuttering equipment, plant and equipment hires, and so on. These requirements can be grouped and the schedule of supplies can be shared with the suppliers and service providers on a periodic basis (weekly or monthly), based on the master contract (quantity contracts) with a panel of suppliers. Scenario 3: Common Materials – In-House Production For construction projects, concrete is consumed on a regular basis at the time of foundation, flooring, slab, and so on. If the enterprise has a ready-mix plant of their own (in-house production), the concrete requirement should be fed to the ready-mix plant for production. 199 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Scenario4: Project Specific Material – In-House Production Some construction companies (or their subsidiaries) produce double-glazed windows and doors which suit the various design needs of their customers. This requirement has to be fed to their in-house production plant or subsidiaries production plant based on the specific project. For all these scenarios, the forecasting performed by the scheduler or project managers is key. These requests have to be cascaded to the procurement manager, site store manager, production plant manager, and ultimately to the suppliers and service providers. You also need to be mindful of the fact that some service providers rely on other software. Hence, it is very important to have a common format that can be consumed easily by the panel of suppliers and service providers. A few enhancements are required to the standard functionality to achieve these desired capabilities: 1. Project Specific Materials 1.1. Scenario 1: Project Specific Material – External Procurement 1.1.1. Enhancement to purchase order (E1) to hold the schedule of quantities by date/period once the forecasting cycle is completed for the period or rolled over to the next cycle. 1.1.2. Workflow Email notification (W1) based on the supplier or service provider and by project or construction zone/distric to be triggered once the forecasting is completed/rolled over to the next period by the scheduler/project manager for all the project’s service and materials. The content and format of this email notification should be compatible and universal to most platforms (platform independent). 1.1.3. When the project-specific materials, such as kitchen cabinets and appliances, are received from the supplier, they are received against the purchase order as a partial quantity. 1.2. Scenario 4: Project Specific Material – In-House Production (Long Lead Times) 1.2.1. Enhancement to reservation (E2) for network or WBSE to hold the spread or distribution based on the forecasting information. 200 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications 1.2.2. The reservations distribution by period should update (via enhancement) the planned order (E3) automatically, at the time of the next MRP run for the project, based on the lead times defined for the material. 1.2.3. Based on the auto-generated planned order, the production order will be created by the shop floor manager managing in-house production of glazed window and doors and send the finished product to the respective project site. 1.2.4. Once the project-specific glazed windows and doors are received by the store managers, they will perform partial goods receipt against the reservation created after quality checks. 2. Common Material 2.1. Scenario 2: Common Materials – External Procurement 2.1.1. Enhancement to reservation (E2) for network or WBSE to hold the spread or distribution based on the forecasting information. 2.1.2. This distribution should update the delivery schedule of the scheduling agreement (via enhancement) (E4) based on the various reservations generated from the different projects, once the forecasting cycle for the enterprise is done. 2.1.3. Workflow email notification (W2) based on the supplier or service provider and by project or construction zone/ district to be triggered once the forecasting is completed/ rolled over to the next period for all the services and materials of the enterprise. The content and format of this email notification should be compatible and universal to most platforms (platform independent). 2.1.4. When the common material is received at site, this is received against the reservation as a part quantity once the quality checks are completed. 201 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications 2.2. Scenario3: Common Materials – In-House Production (Short Lead Times) 2.2.1. Enhancement to reservation (E2) for network or WBSE to hold the spread or distribution based on the forecasting information. 2.2.2. This distribution of quantity for the forecasted week/ month will allow site engineers to create planned orders (via Enhancement) E5 manually for the in-house readymix production plant on a day-to-day basis or on an asneeded basis. 2.2.3. The in-house ready-mix concrete plant can view reservations by period (via report) R1 for their plant so that they can forecast their raw material quantities like cement, aggregate, sand and additives, and so on. When the planned order is generated by the site manager, the plant’s production supervisor converts it into an actual production order and fulfills the requirement. 2.2.4. When the ready-mix truck discharges concrete at the site after the quality check (slump test), the reservation is partially confirmed to the extent of the volume of one ready-mix concrete truck (6.1 m3). The total enhancements considered here are one report, two workflows, and five enhancements. Integration with Resource Management In the initiation and planning phase, the baseline quantities are planned and baselined. These quantities and their requirement dates fluctuate during the course of the project. In the case of IT-related projects, the skill or qualification required for the resource type varies. The specialized skills and qualification requirements may evolve during the course of the project. For the purpose of integration with resource management, we use an example of an information technology project. 202 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Based on the scheduling and forecasting performed as part of the forecasting cycle for an information technology project, the project manager should be able to determine the resource type spread or distribution based on the different forecasting periods— weeks or months. This information, along with the skill or qualification information, can be used by the contact person or resource planner/manager via MRS to soft book or hard book resources. The following enhancements are required to feed the forecasting information into the multi-resource scheduling (MRS). 1. MRS currently operates based on the start and end data and the distribution profile key captured in the network activity. As the project manager/scheduler has provided the detailed distribution of effort based on the forecasting periods, this information can be readily taken via enhancement (E1). This determines demand instead of basing it on the normalized distribution key that the standard SAP PS – MRS integration offers. The total of one enhancement is applicable to the integration of SAP forecasting workbench demand to SAP MRS. In the case of engineering, construction, and operations projects, the enterprises themselves use heavy machinery and heavy equipment and they can be planned for deployment at various construction sites using SAP MRS based on the forecasting demand generated by the scheduler or the project manager. 1. Similar enhancements to the one mentioned previously have to be performed where the detailed distribution of number of days based on forecasting periods can be readily taken via enhancement (E1). This determines demand instead of basing it on the normalized distribution key that the standard SAP PS – MRS integration offers. Engineering, construction, and operations project enterprises can also have light machinery and equipment that has to be scheduled on a daily basis or partially in a day. For these requirements, use the standard SAP PS ➤ MRS integration with date and time. Although the project manager/scheduler might forecast the number of hours for a forecasting period, this forecasting is high level compared to the daily or hourly scheduling. Hence, the forecasting workbench can provide date planning and time planning features for these items or these items can be planned based on date and time 203 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications on the network activity after performing forecasting by period. If these date and time intervals of equipment requirements were to be forecasted and scheduled, then the forecasting workbench should be enhanced further. A total of one enhancement is applicable to the integration of SAP forecasting workbench demand to SAP MRS. AP Interface with Schedule Management S Applications SAP Enterprise Resource Planning (SAP EHP 6.0 EHP8 and S/4 HANA) has most of the project management capabilities you need for the effective and efficient planning and execution of projects for all types of industries. But more and more specialized project management products are available in the market every day, which gives you a lot of choice. These products are specialized in a specific area and in some cases, certain parts of an enterprise feel that these products enable them to perform better in terms of specialized capability and with a user-friendly interface. There are always pros and cons when integrating with third-party applications and the perspective toward the usage of third-party applications and integration with SAP was discouraged due to integration challenges and improper implementation. This section assumes that many organizations want to use specialized third-party applications for their project management capabilities, with enterprise service oriented architecture (eSOA) features being available in SAP. Scheduling is one the capabilities in which we see two prominent third-party applications being considered for integration with SAP: • MS Project • Oracle Primavera Why is the interface to third party schedule management application required? Project management workforce is a contingent workforce in many enterprises. Project managers are used to prominent third-party applications such as MS Project server for IT project management, Oracle Primavera P6 for construction project management, Jira for Agile methodologies, as well as other cloud solutions such as Microsoft Project Online, 204 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications ProWorkflow, monday.com, Wrike, LiquidPlanner, Mavenlink, Clarizen, and so on. Since SAP project management applications including SAP PS, PPM, and CPM, require training and some kind of expertise, there is additional ramp-up time before a project manager can get up to speed and start to use these capabilities. Project managers often work in MS Project, P6, Jira, and so on, and export key information in Excel, which are then summarized as monetary value or by quantities and then uploaded to the SAP application for financial reporting and baseline/variance comparison purposes. This kind of process leads to lack of transparency, incorrect reporting, and lack of trust in the numbers being reported by finance controllers. This will lead to additional non-value added processes to ensure these values match and will further increase the month-end close and reporting time. The resolution for this issue is as follows: 1. Identify projects that require schedule management application integration: Not all projects in SAP PS application require integration with schedule management integration. In SAP PS, projects for the purpose of overhead/cost management, for managing budgets of maintenance work (routine maintenance) and service level (operations) are also managed along with project work (construction, research and development, engineering and design, major overhaul maintenance, etc.). Only the project work requires the schedule management application integration. 2. Ensure that projects are created at the same level as the schedule management application: Ensure SAP PS projects have a set of defined rules when a project is created. This should also takes into consideration the level at which the schedule management application has its project created. Ensure that the rule is consistently followed in the schedule management application as well. SAP PS and PPM allows you to group the work package of projects in many different ways, such as by using subproject labels or by using custom grouping fields at the SAP PS project. You can also use the PPM collection or the PPM item as the work package and the PPM initiative as the projects/programs. Other possible integration options include manual linking of multiple SAP PS project as object links to PPM Item. Using this option, many useful 205 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications functionalities such as DFM will be restricted. The best option is to use the PPM item as a work package and a PPM initiative as the projects/programs. 3. Interface with a schedule management application via SAP Enterprise Project Connector (EPC): Interface the schedule management application, so that highlevel project structures are created from SAP PS to the schedule management application. Detailed planning objects are created in the schedule management application, which are then created in SAP PS. Perform regular updates of key financial/human resource/plant and equipment master data information from SAP PS to the schedule management application. Schedule/resource assignment related information should be transferred from schedule management application to the SAP PS. Refer to the following section for the detailed design principle of the SAP PS EPC interface. It includes an example of a concept that was used with one of the leading public sector organizations in Australia. Design Principles for the Interface For any interface, it is good practice to define design principles and validate the detailed design based on these design principles. During their lifecycles, interfaces can change and transform. During this process of change and transformation, it is always best practice to validate if you are meeting the original design principles of the interface. A new factory calendar will be created only if it’s necessary to align with the project calendar. Otherwise generic country calendars are adopted and any date-related warnings that are generated as part of the interface will be ignored. A more detailed schedule is managed in the schedule management application, and SAP will simply accept the interfaced scheduled dates. 1. All costing, revenue, and effort information is captured in SAP. Except for effort, all this information will remain only in SAP. 206 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications 2. All master data (such as employees, suppliers, service providers, temporary staff, and equipment) will be created and maintained in SAP. All the master data will be shared with the schedule management application. No sensitive information will be shared with the schedule management application. 3. Project structure: a. Project creation: SAP PS Project will be 1:1 with the scheduling application project. Project definition and key structural elements, such as the key WBSEs and milestones, will be created first in SAP PS and will be replicated in the schedule management application. b. Detailed project structure such as the task in the schedule management will be created. It will be replicated as an activity and activity element depending on the detailed configuration. 4. Scheduling: a. The Schedule Management application will perform automatic scheduling on a daily or periodic basis (weekly or monthly) as per the enterprise’s business requirement. b. The schedule management application will then interface the relationship between activities, scheduled dates (early and latest - start and finish dates), constraints if any, effort as detailed by the project manager or scheduler or planner, duration (if the project calendar is not aligned to SAP factory calendar), and floats. The scheduled dates and floats are auto-computed by the system but it is advisable to have these dates aligned with the scheduling application, because resourcing, procurement, production, and forecasting scenarios are based on these dates. 5. Resource management: a. Resource profiling, requests, and staffing by contact person/ resource manager will be performed via SAP MRS with the SAP ECC or S/4 application. 207 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications b. The SAP MRS Resource management application will require the date information interfaced to the SAP PS Network activity from the scheduling application and forecasting information captured by the project manager/planner in the SAP forecasting workbench once the project execution is in progress. c. Resource assignment details will be shared with the schedule management application, so that there is visibility of the resource name and type of resource so that scheduling is performed seamlessly without incorrect assumptions. 6. Procurement and production: a. All procurement activities such as purchase requisitions/purchase orders for the project specific items – service, subcontract, and materials; delivery schedule for scheduling agreements for common items (based on scheduled dates or forecasted dates, sourced from scheduling application and forecasting workbench) will be performed in SAP ECC or Ariba application. b. All production activities, such as creation of reservations for network or WBSE, creation of planned order based on scheduled dates or forecasted dates, sourced from scheduling application and forecasting workbench will be performed in SAP Production planning. c. Once the procurement and production planning activities are completed, these suppliers or service providers basic details (internal or external) will be shared with the scheduling application so that there is visibility of the resource name and type of resource so that scheduling is performed seamlessly without incorrect assumptions. 7. Actual execution: a. Timesheet recording will be performed in the SAP CATS application via mobile or desktop apps. b. SAP PS network confirmation of services (for example annual maintenance service by an in-house team) will be performed in SAP PS via mobile or desktop apps. c. Convert planned order/reservation to production order by the plant manager or shop manager will be performed in the SAP Production Planning (PP) module. 208 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications d. Good receipt, good issue, service entry, and service confirmation by external supplier or service provider will be performed in the SAP MM and PP module via mobile or desktop apps. e. Perform milestone, period, resource, order, or delivery based project billing and recognize revenue for unbilled service and material in SAP SD module via mobile or desktop app. f. Perform overhead posting, month-end accruals, and assessment journals to the relevant project in the SAP FICO module using workflow approval. g. Once all the actual postings are performed, transfer the actual effort, costs, and revenue to the schedule management application. Actual effort is used for the determination of remaining effort and to perform automatic scheduling of the remaining effort/ quantities. Other actual monetary values, such as cost and revenue, are shared for information purposes only so that there is visibility for the project manager while performing scheduling and to ensure that the project manager/planner/scheduler does not make incorrect assumptions. 8. Change request or project variation: a. All types of variation for all categories (scope, schedule, quality, safety, incorrect effort, etc.) will be created and approved in SAP PS via the claim or change request process in SAP CPM. When variations or change requests are approved, additional activities will be created in SAP PS. These additional activities will be transferred from SAP PS to the scheduling application. Once scheduled in the schedule management application and interfaced back to SAP PS, resource planning and staffing will commence in SAP PS via MRS. If execution of the change request or variation has commenced, based on the actual work and scheduling, forecasting will be performed in the SAP PS forecasting workbench for the project variations. 9. Forecasting: a. Forecasting is performed in the SAP PS forecasting workbench custom transaction based on the planned quantity/effort and actual quantity/effort, between the latest scheduled dates, by 209 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications performing the distribution of the remaining quantities and to check if the distribution of the remaining quantities as per the project requirements and resource availability can be met within the latest finish date, otherwise amend the forecast finish date. b. Forecasted data, along with any forecast finish date update, has to go back to resource schedule and Gantt from SAP PS to the scheduling application. 10. Risk and issues: a. Project risk will be captured in SAP CPM. When risk leads to an issue, it will be captured as an issue in CPM and any change request or project variation associated with the issue can be captured in SAP CPM. b. Only the change request and variation, when approved and created as an additional activity, will be transferred from SAP PS to scheduling application. Reference SAP notes and contents: • 2292815 - SAP EPC 3.0 Sample Integration Solutions (SIS) Document Collection • 2292770 - SAP EPC 3.0 Installation Modes and Solution Management • SAP Help for EPC on Integration of SAP ERP, SAP S/4HANA On- Premise, or SAP Portfolio and Project Management and Third- Party Enterprise Schedule Management Systems Table 3-1 is an example of SAP PS integration with MS Project server using EPC 1.0. This table details the project management disciples and its scope to the SAP and the Non-SAP Schedule Management applications. The enterprise had chosen Microsoft Project Server as the schedule management application for construction and IT project management. In this enterprise, forecasting was performed in SAP BPC and operational planning was performed in SAP PS/ PPM (ASAP). Resource management was covered as part of the click soft integration, initially for the maintenance work and then for the whole of the enterprise, including project work. 210 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Table 3-1. Project Management Disciples and Their Scope with Reference to SAP and Non -SAP Schedule Management Application—An Example Discipline Description ASAP Scope Non-ASAP Scope Structures • Standard projects that can be used as X ASAP – high level, templates when creating a new project, used to organizational standardize the basic project structures across monitoring the organization. Non-ASAP - Detail • Project definition: Name of the individual X view, project control project • WBS elements are objects in the system used to break up a project and provide a reporting structure X • Network is a network of project activities X X • Internal network activity is a project activity performed by the enterprise internal staff/ contractors • Planning for general cost includes primary costs, labor, materials, and expenses X • Work order ownership is in SAP. (work orders will not be interfaced to MS Project) X Scope • Definition of the project scope and storage of project documents (TRIM/OpenText/Objective/ eDMS) Time • Milestones (critical/high level reporting dates and start and end dates: linked to MS Project start and end dates) • Project scheduling is setting out the project activities in time; by planning the activity duration and maintaining the Finish-Start relations between the activities X X X (continued) 211 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Table 3-1. (continued) Discipline Description ASAP Scope Cost/Revenue • Overall budgets will be managed in SAP BPC and distributed to SAP PS/PPM X • Planned costs will be maintained in SAP PS. When using network costing, the inputs come from the MS Project schedule X Non-ASAP Scope X(exceptions exist) • Operational forecast costs calculation and reporting (using an activity based structure) • Actual costs are maintained in SAP, the SAP PS X Project will receive costs from SAP MM, CATS, and FICO. The actual costs will be interfaced to SAP PPM/BPC. • Sales revenue will be managed in SAP (using SD and AR) Management of Change Quality X • Contingency planning (to be included in the planned cost) X • Change request process to be managed outside of SAP (the Financial implications of the change are updated in SAP PS) X • The scheduling implications of the change are updated in MS Project X • Quality tasks will be integrated in the project schedule X (continued) 212 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Table 3-1. (continued) Discipline Description ASAP Scope Resources • Maintain resource data is for maintaining details for resources that will be done in SAP HR X • Capacity management X Non-ASAP Scope • Resource allocation and resource leveling for X divisions/branches that manage their resources using work orders and Clicksoft will be managed in SAP • Resource allocation and resource leveling for divisions/branches that do not manage their resources via work orders and Clicksoft will manage the resources via MS Project X Knowledge Management • Knowledge management will be done in TRIM. Some parts of the organization will use network drives, mostly when working with large CAD drawings X Communications • Communication plans will be stored in TRIM; distributing communications will be done outside or using SAP and MS Project • Communication tasks can be included in the project schedule in MS Project X Risk and Issues • Risks and issues will be maintained in lists in MS Project • If contingency planning is done on an individual risk level; a cost activity can be included in SAP PS to plan a contingency for the risks • Activities can be scheduled that will consume the contingency when the risk becomes an issue, or actions taken to prevent the risk from becoming an issue X (continued) 213 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Table 3-1. (continued) Discipline Description ASAP Scope Sourcing and Contracting • Procurement of services (subcontractors) and goods will be done in SAP X Performance Management and Reporting • Status reporting from MS Project Non-ASAP Scope X • Budget reporting from SAP BI (using the PPM structures) X • Operational financial reporting from SAP PS/PPM X Governance and Assurance • Project governance and assurance will be maintained offline Workplace health and safety • Incident recording, management, and reporting X • Workplace risk assessment and management (excludes corporate risk) X Figure 3-6 shows the SAP PS to MS Project integration scenario 1, where both systems use the same structure. There are two forms of data transfer—A and B. Data transfer A is used when the high-level project structure (project definition, division WBSEs (Level 2), phase WBSEs (Level 3), and WBSE milestones and its dates) is set up in SAP PS and transferred to MS Project. Data Transfer A is used for any subsequent update of attributes related to the project definition, division WBSEs, phase WBSEs, and WBSE milestones. The detailed project structure is developed in MS Project by the project planner or scheduler. Detailed project structure will include tasks, duration, dates, and relationships to other tasks. Data Transfer B is used to transfer this detailed information from MS Project to SAP PS. In order not to overcomplicate the interface, the deletion functionality will not be provided both in SAP PS and MS Project and this can be accomplished via Access. Only deletion flags and indicators are allowed to be set in the system, because there will be no deletion of the objects. There could be a few technical structural objects created in the system for its respective reporting and these objects 214 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications need not be transferred or exchanged between applications. These technical structural objects can be restricted from being transferred to the other application by the use of transfer indicator—if it is X, then a transfer is performed, but if the transfer indicator is set to blank, the transfer will not be performed. As mentioned, this option is only available for technical objects that do not have cost (plan and actual cost and revenue). Figure 3-6 explains the IT project with a high-level project structure showing cost capture and AUC structure. Only the project definition, IT division WBSE, and phase WBSEs (Phase 1 to 5) and milestones under cost capture are transferred to MS Project. These WBSEs and milestones are created as tasks within MS Project. Detailed tasks (Task 1 to 7) are created in MS Project under the previously created/transferred tasks from SAP PS, which makes the previous tasks as summary tasks in MS Project. When these detailed tasks are transferred to SAP PS using Data Transfer B, these MS Project tasks, their duration, their scheduled dates, and their relationships are copied to SAP PS as activity, activity duration, activity scheduled dates (latest and earliest start and end dates; constraint dates; etc.), and activity relationships with other activities of the project. In this manner, project structure are synchronised from SAP PS to MS Project and vice versa. The scheduling information from MS Project to SAP PS is seamlessly exchanged for the successful execution and completion of the project. 215 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Figure 3-6. Scenario 1: Structure in SAP and in schedule management application are the same Figure 3-7 shows the SAP PS to MS Project Integration scenario 2, where the SAP PS WBS element is based on the Cost Breakdown Structure (CBS), whereas the MS Project structure is based on the phase and task WBS. Similar to scenario 1, in scenario 2, there are two forms of data transfer—A and B. Data Transfer A is used when the high-level project structure (project definition, division WBSEs, and Milestones and its dates) is set up in SAP PS and transferred to MS Project. Data Transfer A is used for any subsequent update of attributes related to the project definition, division WBSEs, and WBSE milestones. In scenario 2, SAP PS Project does not have any phase WBSEs but it only contains a Cost Breakdown Structure element. The detailed project structure is developed in MS Project by the project planner or scheduler. Detailed project structure includes tasks, duration, dates, and dependency or relationship to other tasks. Data Transfer B is used to transfer this detailed information from MS Project to SAP PS using Assignment Type 216 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications mapping to the Cost Breakdown Structure element. In order not to overcomplicate the interface, the deletion functionality will not be provided in SAP PS and MS Project and this can be accomplished via Access. Only deletion flags and indicators will be allowed to be set in both systems, as there will be no deletion of the objects. There could be a few technical structural objects created in the system for its respective reporting and these objects need not be transferred or exchanged between applications. These technical structural objects can be restricted from being transferred to the other application by the use of transfer indicator. If it is X, the transfer is performed, but if the transfer indicator is set to blank, the transfer will not be performed. As mentioned, this option is only available for technical objects that do not have costs (plan and actual cost and revenue). In Scenario 2, the Cost Breakdown Structure element will have a blank transfer indicator. Figure 3-7 explains the construction project with a high-level project structure showing cost capture and AUC structure. Only the project definition, root PMC division WBSE, and WBSE milestones under cost capture are transferred to MS Project. SAP PS project definition will be transferred as Project. Root-level PMC division WBSE will be transferred as a summary task and all the WBSE milestones are defined as tasks that are defined as milestones, in SAP PS. Subsequent summary tasks and detailed tasks (Task 1 to 7) are created in MS Project under the previously created/transferred task from SAP PS. When these detailed tasks are transferred to SAP PS using Data Transfer B, these MS Project detailed tasks, their duration, their scheduled dates, and their relationships are copied to SAP PS as activity, activity duration, activity scheduled dates (latest and earliest start and end dates; constraint dates; etc.), and activity relationship, under the Cost Breakdown Structure element using the Assignment Type mapping. In this manner, project structure from SAP PS to MS Project and vice versa are synchronised. The scheduling information from MS Project to SAP PS is seamlessly exchanged between SAP PS Cost Breakdown Structure and MS Project Work Breakdown Structure. Note The full size diagram is included in this book’s source code download. 217 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Figure 3-7. Scenario 2: Detailed task in MS Project mapped to a SAP Cost Breakdown Structure Fundamentals of Estimation and Costing This section covers the fundamentals of costing. It goes through the SAP concepts about how SAP stores the unit cost of the material, labor, service, and so on, that will be used by SAP PS for the purposes of estimation and costing. Internal Labor Within the SAP Controlling (CO) module, for every activity type and cost center combination, the system stores a cost rate. This rate can be different for the activity type with another cost center. Therefore, the combination of activity type and cost center will determine the cost rate. This cost rate is used for all internal labor and plant and equipment work. 218 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications The SAP Transaction where internal work-related rate is maintained is KP26. Many enterprises create these cost rates at the level of a band of their internal staff and type of plant and equipment based on its per hour internal hire rate. These cost rates can be captured per period/month and fiscal year. Figure 3-8 shows the cost rate maintained for the Senior Consultant level service during the fiscal year 2022 (periods 1 to 12) as $100. Figure 3-8. Activity type rates based on sender cost center Figure 3-9 shows the cost rate periodic breakdown for Senior Consultant Level service during Fiscal year 2022 (from periods 1 to 12) as $100. In this periodic breakdown screen, the rates can be different for different periods. In the following example, cost rates have been maintained the same for all periods of the fiscal year. 219 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Figure 3-9. Activity type rates based on sender cost center by period E xternal Labor/Service Within SAP Material Management (MM), for services rendered by the external service provider, service master can be created and the cost rate is defined based on the service measurement unit. These cost rates are recorded for the service master as service conditions on different parameters, such as service master, vendor, plant, contract, purchasing organization, and so on, and based on the validity dates. For different validity dates, different cost rates can be recorded for the same parameters. Figure 3-10 shows a list of transactions that are related to service master and service conditions. Figure 3-11 shows service condition (rate) based on validity dates. 220 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Figure 3-10. Transaction codes related to the service master and service conditions Figure 3-11. Service condition (rates) based on validity dates 221 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Subcontracting (Externally Processed Activities) When subcontracting the purchasing information recorded (purchasing info record) from similar procurement activities that have happened before can be referenced and copied for costing purposes. Figure 3-11 shows the Subcontracting Info record selection screen. Figure 3-12 shows the Subcontracting Info Record with price condition (rate) based on the purchasing organization, material group, and validity dates. Figure 3-12. Subcontracting info record selection screen 222 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Figure 3-13. Info record with price condition based on purchasing organization, material group, and validity dates The purchasing info record stores information based on the vendor/supplier and the subcontracting work type (material group) being performed. The purchase info record can be maintained at the plant level or at the purchasing organization level. Subcontracting info record stores cost-related information by supplier, purchasing organization/plant, material group (subcontracting work type), and by validity of from and to dates. I nternal Material For internal material by way of the product costing that takes place in the SAP Controlling (CO) module, a standard price is determined. All the input raw material, activities/operations/processes and overhead by way of the costing structure allows you to compute the cost rate of the internal materials. This price is based on the period and fiscal year. Figure 3-14 shows the material master’s accounting view screen, where the standard price of an in-house finished product has been maintained. This price is updated using product costing by defining a standard cost estimate structure. 223 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Figure 3-14. Material Master – Accounting View – Standard Price E xternal Material For materials that are procured from suppliers, the cost rate can be obtained from the purchasing info record, as seen earlier for subcontracted work, or it can be determined based on the moving average price of the materials. The moving average price of external materials is updated when these goods are received (at goods receipt) by averaging the cumulative value of the same stocked material by the number of the same stocked material in the respective plant. Figure 3-15 shows the material master’s accounting view screen, where the moving price of traded goods has been maintained. This price is updated when traded goods are received to the general stock as part of the goods receipts process. 224 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Figure 3-15. Material Master – Accounting View – Moving Average Price Figure 3-16 shows the material info record price condition (rate) based on purchasing organization, material, supplier, and validity dates. When creating or changing vendor quotations, scheduling agreements, vendor contracts, and purchase orders, you can use the InfoUpdate field to specify that the info record is to be created or updated. Figure 3-16. Info record with price condition based on purchasing organization, material, supplier, and validity dates 225 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications AP Interface with Estimation and Costing S Applications Estimation and costing is performed predominantly before the commencement of the project scope of work and any subsequent project variation. There are different reasons for performing cost estimates; the following are some of the major ones: 1. Cost estimate before performing an investment decision a. Investment decision by the city corporation/council to set up a desalination plant. 2. Cost estimate for tender or as part of the bidding/quotation process a. Tender preparation cost estimate for design and build of 110 MWDC solar park. b. Bid cost estimate of design and build of 110 MWDC solar park. 3. Cost estimate for solution option and approaches a. Seawater intake pumping system with concrete volute pumps or seawater centrifugal pumps. 4. Cost estimate for baseline preparation where no previous estimate exists a. R&D cost estimate of a human medicinal drug development through various stages—Synthesis and Extraction, Biological Screening Toxicology and Safety Testing, Pharmacological Dosage, Clinical Evaluation, Process Development, and Regulatory and Bioavailability. 5. Cost estimate for replan or transfer of work during execution a. Replan of IT project as design/landscape finalization is delayed with many open items. b. Transfer of a subcontracted work to a new agency for the remaining work as the previous service provider has quality and timeline issues. 226 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications 6. Major maintenance work cost estimate to draw down allocated budget from AMP a. Budget drawdown cost estimate for the refurbishment of community swimming pool from council’s annual AMP swimming pool refurbishment budget. 7. Project cost estimate to draw down allocated budget from program a. Budget drawdown cost estimate for the design and development of human landing (lunar) systems (HLS) for NASA’s Artemis program. 8. Infrastructure project cost estimate at various stage gate approvals a. Business case (one of the stage gate) cost estimate for the upgrade of major intersections by transport and main roads. 9. Cost estimate for project variations (external and internal) a. Customer variation to include a small pool in the existing home build Reference: 5-reasons-why-you-can-t-do-a-project-without- cost-estimating Different techniques are used to perform cost estimation as described in the reference “The 4-best-project-estimation-techniques”. These different estimation methods and techniques are based on derivative factors, rules of thumb, orders of magnitude, parametric models, historical databases, and unit rate costing. These different techniques are used for various purposes during the project lifecycle as these techniques provide different levels of estimates (estimate class) and estimate quality. Figure 3-17 is an excerpt from the Association for Advancement of Cost Engineering (AACE) International documentation for Engineering Procurement and Construction for Process Industries. It shows a level of estimate (estimate class), project definition maturity levels, purpose of estimate, estimation technique/methodology, and expected accuracy. 227 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Figure 3-17. Cost estimate classification matrix for process industries A contingency may be included in an estimate to provide for unknown costs indicated as likely to occur by experience, but are not identifiable. When preparing estimate to set a budget or to set aside funding, a contingency is often added to improve the probability that the budget or funding is adequate to complete the project. The estimate or budget contingency is not intended to compensate for poor estimate quality and is not intended to fund design growth, client changes/variations, or anything else unrelated to delivering the scope as defined in the estimate documentation. More contingency is generally needed for earlier estimates due to the higher uncertainty of estimate accuracy. Figure 3-18 illustrates that the estimating accuracy ranges overlap the estimate classes. It also shows that, as the project definition maturity level increases, the variation in accuracy of the estimate becomes smaller. There are cases where a Class 5 estimate of a particular project may be as accurate as a Class 3 estimate of a different project. For example, similar accuracy ranges may occur if the Class 5 estimate of one project is based on a repeat project with good cost history and data, whereas the Class 3 estimate is for another project that involves new technology. It is for this reason that Figure 3-17 provides ranges of accuracy. 228 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Figure 3-18. Example of the variability in accuracy ranges for a process industry estimate Reference: • Wiki Cost Estimate • The 4-best-project-estimation-techniques • how-does-cost-estimating-work-6-steps-to-learn • AACE on EPC Project of Process Industry 229 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications During the different stages and phases of the project’s lifecycle, changes evolve and design certainties are available and finalized. Certain components that were initially present in the estimate’s constructs are either removed or reduced and this happens with the contingency and factors that were initially estimated. Therefore, you must version/ snapshot/baseline these cost estimates during the different stages of the project’s lifecycle. Any solution used by the enterprise should allow you to snapshot these cost estimates and should be able to capture the following cost estimate components: 1. Quantity-based variable lines (based on rules of thumb for cost components that do not have master data in the database) 2. Lump sum variable lines (contingencies) 3. Text lines (unstructured cost estimate lines) 4. Subtotal and arithmetic rules cost lines (based on factors/ parametric model, factor for logistics and insurance, contingency, and overhead) 5. Internal and external labor (structured cost estimate lines) 6. Internal and external material (structured cost estimate lines) 7. Internal and external plant and equipment (structured cost estimate lines) 8. External service and subcontracting work (structured cost estimate lines) SAP PS Easy Cost Planning provides the framework to capture, record, and estimate multiple versions of the cost estimates for different purposes, such as the phases of the project and to estimate alternative solutions and options. Unlike many other estimation and costing applications, SAP PS Easy Cost Planning does not allow recording the best case (BC), most likely (ML), and worst case (WC) estimates or quantities in one single version or snapshot. As a workaround, this has to be performed by preparing the worst case (WC) estimate and then copy it to create most likely (ML), and best case (BC) estimates as two other ECP versions. Using a custom report show all 3 estimates along with the P50 and P90 estimates for the project using the formula shown in Figure 3-19. 230 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Figure 3-19. Formula for P50 and P90 estimates in a public sector enterprise Why is the interface to the third party estimation and costing application required? There are many specialized cost estimation tools available in the market for various different industries, such as capital projects (utilities, oil and gas, etc.), engineering and construction, manufacturing (engineered-to-order and made-to-order), professional services, aerospace, defense, government/public sector contractors, high tech, telecom (solution business case), and so on. In capital projects (utilities, oil and gas, etc.), engineering and construction, manufacturing, aerospace, and defense, the estimates are prepared based on drawings. There is specialized software in the market—such as ARES PRISM Estimating, Autodesk (BIM 360), RIB iTWO, InEight—that convert these drawings into Bill of Quantities (BoQ) and have an interface to SAP so that these cost estimates (BoQ) can be recorded in the SAP Project System. For professional services (IT, legal, advertising, event management, engineering services, etc.), Integrated Project Pricing and Estimating (iPE) byTwenty5 uses three point estimates, parametric, and factor estimation. This software provides an interface to SAP so that cost estimates (BoQ) that involve labor, material, travel, and so on, can be recorded in the SAP Project System. 231 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications In addition to these costing applications, the most common cost estimate applications are MS Excel files, MS Access databases, and home grown applications. In one of Australia’s major telecom providers, there were about 60-70 different applications used by various parts of the business for the purpose of cost estimation, where the value of the quotes ranged from a few thousands to a few hundred million dollars. The most important challenge with this enterprise was to make them use one common pricing model based on the SAP System, as the vendor material’s price changed frequently and vendor catalog items were numerous. SAP provides web services for the creation of cost estimates in the Project Systems module. Other third-party applications should leverage these web services to transfer the bill of quantities and cost estimates. Reference: • InEight • ARES Prism • iPE • Autodesk BIM360 • RIB iTWO Design Principles for the Interface For any interface, it is good practice to define design principles and validate the detailed design based on these principles. During their lifecycles, interfaces can change. During this process of change and transformation, it is always best to determine if you are meeting the design principles of the original interface. The following are design principles for the cost estimation interface with SAP PS Easy Cost Planning (ECP): 1. All items and their quantities should be recorded in the SAP PS ECP cost estimate at the root level WBSE. 2. All items should be mapped to the different master data in the system—internal labor, material, service, subcontracting, plant and equipment, and so on. 232 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications 3. All items that cannot be mapped to SAP master data should be created using the variable items category for the cost estimate line relating to contingency, overhead, cost associated with the risk, and so on. 4. All costing-relevant master data should be shared with the costing application so that relevant master data can be picked. The frequency of updates has to be decided depending on the business requirements. The best option is a batch job that extracts the master information once every eight hours to the third-party application or its database. This could vary based on specific business needs. 5. If, for some reason, the new cost estimate lines are added to a third-party costing application for which no SAP master data exists, at the time of transfer, these should be created as variable item categories. 6. The project cost planner or estimator must review the cost estimate and create a new material or service master in the system. Once created, the master data can be updated in the SAP PS ECP cost estimate, which will then get cascaded to the third- party application for future reference. 7. Multiple versions should be allowed in SAP PS Easy Cost Planning so that different versions can be created for the following purposes: a. Alternate solution options or approaches b. Revised cost estimate of each stage gate c. Original baseline of the approved cost estimate for comparison d. Updated or revised baseline of the approved cost estimate for comparison 8. The project cost planner or estimator should reference the approved cost estimate, prepare the detailed cost plan, and schedule it before the actual commencement of the project execution phase. 233 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications 9. Project structures, including network activities, should be interfaced to the third-party application so that future project variations/change requests can be recorded accordingly. 10. Some third-party applications have the ability to record and store bills of quantities (BoQ)/cost estimates for the best case, worst case, and most likely scenarios in one document. When interfaced to SAP PS ECP, only the most likely quantity and monetary value will be transferred as part of the standard SAP solution. If the best case and worst case scenario need to be recorded in the same version, the standard SAP solution has to be enhanced to interface and store best and worst case quantities and monetary values (some items are planned by dollar value and not by quantity). 11. Cost estimates prepared for project variations follow the same process as the initial scope of work, except for the fact that this project variation estimate is interfaced and recorded to SAP to update the project variation claim or CPM change request against the respective network activities. 12. When it is approved, similar to the initial scope of work, the project variation claim should update the respective network activities-both network costing for actual execution and revised baseline ECP/CO/Project version. The newly approved change request/project variation updates the cost estimate at the root WBSE in SAP PS ECP as a separate cost estimate. 13. As mentioned, the most important challenge is the maintenance of vendor catalog items as material in the SAP system. For this purpose, you can use the Vendor Part Number (VPN) in the vendor info record and the Manufacturer Part Number (MPN) in the purchasing view of the material master for the original equipment manufacturer (OEM). 14. When the cost estimates are transferred from the third-party application, the system defaults to a unit price if not provided by the interface. Otherwise, the price of the material or service as sent by the third-party application can be captured and used to compute cost estimates. 234 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications AP Interface with Forecasting Applications S or Products This section covers the SAP PS interface with third-party forecasting applications. As discussed in Chapter 2, the forecasting functionality in SAP PS has many gaps. For this reason, many enterprises and project managers prefer to work with other project management applications for the purpose of forecasting, such as MS Project or Oracle P6. Other project managers prefer to use Excel spreadsheets to update the cost forecast. Why is the interface to the third party forecasting application required? Once project forecasting is performed on an external third-party application, there are many side effects to the project management solution within SAP PS: 1. When forecasting is performed outside of SAP, the need to send the project quantities to SAP PS will appear as not essential. By sending quantities to SAP PS, there will be additional reconciliation issues. If the quantity does not match due to the frequency of the update, this impacts the ability to perform changes during period end close. 2. If the forecasted item’s quantities and distribution are not sent back to SAP PS but a lump sum value by period/FY is sent, this causes all the schedules (including the resource schedule, the procurement schedule, and the in-house production schedule) to stop working. 3. If this happens, the project and WBSE will be used purely for costcapturing and asset-capitalization purposes. 4. This will slowly lead to the project structure being created as a Cost Breakdown Structure and not as a project schedule. Keeping this in mind, the decision to keep forecasting outside of SAP should certainly be backed up by interfacing both the quantity and monetary value of the forecasted item back to SAP PS. 235 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Design Principles for the Integration For any interface, it is good practice to define design principles and validate the detailed design based on these design principles. Interfaces during its lifecycle have the potential to get changed and transformed. Therefore, during this process of change and transformation, it is always a best practice to determine if you are meeting the design principles of the interface. External forecasting applications, such as MS Project, Oracle P6, and Excel, should follow the following design principles when their forecasting data is interfaced to SAP PS: 1. Forecasting information should be shared by the third-party application at the level of network activity, activity element, material, and milestone to SAP PS. 2. Forecasting line items should provide quantity, monetary values, and spread or distribution of the remaining quantities by period/ fiscal year. 3. The forecast application should take into consideration actual work information from the timesheet application and activity confirmation application. All actual project information, such as the receipt or service entry sheet/acceptance of service from SAP MM, should be taken into consideration to determine the remaining work. It is only the remaining work that should be distributed to the latest finish date. 4. Any approved change request or project variation claim against the respective project network activity should be taken into consideration before scheduling and forecasting are performed in the third-party application. 5. If scheduling is performed by the third-party application in the case of MS Project or Oracle Primavera P6, this should be completed before the forecast finish date is updated and the remaining quantity spread is updated. This will ensure that correct remaining quantities and correct scheduled dates are reflected for the forecasting item before the commencement of forecasting. 236 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications 6. Forecasting (forecast finish date update and remaining quantity distribution) is performed by the project manager, work package manager, or scheduler based on the project requirements and the current situation. 7. For any items for which additional effort or quantity is required, compared to the remaining quantity, a change request/project variation should be raised in the SAP PS Claim or CPM Change Request. 8. Based on the frequency of forecast updates to the SAP PS system, the forecast line items’ quantity and monetary value at the level of network activity, activity elements, milestones, and material will all be interfaced back into SAP PS by period and fiscal year. 9. The forecasting application requires the following master and transaction information: a. Project structure: WBS, activities, activity elements, milestones, and material components b. Actual work and quantities from SAP CATS, SAP PS Confirmation, SAP MM (including External Service MM-SRV) c. Project/factory calendar if the forecasting application is not the scheduling application d. Scheduled dates for the project objects listed before if the forecasting application is not the scheduling application e. Revised baseline quantities from SAP network costing structures f. Costing information, such as internal labor rates, material rates, external service rates, and so on 237 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications 10. For excel spreadsheet based forecast, the SAP PS system can compute the remaining work (revised baseline − actual quantities) and provide the unit rate and scheduled dates (latest finish date). The project manager, work package manager, or scheduler should send back the quantities and the monetary amount by period/ fiscal year. If the finish dates are changed then the forecasted finish date should also be provided. Activities for this Chapter 1. For your enterprise, try to define the process flow related to project estimation, planning, budgeting, scheduling, forecasting, and workforce/capacity/procurement planning as part of the project period end process. Do this for, when the project is active and when it is in the execution phase. What is the sequence in which estimation, scheduling, forecasting, and workforce/capacity/procurement planning happen for the projects in your enterprise? 238 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications 239 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Test Your Learning 1. What’s the formula for remaining quantities during forecasting? Remaining Quantity = (________________- Actual Quantity). 2. If free float = total float = 0 for an activity, is the activity in the critical path? 3. Activity type (AT0001) rates can be different for different cost centers belonging to the same Controlling area. a. True b. False 4. SAP PS Easy Cost Planning allows periodic breakdown of cost and quantities. a. True b. False 5. Performing forecasts by quantity and by monetary amount by date/period and fiscal year supports resource management, procurement, and in-house production management schedules. a. True b. False Answers: 1. Revised Baseline Quantity 2. Yes 3. True 4. False 5. True 240 Chapter 3 Interface with Scheduling, Estimation, Costing, and Forecasting Applications Summary In this chapter, you learned about the critical touch points of estimating, forecasting, and scheduling functionalities with third-party applications and with other SAP process streams such as human resource management, plant and equipment management, and procurement and contracts management. • • • SAP Interface with Schedule Management Applications • Fundamentals of scheduling • Detailed planning of dates and schedule • Integration with procurement and production • Integration with resource management • Background on why an interface to third-party scheduling application is required • Design principles for the scheduling interface SAP Interface with Estimation and Costing Applications • Fundamentals of estimation and costing • Background on why an interface to third-party estimation and costing application is required • Design principles for the estimation and costing interface SAP Interface with Forecasting Applications or Products • Background and why an interface to a third-party forecasting application is required • Design principles for the forecasting interface In the next chapter, you learn about the industry best practices, business challenges, solution options, recommendations, and commonly asked questions related to EPPM. 241 CHAPTER 4 Industry Best Practices and Business Recommendations This chapter discusses industry best practices, business challenges, solutions, recommendations, and commonly asked questions related to Project, Program, and Portfolio Management (PPM). Unlike SAP’s best practices, which are software version and functionality specific, these industry best practices are based on PPM’s business practices and capabilities (which are outcome based). Only the top seven industry best practices are discussed in this chapter, but that does not mean these are the only ones that SAP offers. There are many more that are not covered because they are relatively less significant than the ones detailed in this chapter. This chapter covers four important business challenges faced by SAP Consultants and Business Partners during the implementation of the SAP solution and its application lifecycle. Again, this does not mean that there won’t be other business challenges. These four business challenges have been picked for discussion, as they have a large impact and bring significant benefit when they are dealt with correctly. In this chapter, business challenges are cross-examined and different solutions and recommendations are provided. In some cases, the recommendation is as simple as choosing one correct option. In other cases, the recommendations are situational and they therefore have to be interpreted based on the organization’s project management maturity, whether the organization is managing, delivering, or performing both, applications used for scheduling and forecasting, and so on. © Joseph Alexander Soosaimuthu 2022 J. A. Soosaimuthu, SAP Enterprise Portfolio and Project Management, https://doi.org/10.1007/978-1-4842-7863-5_4 243 Chapter 4 Industry Best Practices and Business Recommendations In terms of commonly asked questions, four questions have been picked for discussion. They resonate with the topics discussed so far in this book and with respect to the SAP solution roadmap. These questions are functionality and capability focused and have been picked based on their business impact and the benefits they can provide to business. In this section, the different solution options that are available for respective business needs are detailed with perspective. This chapter also provides a standard development object list and functionality list by industry as ready references for solution and application consultants and for business partners engaged in SAP implementations and maintenance (independent of the SAP versions, whether it’s S/4 HANA or an existing business suite). Industry Best Practices Best practices are a set of guidelines, ethics, or ideas. They can be commercial or professional procedures that are accepted or prescribed as being correct or most effective. They represent the most efficient or prudent course of action in a given business situation. Best practices may be established by authorities, such as regulators or governing bodies, or they may be internally decreed by a company’s management team. This section covers industry-specific best practices. Industry best practices are commonly used practices or procedures in the project, program, and portfolio management stream for a particular Industry. Mobility and App Based Project Management Solutions (Cross Industry) Most project management activities are performed in construction sites, mines, plants, and remote areas that lack connectivity to the enterprise resource planning tool. Even if there is a connection to the ERP tool, it is usually stationed at a construction site office (container buildings). This means that field engineers and service staff often have to perform offline recording/capturing of data and then transfer it to the SAP or ERP tool. In this age of 4G and 5G mobile technologies, smartphones and tablets, businesses and enterprises want their construction engineers, managers, supervisors, and service staff to perform this activity in real-time and only once. 244 Chapter 4 Industry Best Practices and Business Recommendations This is where SAP Fiori apps come in handy, by providing the perfect solution for the construction, mining, field engineers, and other field -related staff, to record information on their smartphones and tablets as soon as the measurements or activities are confirmed. This provides real-time updates on progress, inventory, costs, control, quality, and safety. SAP’s Portfolio, Program and Project Management (which comprises SAP Commercial Project Management (CPM), Portfolio and Project Management (PPM), and Project Systems (PS)) has around 250 Fiori-based apps that are related to project, program, and portfolio management solutions. Fiori is more than just a new user interface and the Fiori framework is designed in such a way that the applications can be used on different device types—desktop, tablets, and smartphones—using the standard browsers available within each system. Fiori is a set of cross-device applications called apps that, among other things, allow users to start a process on their desktop and continue it on a tablet or smartphone. SAP is developing its Fiori apps on its latest user interface framework, SAPUI5. SAP lists three types of Fiori apps: • Transactional apps • Factsheet apps • Analytical apps These apps are role based and are ready to use. Transactional apps allow users to perform SAP transactions on mobile devices as well as on desktops. For instance, there is a transactional app called “Confirm Network Activity,” as shown in Figure 4-1 for the confirmation of activities of different projects that are assigned to you. 245 Chapter 4 Industry Best Practices and Business Recommendations Figure 4-1. Confirm Network Activity transactional app 246 Chapter 4 Industry Best Practices and Business Recommendations Fact sheets display information about key business objects in SAP. For example, there is a fact sheet app called “Project Definition Overview,” as shown in Figure 4-2. It allows users to display the master data details for a project definition. Figure 4-2. Project Definition Overview fact sheet app 247 Chapter 4 Industry Best Practices and Business Recommendations Analytical apps allow users to display key performance measures and other aggregate information about the business. For example, there is an analytics app called “Procurement Overview,” as shown in Figure 4-3, which provides information related to the procurement of resources for commercial projects relevant to you. You can also perform PR and PO release, Goods Receipt & Service Entry, and Convert PR ➤ PO using this app. Figure 4-3. Procurement Overview Analytical app 248 Chapter 4 Industry Best Practices and Business Recommendations Table 4-1 lists the top 50 Fiori apps for easy reference from various project management applications, such as Commercial Project Management (CPM), Portfolio and Project Management (PPM), and Project Systems (PS) for S/4 HANA on-premise and cloud versions. Information in this table has been enriched so that users can easily make sense out of the list. If a native Fiori app is not available from the from SAP Fiori library, custom apps can be developed based on your organization’s requirements and are then accessible through mobile/tablet/desktop. 249 250 CPM CPM 1 2 F2314 F2367 change requests, risks, related to the procurement order value, Overview open Entry, and convert PR➤ PO Goods Receipt & Service perform PR and PO release, amounts, etc. PO and PR information and quantities, to you. You can also view projects (projects) relevant quantities, of resources for commercial unit price, total You can view information Procurement commercial projects. planning or execution of Purchase net Items originate from issues, or checklists during the and checklist process activities that Activities manager Project management) project (commercial request, issues member You can manage and Project team Role Project No. of change KPI Supported tablet HANA SAP S/4 HANA Transactional SAP S/4 Category Type of App Product Desktop and Analytical tablet smartphone, Desktop, Types App Description Appln. App Name Device App ID Mgmt. App Proj. CA-CPD-WS CA-CPD-WS Component Application Table 4-1. Top 50 Critical Fiori Apps in the Enterprise Portfolio and Project Management Solution Area (SAP PS, PPM, and CPM) Chapter 4 Industry Best Practices and Business Recommendations CPM CPM 3 4 F2134 F2182 related to billing and invoices for commercial projects (projects) relevant amount, and Receivables Overview received, etc. summary and act on Invoice Debit Memo Request, and Receivables, Billing Plan, information such as: Aged amount to you. You can view a outstanding billed amount You can view information Billing people on the projects and dates, and contact members, update statuses and assign key project general information, view and attachments, view You can also view alerts Net value, etc. viewing and drilling down to KPIs - ETC, EAC, etc. revenue, EVA, check on your project by Overview manager Project manager ETC, EAC, cost, Project Single-Project You can run a health factsheet Analytical/ HANA SAP S/4 tablet HANA Desktop and Transactional SAP S/4 smartphone tablet, and desktop, (continued) CA-CPD-WS CA-CPD-WS Chapter 4 Industry Best Practices and Business Recommendations 251 252 CPM CPM CPM CPM 5 6 7 Role 8 issue, and (projects) relevant to you. projects Financial Plan plans for commercial PLANNING_APPL You can create financial Create /CPD/WDA_FIN_ commercial project. change request for a Request CHANGE_ REQUEST Create Change You can create a new (commercial management) project (commercial manager etc. management) project (commercial commitments, manager Cost, revenue, Project request No. of Change Project management) project manager Project the project No. of issues manager process issues related to Report Issues You can manage and interested in or projects you are which you are responsible These could be projects for change request EVA, no. of for commercial projects Overview Cost, revenue, Project You can view information Multi-project /PICM/OVP_ OVP_ISSUE_APPL /PICM/ F2133 KPI Supported Desktop Desktop Desktop tablet Web Dynpro Web Dynpro Web Dynpro S/4HANA SAP S/4HANA SAP S/4HANA SAP transactional HANA SAP S/4 Category Type of App Product Desktop and Analytical/ Types App Description Device App Name Appln. App ID Mgmt. App Proj. Table 4-1. (continued) CA-CPD-WS CA-CPD-WS CA-CPD-WS CA-CPD-WS Component Application Chapter 4 Industry Best Practices and Business Recommendations CPM CPM PPM 9 10 11 Currency WS_ for information displayed in You define personal settings Currency F3859 finally decide the entire set (scope) of all the projects Project Rankings your regular review process decision-making basis in rankings that you use as a create one or more project scope or out of scope, you which projects will be in for an upcoming period planning period. To define execute within a certain you definitely want to You can simulate and Manage operations (EC&O) controller financial Cost, date, etc. Project management) (commercial project EVA, etc. Cost, Revenue, manager construction, and such as professional Project Project management) project (commercial manager Project services or engineering, projects for businesses Commercial MP_CFG_APPL You can create commercial ETC, EAC, Create /CPD/PWS_WS_ PERSONALIZATION Personalization the cross-project view app Alert and /CPD/PWS_ tablet smartphone, Desktop, Desktop Desktop S/4HANA SAP S/4HANA SAP Cloud S/4HANA Transactional SAP Web Dynpro Web Dynpro (continued) RANKING_SRV PROJECT_ PPM_PRO_ CA-CPD-WS CA-CPD-WS Chapter 4 Industry Best Practices and Business Recommendations 253 254 PPM PPM PPM PPM PPM 12 13 14 15 16 F2090 F2150 F2165 F2166 F3215 checklist items for which Items controller financial Project You can display all active Date, cost, completed nor cancelled. been released but neither A project is active if it has is assigned as a substitute. As a Substitute projects to which your user revenue, etc. My Projects - manager or as a substitute etc. projects to which your user and duration, (PPM) is assigned as a project You can display all planned Date, effort, My Tasks Checklist Items app manager Project member Project team member have selected in the My of a checklist item that you Object Page member Project team duration, etc. Date, effort and Project team revenue, etc. Date, cost, Role Checklist Item You can display the details No. of objects you are responsible You can display the My Checklist Project Control app header details using the create and maintain project financial controller can Project Control With this feature, a project KPI Supported tablet smartphone, Desktop, tablet smartphone, Desktop, tablet smartphone, Desktop, tablet smartphone, Desktop, tablet smartphone, Desktop, Types App Description Device App Name Appln. App ID Mgmt. App Proj. Table 4-1. (continued) S/4HANA Transactional SAP S/4HANA Transactional SAP S/4HANA Transactional SAP S/4HANA Transactional SAP S/4HANA Transactional SAP Category Type of App Product PPM_PRO PPM_PRO PPM_PRO PPM_PROtha PPM_PRO Component Application Chapter 4 Industry Best Practices and Business Recommendations PPM PPM PPM 17 18 19 F2086 F2087 F2088 severities of the active Critical completed nor cancelled been released but neither A project is active if it has manager or as a substitute. is assigned as a project projects to which your user You can display the My Projects - not currently locked not yet been released and is A project is planned if it has manager or as a substitute. revenue, etc. Date, cost, projects to which your user revenue, etc. Planned is assigned as a project You can display all planned Date, cost, My Projects - cancelled but neither completed nor if it has been released manager. A project is active is assigned as a project projects to which your user revenue, etc. Active Date, cost, You can display all active My Projects - manager Project Manager project manager Project tablet smartphone, Desktop, tablet smartphone, Desktop, tablet smartphone, Desktop, S/4HANA Transactional SAP S/4HANA Transactional SAP S/4HANA Transactional SAP (continued) PPM_PRO PPM_PRO PPM_PRO Chapter 4 Industry Best Practices and Business Recommendations 255 256 PPM PPM PPM 20 21 22 F2031 F2084 F2085 Role milestones of the active Milestones You can display the 20 completed nor cancelled been released but neither A project is active if it has manager or as a substitute. is assigned as a project manager issues the most important project events, and to focus on or in response to certain either on a regular basis duration, etc. Progress and progress of a project, Project manager No. of projects Project manager Monitor Project You can track the schedule Date, effort, called up most recently Used Projects projects that your user has Display Last upcoming and overdue Upcoming projects to which your user You can display the My Projects Date and POC Project KPI Supported Desktop tablet smartphone, Desktop, tablet smartphone, Desktop, Types App Description Device App Name Appln. App ID Mgmt. App Proj. Table 4-1. (continued) S/4HANA Transactional SAP S/4HANA Transactional SAP S/4HANA Transactional SAP Category Type of App Product PPM_PRO PPM_PRO PPM_PRO Component Application Chapter 4 Industry Best Practices and Business Recommendations PPM PPM 23 24 F0284 F1876 your user is assigned as Manager member (portfolio and project management) effort and They can also confirm the progress of their work view a list of all project Project Tasks Project team manager Project tasks they are assigned to. Duration Project team members can No. of tasks, Confirm called up most recently the projects that you have In addition, you can see yet completed or cancelled. have been released but not and active projects, which have not yet been released, planned projects, which substitute. This includes a project manager or as a of all the projects to which revenue, etc. Project Date, cost, You can get an overview My Projects - tablet smartphone, Desktop, tablet smartphone, Desktop, S/4HANA SAP S/4HANA Transactional SAP Analytical (continued) PPM-PFM PPM_PRO Chapter 4 Industry Best Practices and Business Recommendations 257 258 PPM PPM PPM 25 26 27 F0281 F0282 F0283 manager can send it to start You can change portfolio You can approve decision Decision Points points Approve Portfolio Items items Dates revenue, etc. Date, cost, management) completed, the program Change and project items. Once a proposal is Proposals the reviewing process (portfolio proposals for new portfolio revenue, etc. Portfolio Item Supported Suite (portfolio management) and project Business Transactional SAP manager Program management) Desktop Suite and project (portfolio Transactional SAP Suite Business Transactional SAP Business Desktop tablet smartphone, Desktop, Category Type of App Product manager Program manager Managers can create Program Role Create Date, cost, KPI Types App Description Device App Name Appln. App ID Mgmt. App Proj. Table 4-1. (continued) PPM-PFM PPM-PFM PPM-PFM Component Application Chapter 4 Industry Best Practices and Business Recommendations PS PS 28 29 F3216 F5130 You can use this app to definition. A structured Overview monitoring tasks planning, execution, and project is the basis for all data details for a project revenue, etc. You can display the master Date, cost, Definition duration Date and Project for selected objects display detailed information confirmation status, and their dependencies, and identify critical activities, The app allows you to as an interactive graph. and their relationships Network Graph display network activities Project controller financial Project controller logistics Project tablet S/4HANA SAP S/4HANA Transactional SAP Desktop and Factsheet Desktop (continued) OVERV_SRV PROJECT_ PS_ PS-ST-PB Chapter 4 Industry Best Practices and Business Recommendations 259 260 30 PS F3088 Role Supported closing collection or period end steps, such as actual cost control subsequent process well as parameters that of a work package as the essential characteristics SRV * & PS_ SMMRY_SRV This app enables you to edit Cloud S/4HANA PREDICT_ tablet smartphone, PS_PROJFIN_ PROJCOST_ a work package. A work Transactional SAP Component Application element of a specific project. controller detailed master data for Projects Desktop, Category Type of App Product package is a structure financial You can display and edit Monitor Cost, date, etc. Project KPI Types App Description Device App Name Appln. App ID Mgmt. App Proj. Table 4-1. (continued) Chapter 4 Industry Best Practices and Business Recommendations 31 PS F3078 easily monitor aggregated and non-aggregated project costs by allowing you to Financial Controller Overview projects and hierarchies WBS elements from different details of multiple projects or be expanded and view cost which a project tree has to can also enter the level to calculate variance. You and use one category to cost planning categories, item level, configure two costs at an individual line monitor the variance and actual costs. You can also compare plan costs with This feature enables you to Project controller financial Cost, date, etc. Project tablet smartphone, Desktop, Analytical Cloud S/4HANA SAP (continued) OVPS1 PS_PFC_ Chapter 4 Industry Best Practices and Business Recommendations 261 262 32 PS F2538 KPI Role Supported and non-aggregated project Items hierarchies from different projects and projects or WBS elements cost details of multiple to be expanded and view which a project tree has can also enter the level to calculate variance. You and use one category to cost planning categories, item level, configure two costs at an individual line monitor the variance and actual costs. You can also compare plan costs with costs by allowing you to easily monitor aggregated Report - Line controller financial This feature enables you to Cost, date, etc. Project Project Cost Desktop Types App Description Device App Name Appln. App ID Mgmt. App Proj. Table 4-1. (continued) S/4HANA Transactional SAP Category Type of App Product PROJCLIS1 * PS_ Component Application Chapter 4 Industry Best Practices and Business Recommendations 33 PS F2513 and non-aggregated project Overview hierarchies from different projects and projects or WBS elements cost details of multiple to be expanded and view which a project tree has can also enter the level to calculate variance. You and use one category to cost planning categories, item level, configure two costs at an individual line monitor the variance and actual costs. You can also compare plan costs with costs by allowing you to easily monitor aggregated Report controller financial This feature enables you to Cost, date, etc. Project Project Cost Desktop S/4HANA Transactional SAP (continued) & PS_PFRS1 PROJCLIS1 * PS_ Chapter 4 Industry Best Practices and Business Recommendations 263 264 PS PS PS 34 35 36 F1971 F1974 F1975 KPI Role Supported financial controller data details for a milestone. A milestone can be used Overview financial process material procurement used in the project-based material component is to network activities. A component that is assigned price, amount, controller Overview etc. logistics data details of a material Component qty, date, unit You can display the master No. of material, Project Material certain hierarchy various project tasks in a elements. A WBS organizes breakdown structure (WBS) controller Project revenue, etc. Overview data details for work WBS Element You can display the master Date, cost, project during various phases of a to track events that occur You can display the master Dates and POC Project Milestone Factsheet tablet smartphone, Desktop, tablet Factsheet S/4HANA SAP S/4HANA SAP S/4HANA SAP Category Type of App Product Desktop and Factsheet tablet smartphone, Desktop, Types App Description Device App Name Appln. App ID Mgmt. App Proj. Table 4-1. (continued) SRV COMPONENT_ MAT_ PS_PROJ_ OVW_SRV MENT_ WBSELE PS_ OVW_SRV MILESTONE_ PS_ Component Application Chapter 4 Industry Best Practices and Business Recommendations PS PS 37 38 F1761 F1970 activity. A network activity Overview services billing requests 2. Edit a request requests 4. Reject a billing blocked 3. Release billing billing request that was commercial manager - etc. display a list of blocked features: 1. Filter and Requests controller Revenue, date, Project etc. Release Billing Provides the following within a project and execution processes for further logistics planning network. It forms the basis task within the flow of a is used to represent a data details of a network Activity Project duration, cost, logistics You can display the master Date, effort, Network Desktop tablet S/4HANA SAP HANA Transactional SAP S/4 Desktop and Factsheet (continued) CDS REQUEST_ BILLING C_OPEN OVW_SRV NTWKACTY_ PS_ Chapter 4 Industry Best Practices and Business Recommendations 265 266 PS PS 39 40 F0930A F0965A apps for management Plan/Actual report on actual and plan apps for management accounting, you can report on actual and plan Plan/Actual YTD (Design Studio) Projects – Plan/Actual of data, for example, entity as well as the type of the app indicates the accounting. The name relevant to management data for different entities With all analytical Projects – Projects – Plan/Actual of data, for example, entity as well as the type of the app indicates the accounting. The name relevant to management (Design Studio) data for different entities Translation with Currency accounting, you can With all analytical Projects – revenue, etc. Date, cost, revenue, etc. Date, cost, KPI overhead accountant – Cost overhead accountant – Cost Role Supported Desktop Desktop Types App Description Device App Name Appln. App ID Mgmt. App Proj. Table 4-1. (continued) and factsheet S/4HANA BW query app SAP and factsheet S/4HANA BW query app SAP Category Type of App Product CO-OM-IS CO-OM-IS Component Application Chapter 4 Industry Best Practices and Business Recommendations PS PS PS PS 41 42 43 44 F0295 F0296 F0539 F0540A milestones defined in a project Project Milestone within a network Activity You can confirm the processing of an activity Network Confirm You can confirm the Confirm Activity Status network activity and user status of a Network controller logistics Project controller logistics Project controller logistics Project controller financial Date and POC Project duration Date and effort, etc. You can change the system Date, Change process material procurement used in the project-based A material component is a material component. qty, etc. data and related object Component details associated with You can display the master Unit price, Material Factsheet S/4HANA Transactional SAP S/4HANA SAP S/4HANA SAP tablet S/4HANA Desktop and Transactional SAP tablet smartphone, Desktop, tablet Desktop and Factsheet and tablet Desktop (continued) CONFIRM MILESTONE_ PS_ CONFIRM PS_ACTIVITY_ SRV STATCHG_ ACTVT PS_NTWK NENT_SRV COMPO MAT_ PS_PROJ_ Chapter 4 Industry Best Practices and Business Recommendations 267 268 PS PS PS 45 46 47 F0290A F0291A F0292 details associated with (S/4HANA) tasks execution, and monitoring basis for all planning, structured project is the a project definition. A data and related object Definition revenue, etc. You can display the master Date, cost, Project tasks in a certain hierarchy organizes various project a WBS element. A WBS details associated with controller financial Project controller Financial revenue, etc. Project data and related object (S/4HANA) controller financial Project Role WBS Element You can display the master Date, cost, element breakdown structure Duration You can change the system Date and Element Status and user status of a work Change WBS KPI Supported tablet Desktop and Factsheet tablet S/4HANA SAP S/4HANA SAP S/4HANA Transactional SAP Category Type of App Product Desktop and Factsheet tablet smartphone, Desktop, Types App Description Device App Name Appln. App ID Mgmt. App Proj. Table 4-1. (continued) PS-FIO-STR PS-FIO-STR CHANGE_SRV STATUS SELEMENT PS_WB Component Application Chapter 4 Industry Best Practices and Business Recommendations PS PS PS 48 49 50 F0288A F0286A F0289A and duration details associated with project project or task within a represents the flow of a control effort, material, logistics data and related object a network. A network You can display the master No. of tasks, (S/4HANA) of a project occur during various phases be used to track events that tablet Desktop and Factsheet controller details associated with a Project tablet milestone. A milestone can Desktop and Factsheet financial tablet data and related object control Desktop and Factsheet You can display the master Dates and POC Project within a project and execution processes for further logistics planning network. It forms the basis a task within the flow of a activity is used to represent and duration Network Milestone details associated with a (S/4HANA) network activity. A network data and related object Activity Project effort, material, logistics You can display the master No. of tasks, Network S/4HANA SAP S/4HANA SAP S/4HANA SAP PS-FIO-STR PS-FIO-STR PS-FIO-STR Chapter 4 Industry Best Practices and Business Recommendations 269 Chapter 4 Industry Best Practices and Business Recommendations A complete list of current Fiori apps is available on SAP’s website. • Fiori App Library: https://fioriappslibrary.hana.ondemand.com/sap/fix/externalViewer/#/ https://sapfioriapps.com/ • SAP PPM Fiori App Library: https://help.sap.com/doc/b75cf8a90d7b44ae95001ccf333db3b7/1.0%202016-07/ en-US/frameset.htm?8cab525269c1097de10000000a445394.html • SAP CPM Fiori App Library: https://help.sap.com/viewer/0f7d6745e28b4059b7d6c2acee84e67a/2020.002/ en-US/fb8ef35723a6bc12e10000000a4450e5.html • SAP PS Fiori App Library https://help.sap.com/doc/0f1a0a56d448792de10000000a44538d/1610%20002/ en-US/frameset.htm?frameset.htm Resource-Related Billing (Professional Service) Profession Service includes information technology, business process outsourcing, legal, engineering and design consulting, media/advertising, and public sectors (all government). SAP Project Systems, with integration with other SAP modules such as Sales and Distribution (SD) and Controlling (CO), provide a capability which works on the principle that any effort or output/outcome quantity or material or expense toward a billable statement of work (SOW) or contract should be reviewed against SOW/contract and billed back to the customer. All the actual made to a project, such as statistical key figure posting toward the business process outsourcing outputs/outcome (no. of calls; service level agreement (SLAs), actual timesheet posting (engineering and design effort in consulting project), expenses incurred during travel/trips to the client, materials purchased toward the service provided for the client work (server in IT project; props/costume for a photo shoot), and so on, have to be billed to the client based on the agreed selling price. This price is based on agreed billing rates, cost plus rates, volume based pricing agreements, service level agreements, or value provided to the client (outcome based). 270 Chapter 4 Industry Best Practices and Business Recommendations SAP uses dynamic line item processing for resource related billing, where each posting is summarized and shown as an item to be billed based on the dynamic line item characteristics. The system then shows the summarized items based on the characteristics of the posting for review and the “Billing Editor” provides an ability to edit the information (postpone billing, accept quantities for billing, accept rates applied, etc.) so that a billing request can be created for further review and acceptance by the relevant stakeholder. This billing request when accepted, billing document (invoice) can be created against the customer. For all the following charging modes, resource related billing can be used: • Time and materials • Time and materials with cap • Output/volume/quantity based billing • Outcome/value/service level based billing • Cost plus billing In industries such as IT, BPO, and Engineering & Design, billing rates can depend on the following parameters: • Location of the resource (onsite, offshore, nearshore, etc.) • Overtime or on call, weekday or weekend, public holiday, and so on • Type of resource (level of support or service or resource qualification or named resource) • Volume (telescopic rates or number of hours of effort) • Validity dates (price rise or price escalations) • Service level (incentives based on Key Performance Indicators) SAP provides a lot of enhancement opportunities in the Dynamic Line Item Processor (DIP) to make it relevant to the industry and business processes of the enterprise. 271 Chapter 4 Industry Best Practices and Business Recommendations evenue Recognition via Results Analysis and Integration R with Revenue Accounting and Reporting (IFRS) (Cross Industry) Revenue recognition within SAP is performed in a number of ways. Revenue recognition using SAP Sales and Distribution (SD) module is performed using the following transactions: • VF44 – Revenue Recognition – Post Revenue • VF46 – Cancel Revenue Recognition • VF45 – Revenue Recognition Overview In addition to the SD revenue recognition, for projects, revenue recognition is performed using results analysis. Results of the projects are only computed as part of the results analysis functionality. Posting them to Financial and Controlling happens only at the time of project settlement. Results analysis computed are only posted in the controlling area currency as part of the project settlement. • KKA0 – Results Analysis – Cut-off Period • KKA2 – Results Analysis – Individual Processing • KKAJ – Results Analysis – Collective Processing • KKA8 - Results Analysis – Delete Data • CJ88 – Project Settlement - Individual Processing • CJ8G - Project Settlement - Collective Processing What’s different with results analysis? Results analysis provides 15 different methods for the computation of the results of the project. These methods cuts across industries—Professional Service (IT, BPO, engineering and design), Media (advertising), Engineering Construction and Operation (ECO), 272 Chapter 4 Industry Best Practices and Business Recommendations Discrete Industries (Manufacturing - Engineer-To-Order and Made-To-Order scenarios), Telecom (customer projects), and so on. The most widely used valuation methods are as follows: 1. Revenue Proportionality Method (Method 1): Percentage of completion for the computation of the results analysis is calculated based on the revenue proportionality. 2. Cost Proportionality Percentage of Completion (POC) Method (Method 3): Percentage of completion for the computation of the results analysis is calculated based on the cost proportionality. 3. Percentage of Completion (POC) Method (Method 7): Percentage of completion for the computation of the results analysis is calculated based on the actual percentage of progress of the project recorded in the system using progress analysis. 4. Contract Completion Method (Method 9): Cost of sale and revenue is recognized only if the work has been completed (technically completed). Until such time, actual cost and revenue will be deferred. 5. Resource Related Billing Method –COS Recognition (Method 14): This method uses the dynamic item processor (DIP) line item x Cost Rate (cost) as the revenue to be recognized for the project based on the statement of work (sales document) linked to the project. 6. Resource Related Billing Method – Derive Revenue (Method 15): This method uses the dynamic item processor (DIP) line item x billing rate as the revenue to be recognized for the project based on the statement of work (sales document) linked to the project. Figure 4-4 shows a detailed list of valuation methods that are available via project results analysis. 273 Chapter 4 Industry Best Practices and Business Recommendations Figure 4-4. Detailed list of valuation methods in Results Analysis (PS) As we all know, revenue recognition applies only to customer projects and not to capital work. Using results analysis, the following key figures are computed: • Work In progress (WIP) or inventory • Reserve for imminent loss (reserve for unrealized cost) • Revenue in excess of billing (unbilled receivables) • Revenue surplus (deferred revenue) With the introduction of the International Financial Reporting Standard (IFRS), all global enterprises have to adhere to the international financial standard. Therefore parallel accounting is enabled, in addition to the local Generally Accepted Accounting Principles (GAAP) as more than 166 jurisdictions (mostly countries) follow IFRS for their financial reporting. IFRS is based on the following objectives—transparency, accountability, and economic efficiency. 274 Chapter 4 Industry Best Practices and Business Recommendations Within IFRS, revenue recognition is covered under standard “IFRS 15 - Revenue from Contracts with Customers,” which was issued by the IASB on May 28, 2014 and applies to an entity’s first annual IFRS financial statements for a period beginning on or after January 1, 2018. The IFRS 15 standard states that revenue is to be recognized based on performance obligations of the contract. For this reason, SAP introduced an add-on solution called “Revenue Accounting and Reporting” (RAR) to meet these IFRS requirements. There are two ways in which project results analysis integrates with RAR for the following valuation methods. RAR is the driver that influences the revenue that gets posted to the Finance module via settlement in both integration types. 1. Percentage of Completion methods (Methods 3, 7, and 9): Results analysis is performed in ECC and then the calculated values (POC and Revenue) are shared to the RAR application. Posting run is performed in RAR based on the contract performance obligation and the resultant adjustment revenue is sent to ECC. Calculated values along with adjustment posting are then settled to Finance (only COS; posting run updates FI with actual revenue values) and COPA (both Cost of Sale and Revenue). 2. Revenue based valuation methods (Methods 1 and 2): Posting run is performed in RAR and the actual revenue is posted to FI. Adjusted revenue is sent to ECC. With the adjustment revenue, calculated values are computed. These values are settled to FI as part of the project settlement. Note If parallel accounting (IFRS and local GAAP) is adopted in your enterprise, multiple RA versions can be used for this purpose. Project Management Controls Earned Value Analysis (EVA) (Public Sector, Engineering, Construction and Operation and Infrastructure Projects of Utilities and Telecom) EVA is applicable to public sector (defense and government—local, state, and federal), engineering, construction and operation, and utilities and telecom. 275 Chapter 4 Industry Best Practices and Business Recommendations Earned Value Analysis (EVA) is an industry standard method of measuring a project’s progress at any given point in time, forecasting its completion date and final cost—Estimate at Completion (EAC) and Estimate to Complete (ETC)—and analyzing variances in the schedule (Schedule Variance and Schedule Performance Index) and budget (Cost Variance and Cost Performance Index) as the project proceeds. What Is Earned Value Analysis? Earned Value Analysis (EVA) is a method that allows the project managers and controllers to measure the amount of work actually performed on a project beyond the basic review of cost and schedule reports. EVA provides a method that permits the project to be measured by progress achieved. The project manager is then able, using the progress measured, to forecast a project’s total cost (EAC and ETC) and date of completion, based on trend analysis or by applying the project’s burn rate or earned value. The term earned value is defined as the budgeted cost of work performed or BCWP. This budgeted cost of work performed measure enables the project manager and the controllers to compute performance indices for cost and schedule performance, which provides information on how well the project is doing or performing relative to its original plans. These indices, when applied to future work, allow the project manager and controllers to forecast how the project will do in the future, assuming the earned value will not fluctuate, which often is a large assumption. Reference: Above paragraph is an extract from PMI Library; refer to the following link for more information: https://www.pmi.org/learning/library/earned-value-management-systemsanalysis-8026 Earned Value Analysis can be applied to projects where the budgeted cost is well detailed based on the project scope and deliverables. EVA provides a method that permits the project to be measured by progress achieved. Following are the key figures and its definitions that are related to EVA and its computation. Planned POC The planned POC expresses the planned work as a percentage up to a particular point. In SAP PS, the planned POC is determined based on the following parameters: 276 • Weighting provided for the POC aggregation. • Set of dates to determine the planned POC; planned POC with respect to the project timeline. Chapter 4 • Industry Best Practices and Business Recommendations Default plan measurement method for determining the planned POC on WBSEs and network activity. A simple example of measurement method is “estimate,” where the planned POC can be entered by the project manager or determined by the project controller/planner and updated when baselines are updated. The following are the list of measurement methods provided within SAP PS for the purpose of calculating percentage of completion (POC): Plan and Actual. • Start - Finish Rule: This is a quick and easy measurement technique to get an initial rough picture of the project’s progress. This measuring technique is based on scheduling and is adopted on work packages where the duration is longer than three months. • Milestone Technique: This technique is date-related and works on the basis of WBSE or network activity milestones. It is preferred on projects that last longer than three months. The milestone technique is typically used in development, design, engineering, engineer-toorder (ETO), or made-to-order (MTO) productions and assembleto-order (ATO) assemblies and customer order scenarios where the customer prescribes milestones as the basis for billing. • Estimates: This method involves making an assessment of the project progress and it is schedule based. This method is used more often when interfacing schedule-related information from thirdparty scheduling applications. The work package duration for this technique should be more than three months. • Degree of Processing: This measurement method is used to determine actual progress of internal activities where degree of processing is entered during confirmation. • Time Proportionality: This measurement technique is suitable for work packages where internal work is performed and there is an even distribution of effort based on the dates. This technique is used during the blueprint or realization phase WBSE, where effort per day is the same for the entire duration of work but not for the final preparation phase WBSE, where resource ramp down starts. 277 Chapter 4 Industry Best Practices and Business Recommendations • Cost Proportionality: This measurement technique is suitable for work packages where costs and progress have a constant relationship. The system does not take into account hierarchical costs when this technique is adopted on a WBS element. • Quantity Proportionality: This measurement technique is used when countable events occurring during the life of a work package are planned and confirmed using Statistical Key Figures (SKF). • Secondary Proportionality: This technique is used when progress of one work package is dependent on another reference work package. Successful Earned Value Analysis is dependent on the determination of the planned POC during the project lifecycle: • Correct planning method and weightage should be adopted to the different activities (based on material, labor, and equipment cost ratio to the project cost). • Sometimes high-price materials have to be bought at the start of the project. If cost proportionality is adopted for the determination of the planned POC, it will be inflated and hence appropriate measurement method and weightage should be adopted. Actual POC The actual POC expresses the work actually performed as a percentage up to a particular point. In SAP PS, the actual POC is determined based on the following parameters: • Weighting provided for the POC aggregation (same weighting applied to plan and actual). • Set of dates to determine the actual POC; actual POC with respect to the project timeline. • Default actual measurement method for determining the actual POC on WBSEs and network activity. A simple example of measurement method is “estimate,” where the actual POC can be entered by the project manager or as determined at the project site by the site supervisor or field engineer at different time intervals. 278 Chapter 4 Industry Best Practices and Business Recommendations Successful Earned Value Analysis is dependent on the determination of the actual POC during the project lifecycle: • Correct planning method and weightage should be adopted to the different activities (based on material, labor, and equipment cost ratio to the project cost). • Heavy reliance on the input from site or field may lead to inaccuracies if methods such as estimate are adopted. • It is recommended to keep the plan and actual methods mostly the same so that the basis of comparison is the same. In some cases, these rules will have to be changed for the reason of accuracy of information. Planned Costs Planned costs are the cumulated planned costs for a CO version. You can use the planned costs as the base to evaluate the work. The total planned costs reflect the planned costs on completion. EVA recommendations: • EVA cannot be adopted if there is less maturity in the planned cost. • EVA is adopted for repeated project work where there are historic references. Planned Earned Value (BCWS) The planned earned value is the value of the planned work at a particular point. The planned earned value is computed from the planned POC in relation to the planned total value of the work to be performed (base). BCWS = Planned POC X Total Planned Cost Actual Earned Value (BCWP) The actual earned value is the value of the work actually performed up to a particular point. BCWP = Actual POC X Total Planned Cost 279 Chapter 4 Industry Best Practices and Business Recommendations Actual Costs (ACWP) The actual costs are the costs incurred up to a cut-off date. Work or Schedule Variance (SV) Schedule variance helps to figure out if you are ahead of or behind schedule, and by how much. Project Managers use the schedule variance formula when they are figuring out their remaining resources, so they can best utilize them. Specifically, Schedule Variance (SV) is the difference between the cost of work performed (BCWP) and the cost of work scheduled (BCWS); the Earned Value (EV) minus the Planned Value (PV). If you calculate SV and the value is positive, you are ahead of schedule. If you calculate SV and the value is negative, you are behind schedule. If you calculate schedule variance and the value is zero, you are on schedule. Schedule variance is zero at the completion of a project because all of the planned value has been earned. SV = BCWP - BCWS Value or Cost Variance (CV) The value or Cost variance (CV), also known as budget variance, is the difference between the budgeted cost (BCWP) and, the actual cost (ACWP) or what you expected to spend versus what you actually spent. This formula helps project managers figure out if they are over or under budget. A positive CV shows that the project is under budget, and a negative CV shows that the project is over budget. If the calculated cost variance is zero (or very close to zero), you are on budget. CV = BCWP - ACWP Value Index (CPI) The key value that represents the relationship between the value flow and the actual costs as a percentage. The value index shows the extent to which project execution has deviated from the plan. Using the value index, you can forecast future costs. CPI = BCWP/ACWP Estimated Costs-To-Complete (ETC) The estimated costs-to-complete is an estimate of the residual costs up to completion based on the project earned value. ETC = (BCWS - BCWP)/CPI 280 Chapter 4 Industry Best Practices and Business Recommendations Estimated Costs at Completion (EAC) The estimated costs-at-completion is an estimate of the total costs upon completion based on the project earned value. EAC = ACWP + ETC Figure 4-5 shows the Earned Value Analysis in the form of an S curve, with a view of the EAC and expected end date of the project. Figure 4-5. Earned value analysis (S curve) with EAC and expected end date of the project Milestone Trend Analysis (MTA) (Construction, Information Technology, and New Product Development) Milestone Trend Analysis (MTA) is used in construction, information technology, and new product development areas. Milestone Trend Analysis (MTA) is another simple and elegant way of performing project control using dates/schedule, in addition to the Earned Value Analysis and Variance Analysis. MTA is not widely adopted in projects due to lack of understanding it, 281 Chapter 4 Industry Best Practices and Business Recommendations its usage as project control in their industry, and due to the fact that not many thirdparty project management applications support it without having to have a bolt solution to their existing applications. MTA requires the following to be performed to successfully use the Milestone Trend Analysis: 1. Identification of a key milestone for a project. 2. Dependencies of project activities to the milestone and interdependence between project milestones. 3. Update plan (basic), forecast, and actual dates on a regular basis or as per the reporting date/period (including future milestones). 4. Snapshot milestone/project dates (basic, forecast, and actual) for each reporting date/period. 5. Frequency of snapshot for reporting purpose depends on the duration of the project. For shorter projects, if this method were to be applied, the reporting snapshot should be performed more frequently for meaningful results. 6. Define corrective activities, if there are delays. Following are the important items to note for Milestone Trend Analysis (MTA) to be used: 1. Snapshot (SAP PS version) helps use the date references (basic, forecast, and actual) to report milestone dates by reporting date (snapshot date). 2. MTA is a trend analysis tool and does not take into consideration any defects or issues arising after the completion of previous milestones for predictive analysis of inter-dependent subsequent milestones. 3. If MTA is performed rigorously, it can be used to determine any delays earlier on in the project. 4. MTA only indicates the deviations but does not provide root cause analysis. So narrative or commentary for the dates will help support or justify deviations. 282 Chapter 4 Industry Best Practices and Business Recommendations Prepare a Milestone Trend Analysis chart by entering the reporting periods on the x-axis (starting left and progressing to recent/future reporting period on the right) and the milestone dates on the y-axis (future/most recent to oldest milestone date downward). If the corresponding points are connected, the result is a line, which shows the progress. • If that line is horizontal, that means the project is on schedule. • If the line is trending upward, that means the project is experiencing delays. • If the line is trending downward, that means the project is ahead of schedule. Reference: https://rolandwanner.com/how-to-use-the-milestone-trend-analysis/ Figure 4-6 is an example of a home building (construction) project that shows the significance of the foundation (M1) and ground floor (M2) slab milestones. Any delays in the foundation and ground floor slab milestone have a knock-on impact on the first floor slab and handing over the home to the client. The following milestone trend analysis shows how the project was delivered ahead of schedule in spite of serious delays to the first two key milestones. This also shows that the project controllers have been tracking the project based on the initial two key milestones and because of the corrective actions taken, the project got on schedule and later went ahead of schedule. 283 Chapter 4 Industry Best Practices and Business Recommendations Figure 4-6. Milestone Trend Analysis (MTA) of home building (construction) project with its critical milestones Variance Analysis (VA) (Cross Industry) Variance analysis or cause of change analysis (as some companies refer to it) is one of the important activities that gets done in any organization on a monthly basis. This is a project control exercise to review the project and understand the reasons that the actual 284 Chapter 4 Industry Best Practices and Business Recommendations performance varies from budgets or plan, in financial terms. The project managers and project finance controllers always like to understand root causes for the variances. Variances are measured for the various key performance indicators (cost, revenue, and budget) and this is done at a very detailed level, analyzing each and every aspect of the financial results. Let’s take an example of analyzing the variance between actual and plan cost. The project manager wants to explore the huge variance in cost. As the project manager explores the variance, they would get mixed reasons (both positive and negative) contributing to variances. This could be on account of the following: 1. Early receipt of high value material at the project site. 2. Incorrect cost accrual being posted. 3. Rework due to a quality issue. 4. Change in site condition compared to what was planned, and so on. SAP PS, PPM, and CPM provide a long list of variance analysis reports that show absolute and percentage variance between the actual and plan (cost/budget/revenue). These reports allow the project manager and project finance controllers to compare and determine corrective actions to bring the project back on course with respect to cost, budget, and revenue. Standard SAP PS variance reports that are widely used for variance analysis are as follows: 1. S_ALR_87013543 - Actual/Plan/Variance Absolute/Variance % (Cost Element Based*) 2. S_ALR_87013532 - Plan/Actual/Variance (Hierarchical Cost Report) 3. S_ALR_87100190 - Plan/Actual/Variance for Each Project and Person Responsible (Hierarchical Cost Report) 4. S_ALR_87013557 - Budget/Actual/Variance (Hierarchical Budget Report) 5. S_ALR_87013570 - Act/Plan/Variance Abs./% Var. (Revenue Element Based*) 6. S_ALR_87013564 - Plan/Actual/Variance (Hierarchical Revenue Based) 285 Chapter 4 Industry Best Practices and Business Recommendations 7. S_ALR_87013503 - Actual/Plan/Variance (Summarization*) 8. S_ALR_87013512 - Actual/Plan/Variance (Summarization*) *Available in S/4 HANA. Standard SAP PPM Variance Analysis Report: 1. Actual vs. Planned Cost by Portfolio Item (Query: 0RPM_ C03_Q0202) a. Variance Actual/Plan b. Variance Actual/Budget Standard CPM Variance Report: 1. Variance Analysis of the Project (Query:/CPD/AVR_VP14_Q001; Info-Provider/CPD/AVR_MP07) a. Variance Plan vs. EAC (Variance) ortfolio and Program Management Controls P and Decision Making Investment Prioritization Framework (Cross Industry, Government Organizations, and Private Enterprises that Are Capital Intensive) In Chapter 1, the same topic is covered under the prioritization framework. Therefore, in this section of the book, we restrict to the best practices and don’t cover the capability itself. Most private enterprises and government organizations that are capital intensive have huge CAPEX budgets and have to go through the investment prioritization framework. These government organizations operate on an annual budget cycle, where the need for new investment is considered, potential investments are identified, and decisions are made as to how the budget will be spent. These decisions are sometimes made without a clear understanding of the challenges to the organization or the benefit criteria to evaluate competing bids. In the absence of such criteria, investment decisions are often determined by the loudest voices. 286 Chapter 4 Industry Best Practices and Business Recommendations Therefore it is important for the government organization to review the investment decision based on the following questions and capture metrics associated with it for the purpose of comparison. 1. What will the economic return be (NPV and cost benefit ratio)? 2. Are all the risks associated with the investment decision understood and managed? What’s the risk profile of the investment decision? 3. What would happen to infrastructure assets if investment decisions got through? Will the infrastructure asset be sustainable? 4. Is the investment decision already part of government commitment? Is the investment decision aligned to the strategic goals of the agency? 5. Will there be equity in the expenditure from other government agencies? 6. Does this investment benefit rural and disadvantaged areas? Should this proposal be prioritized? Private enterprises that are expanding their infrastructure—for example, a telecom major expanding their optical fiber network or a mobile service provider changing from 4G to 5G technology infrastructure—would also have to prioritize their investment decision so that their strategic objectives and market share or leadership and competitive edge can be maintained. For these reasons, these private enterprises have to go through an investment prioritization framework. This framework and governance allows all investment proposals to be analyzed with the same yardstick so that all the investment proposals are evaluated based on their risk profile, strategic advantage, return of investment (ROI), and payback period. SAP Portfolio and Project Management (PPM) offers questionnaire capability to perform evaluation and profiling of the risk associated with the investment decision. It also provides risk scoring based on the scoring model. Within SAP PPM, key figures and metrics can be used to capture benefits, and financial and resource information coming from financial and capacity planning. This information can be reviewed within PPM by creating a review cycle (reviews) and then ranked, prioritized, and approved for further processing. 287 Chapter 4 Industry Best Practices and Business Recommendations Decision Flow Management (Cross Industry) As the name depicts, Decision Flow Management (DFM) is about how decisions related to work being delivered are being made at a point in time and how this influences other or next parts of the work being performed. It also considers what the knock-on impacts are to the program of work and other projects it is related to or dependent on. In SAP PPM, the decision being made at a point in time is referred to as the Decision Point (DP). These decision points allow the project or program manager to move from one phase to another and act as the stage gate. Therefore, at the time of decision point, a decision is made to go ahead and move to the next phase or to hold back in the current phase. The decision to move to the next phase is performed objectively based on a certain list of checks that need to be performed and confirmed. But for these confirmation of checks, the project manager or program manager cannot move to the next phase. Once moved into the next phase, work execution commences for the next phase. This goes on until the last phase is completed, in order to fully complete the work being delivered. In this explanation, the phases are represented in SAP PPM as cProject Phases or PS Project WBSE (representing phase). The checks and the confirmation of these checks represent checklists and confirmation of checklist items, respectively. The work being performed or delivered is represented by item or initiative. Items can be a proposal (proposed work/idea/concept) or project work or major maintenance work. Initiatives can be a program of work or projects. Items and initiatives both have decision points. These decision points are then linked to phases (cProject phase) or PS WBSE, depending on the integration scenario. When the decision point approval happens, the subsequent or linked phase or WBSE should be allowed to commence work execution. This process of moving through the stages and gates is referred to in SAP PPM as phases and decision points. As part of the decision flow, the following might not be required to be synchronized from one part of the work to another (top-down, bottom-up, or laterally if there is more than one object representing the same work in different applications—Portfolio Management, Project Management, and Project Systems), depending on your enterprise requirements: 1. Attributes (how the change to one attribute should be synchronized to another object with the same value) 2. Status (how the change to one status can impact another change of status in another object) 288 Chapter 4 Industry Best Practices and Business Recommendations 3. Authorization (how the change of access to one object can impact access in another object) 4. Workflow task to the extent to update the status of subsequent decision point status, program decision point status, item status, and so on Decision flow management is a capability that can be customized to suit varied business requirements from various industries. This functionality is a widely used common practice within project and program management. SAP PPM provides this best practice capability with additional special features, such as the synchronization and workflow, as part of its native solution. roject Accounting and Integration with Other P Modules/Third-Party Applications (Cross Industry) The most featured functionality of SAP is its integration. Integration has been highlighted as a best practice, as it is the most important and paramount functionality that differentiates SAP Portfolio, Program, and Project Management/systems capability from other ERP products. SAP Project System is a highly integrated solution from an actuals perspective with other modules such as Sales and Distribution (SD), Customer Service (CS), Materials Management (MM), Production Planning (PP), Production Planning – Process Industries (PP-PI), Cross Application Timesheet (CATS), Controlling (CO), Revenue Accounting and Reporting (RAR), and Financial Accounting (FI). SAP PPM and CPM solutions also integrate with SAP PS from an actuals perspective but to summarize group and report actuals posted on the network activity/element and WBS Elements in SAP PS. SAP Project System is a highly integrated solution from a planning perspective with other modules such as Sales and Distribution (SD), Customer Service (CS), Materials Management (MM), Production Planning (PP), Production Planning – Process Industries (PP-PI), Controlling (CO), Business Planning and Consolidation (BPC), Investment Management (IM), Human Resource (HR), Portfolio and Project Management (PPM), and Commercial Project Management (CPM). Data flow is so seamless that when a WBSE is account assigned (Ref. Tab Page: Account Assignment) in SD sales document (sales order/contract) or when a WBSE 289 Chapter 4 Industry Best Practices and Business Recommendations or network activity is account assigned in an MM purchasing document (PR/PO), the actual, plan/commitment can be posted or captured against the WBSE (cost and revenue) and network activity (cost only). Similarly for other order types such as internal order, plant maintenance order, and so on, depending on the Order Value update setting (appended and apportioned), when assigned (Tab Page: Assignment) to a WBSE or network activity, planned values can be updated on the WBSE and can be considered a commitment. Actuals posted on these objects can also be viewed using standard reports by correctly choosing the database profile that includes these order types without having to wait for the actual settlement run of these orders, to show these actuals on the project. The SAP Portfolio, Program, and Project Management system is very well integrated with operational and strategic analytics with pre-built queries, extractors, analytic apps* (embedded analytics*), embedded BW*, standalone BW or BW on HANA or BW/4 HANA. The * indicates possible with S/4 HANA versions. Some useful links related to Portfolio, Program, and Project Management system analytics are as follows: CPM: Embedded Analytics: https://help.sap.com/viewer/d6c1ceb7e0074cd1a8f28dad8a1a649c/2020.002/ en-US/8db66d56211d421d9b6be4418cb33252.html CPM: BI Content: https://help.sap.com/viewer/43d46b9a01bf4f10af638de441ec90d9/2020.002/ en-US/c2d3ae1f2bc44078a29138b1d650e29a.html CPM: Apps (including Analytics/Transactional Apps) https://help.sap.com/viewer/0f7d6745e28b4059b7d6c2acee84e67a/2020.002/ en-US/fb8ef35723a6bc12e10000000a4450e5.html PPM S/4 HANA Analytics: https://help.sap.com/viewer/db719753e69f4e8eb9902aaea0fd8471/2020.002/ en-US/8949a751cfd66472e10000000a423f68.html PPM: BCV Reporting Cockpit: https://help.sap.com/viewer/db719753e69f4e8eb9902aaea0fd8471/2020.002/ en-US/4ab7f26d5a8c37b1e10000000a421138.html PPM: BI Content https://help.sap.com/viewer/9c73d7ba21854ef6be678402913647c3/7.57.30/ en-US/90820352f816bb64e10000000a423f68.html PS: BI Content 290 Chapter 4 Industry Best Practices and Business Recommendations https://help.sap.com/viewer/9c73d7ba21854ef6be678402913647c3/7.57.30/ en-US/36028653aa9a6159e10000000a174cb4.html PS: Fiori Apps (including Analytics/Transactional Apps) https://help.sap.com/viewer/4dd8cb7b1c484b4b93af84d00f60fdb8/2020.002/ en-US/30190a56d448792de10000000a44538d.html SAP Notes relevant to S/4 HANA on Analytics: • 2500202 - S4TWL - BW Extractors in SAP S/4HANA From https://launchpad.support.sap.com/#/notes/2500202 • 2267286 - S4TWL - Project Reporting From https://launchpad.support.sap.com/#/notes/2267286 • 2496759 - Restrictions for BW extractors relevant to S/4HANA in the area of Enterprise Portfolio and Project Management From https://launchpad.support.sap.com/#/notes/2496759 • 2716026 - Usage of BW content for PPM in SAP S/4HANA From https://launchpad.support.sap.com/#/notes/2716026 hases and Decision Points: (Government P or Public Sector; New Product Development; Infrastructure projects of Telecom and Utilities)) SAP Portfolio, Program, and Project Management system capabilities within SAP provides a framework to manage phases and their respective decision points. • SAP PPM provides the ability to manage phases or stages using Project Management (cProject) Phase or PS Project WBSEs. • Decision points are the gates or the gateway approval processes for the successful completion of the phase and approval to step into the next phase of the project/proposal lifecycle. 291 Chapter 4 • Industry Best Practices and Business Recommendations During the gateway review process, the following are submitted: • Mandatory and Optional Gateway Review Documentation and Deliverables. • Checklist of items to be assessed for gateway or decision point approval. • Performance with reference to exit criterions and Target Key Figures which are based on strategic objectives, focus areas and themes, risk and issues, readiness for the next stage or phase, and closure of previous recommendations and comments. • Decision approval or stage gate approval should allow the commencement or release of the next phase but should still allow residual cost or pending time to be allocated to the previous stage or phases. • Plan and forecast dates to be captured based on the initial timeline planned and forecasted in the business case. During the course of the project or proposal, dates from the project management/systems should determine the forecast and actual dates. • Depending on the lifecycle of the project or proposal, these work related objects/items can change the decision-making process based on the risk profile, financial, resource, or schedule related key performance figures. The SAP Portfolio, Program, and Project Management system provides the following capabilities to meet these requirements: 292 • Document and Notes to capture mandatory and optional documents or links to documents. • Checklist and Checklist items to capture status of a checklist item, its results, and dates. • Key Figure to capture and monitor key performance figures. Key Figures are tagged to metrics to review and monitor deliverables of the project/proposal. Chapter 4 Industry Best Practices and Business Recommendations • “What if” scenarios to simulate target values based on the original and simulation versions, with or without initial costs and sponsors. • Process change capability allows the portfolio item to change the decision approval process during the course of the project or proposal without having to lose the original item details. During process change, versions such as snapshot (non-editable version) and simulation (editable version) can be created for reference or be a simulation of key performance indicators. • Decision points status change can trigger the following workflows (WF): • Item/Initiative Deletion Workflow (to be used with caution after analyzing business impact related to BW and reporting) • Item/Initiative Attribute Change workflow (this WF change field value of an item or initiative) • Item/Initiative Decision Point Attribute Change Workflow (this WF change field value of an item or initiative DP) • Item/Initiative Decision Point Status Change Workflow (this WF is for the approval or rejection of a decision point) • Item/Initiative Status Change Workflow (this WF is for changing the status of item/initiative based on a decision point status change) • Decision Flow Management (DFM) provides the functionality to synchronize attributes (at the time of creation/default and as part of change), statuses, and authorization synchronizations between the decision making application (portfolio management) and the project management application (cProject or PS Project). • Commercial Project Management (CPM) with the recent S/4 HANA roadmaps allow you to link and navigate to the commercial project (refer to Figures 4-7 and 4-8) and to link CPM risk management to the portfolio item (refer to Figures 4-7 and 4-9) using the Risk Management button on the Item menu bar. 293 Chapter 4 Industry Best Practices and Business Recommendations Figure 4-7. Roadmap item: Link PPM item and CPM project via the project navigation drop-down Figure 4-8. Roadmap item: Link PPM item and CPM project via decision flow management 294 Chapter 4 Industry Best Practices and Business Recommendations Figure 4-9. Roadmap item: Link PPM item to CPM risk management application Reference to SAP S/4 HANA EPPM Q1/2021 and Q2/2021 Functionalities: https://roadmaps.sap.com/board?BC=6EAE8B27FCC11ED892E91C2A1E0220CC&SC=6E AE8B27FCC11ED892E9269E46EFA0CC&range=2021Q1-LAST#Q1%202021;INNO=40F2E9281A6 31EDA9CD839CB3A39A0F5 https://roadmaps.sap.com/board?BC=6EAE8B27FCC11ED892E91C2A1E0220CC&SC=6E AE8B27FCC11ED892E9269E46EFA0CC&range=2021Q1-LAST#Q1%202021;INNO=6EAE8B28C5D 91EDA9CD844ADC35B20E5 Business Challenge: Project Structure Project structure plays a critical role in terms of how the project is detailed for planning and forecasting purposes and for the purpose of monitoring progress and performance. Project structure also plays an important role in reporting when the structures are standardized and key data structure for the project attributes are well defined. Many organizations and enterprises use project structure to capture the reporting requirement and this leads to constraints in the way projects are detailed, planned, and managed. This section goes through the different solutions adopted by the enterprises, their reasoning, and the recommended solutions in order to achieve the best outcomes. 295 Chapter 4 Industry Best Practices and Business Recommendations Work Breakdown Structure vs. Cost Breakdown Structure During the course of the SAP Project Management system implementation, many organizations and enterprises make important decisions about the project structure. As the ERP implementation is driven by finance stakeholders, especially the Chief Financial Officer, there is a tendency to have more key stakeholders from the finance stream who are related to the projects. This influences the way the project is structured. Most project managers use MS Project or Primavera as their legacy project management application or continue to use it as the scheduling application. If the project manager continues to use these applications for their schedule management application, the ownership of the ERP project system is vested in the hands of the finance controller. Hence, the approach is to have it created to reflect a budget book or budget paper or reflect the financial reporting requirements. Although cost breakdown structures provide the ability to report on actual, plans, budgets, and commitments, its ability to report based on phase, tasks, activities, milestones, and dates becomes limited. What this means is that the ability for the project manager/planner/scheduler to plan and forecast based on these cost breakdowns will be a difficult exercise, as this structure does not relate or follow the natural flow of project activities or tasks. This also leads to dual maintenance—detailed project schedules, dates, and quantities in the schedule management application and the summarized cost-by-cost element in the ERP project systems. As time progresses, this cost planning in ERP will be further summarized and will be captured at the root level WBSE. Then the phasing details (cost plan by period) will be evenly distributed without the details of when the cost is likely to go up or down. All of these impact project controls such as earned value analysis, percentage of completion, revenue recognition, and so on. Due to these knock-on impacts, it is wise to have the ERP project structure in line with the natural flow of project activities based on the different work packages delivered at different stages of the project. ecommendation on Work Breakdown Structure vs. Cost R Breakdown Structure When the project is structured based on project phases, work packages, and on the activities performed within these work packages, this allows reporting of actual, plan, budget, and commitments in addition to reporting by phases, dates, quantities, and cost 296 Chapter 4 Industry Best Practices and Business Recommendations distribution based on the project activity planning. Financial reporting requirements based on the budget book/budget paper, the responsibility requirements (internal customer and service provider), or the Final Assets (FXA) created can be performed via the portfolio management application, by using buckets (primary and classification buckets), collection, and initiative. Others using commercial project management’s master project, and Project system’s profit centre/cost centre information, and settlement of Asset Under Construction to the Final Fixed Assets via grouping of posted actual cost. In the case of a cost project, where there is no project or schedule management involved, it makes sense to have the project created based on the cost breakdown structure. usiness Challenge: Level of Planning During B the Lifecycle of the Project Level of planning, to some extent, was covered in Chapter 2 under the forecasting topic. In Chapter 2, you learned how the project and schedule management maturity of the enterprise determines the forecasting methods. This section covers the level of planning during the lifecycle of the project for the purposes of estimation—Bills of Quantities (BoQ), Bills of Service (BoS), and Bills of Material (BoM)—as well as detailed planning, scheduling, and forecasting. E stimates (BoQ/BoS/BoM) Depending on your industry, estimates are prepared before the actual commencement of work/job/project or as part of the bidding/quotation/proposal process. These estimates are rough cut planning documents in order to come up with best and worst case estimates. These estimates serve as references or baselines when the actual work commences. In this type of planning, although timelines have been considered for major or long duration projects to plan human/equipment resource estimates, it may not be possible to have absolute clarity on when these resources will be required at the time of bid estimate or change request estimate. In other words, the effort is known but the phasing for these efforts is not. Therefore, planning methods should capture the type of resource with their characteristics, quantities, unit prices, and total value in the form of a list of quantities, prices, and value. These estimates can also be summarized or grouped based on the different costing groups—design labour, material, freight, civil work, mechanical work, electrical work, instrumentation work, and erection and commissioning work 297 Chapter 4 Industry Best Practices and Business Recommendations depending on bid proposal structure or for better visualisation of complex estimates. In new product development and product manufacturing enterprises, the design drawing is the basis for estimation and bid planning. When project cost mostly comes from material supply and logistics compared to design, erection, and commissioning services, in order to consider cost differences arising due to price escalation, inaccuracies related to lack of detailed planning, and changes to in situ conditions with reference to time, contingencies must be factored into the estimation. With turnkey projects, where large contracts are managed as design and construct, plus operate, or plus operate and maintain, comprises of work packages such as design, procurement, construct, operate and maintain. It is better to have estimates based on these work packages, as the project delivery approaches can change during the course of the project lifecycle. etailed Plan (Schedule of Quantities, Services, and D Materials Against a Delivery Plan) In the detailed plan (delivery plan), the bill of quantities, materials, and services are tagged against the tasks to which the material or service is related. In the case of materials and services that are recurrently required, the quantities are planned as a lump sum and then distributed over a period of task duration based on the distribution profile. This allows the cost to be phased over the project timeline. Based on the billing milestones and revenue schedule (billing plan) agreed-on with the customer, revenue can be phased over the project timeline. There are many benefits when project cost and revenue are phased over the project timeline based on the project task, activity, or milestone progress. This enables more accurate earned value analysis, milestone trend analysis, and variance analysis. These project controls are driven based on a detailed project plan. In this planning method, when task/activity plan dates change, the corresponding labor, material, and equipment costs associated with the task move as well. This is reflected on the project revenue (milestone-based billing) and can be reflected in the budget, commitment, and revenue as well (other than milestone billing). Sometimes, depending on the size and type of project, the transition from rough cut planning (bill of quantities) to detailed plan is a time-consuming process. This is where the expertise of a project scheduler or planner and any reference to similar size/type projects helps build the project structure and detailed plan. The transition from one planning method to another is very important in the context of the project control, governance, and readiness. 298 Chapter 4 Industry Best Practices and Business Recommendations Recommendation About the Level of Planning Most enterprises and organizations adopt the appropriate level of planning mentioned previously for estimation and detailed planning. Some enterprises and organizations, due to lack of project management maturity or due to gaps in the project structuring, cost reporting, and scheduling requirements (or for the purpose of simplification) prefer to continue to use the bill of quantities approach based on work or cost packages (including responsibility view and function/ object view). If your enterprise or organization wants to use the project management capability offered by SAP Portfolio and Project Management systems (EPPM), the recommended approach is to use the bill of quantity approach for each major task and activity of the project/work/job. Then maintain a schedule of quantities (broken down on the basis of period and if not by date) for these major tasks/activities, which are one or two levels lower than the work package or phase WBSEs. This allows the enterprise to benefit from project structure simplification and also provide a framework to integrate with the schedule management application such as MS Project or P6. This approach allows reporting and forecast based on the project timeline (period) with better accuracy from project controls such as EVA, milestone trend analysis, and variance analysis. The success of this approach hinges on the ability of the project planner or scheduler to manage and forecast the change of resource (labor/material/service) quantities based on the project timeline (based on periods at the major task/activities level) and having to interface date movement from the schedule management application. Refer to Chapter 3 for more about integration with estimation and schedule management third-party applications. usiness Challenge: Remote Project Location, B Offshore Work, or Work Location with No Computer Access Many times the project sites are located in remote or offshore locations where access to computers is limited. In the 21st century, with the advent of advanced mobile technology and 4G/5G network, access to handheld devices such as tablets and smartphones, has increased multiple folds. 299 Chapter 4 Industry Best Practices and Business Recommendations The need for supervisors or field staff to go back to their desks in order to retrieve information or perform job-related tasks in the ERP system means leaving the project site. This has led to workaround requirements such as an ERP system being able to perform offline data entry or offline data retrial of information that are not real-time or outdated. This relatively outdated information can lead to accumulated inaccuracies and misinformation on material availability, stock, duplicate work, lack of safety, and quality at the project site. Needless to say, at times site offices are not located close enough to the actual place of work. It can be counterproductive if project managers have to access up-to-date, critical project design or status or stock information via a desktop connected to wired or WiFi Internet. As a matter of convenience, in this age of Internet and mobility, project managers, planners, and schedulers want to access critical project information and they don’t always have the luxury of opening a laptop to access their ERP system. Therefore, SAP provides approximately 28 smartphone-based Fiori based apps and approximately 171 tablet-based Fiori based apps of various application versions to perform these day-to-day transactions, factsheets, and analytics. These numbers are constantly changing, as more and more S/4 HANA on-premise and cloud-based apps are being created and a few old apps are being deprecated when they do not align with the S/4 HANA simplification roadmap. Recommendation about Remote Work and Offshore Work A BBC article entitled “The Last Places on Earth Without the Internet” by Rachel Nuwer mentions that “assuming you had the right device, is there anywhere left on Earth where the labyrinth of cable and wireless signals does not reach?”. This article discusses the challenges related to availability of internet and wireless communication in difficult locations, such as offshore oil rigs, deep underwater submarines, Eurotunnels, and so on. Considering mobility is a game changer for all kinds of work that we do, SAP’s Fiori and mobility capability are in many ways ahead of the curve and should be something that enterprises and organizations take advantage of. Business Challenge: When to Use Mass Upload During the SAP implementation lifecycle, there will be many instances when business users request mass upload tools. These requests could be due to change management 300 Chapter 4 Industry Best Practices and Business Recommendations issues. Most of the business users are used to working in Excel spreadsheets and would like to have the data entered in that Excel spreadsheet be transferred to SAP ERP systems. Mass Upload: When to Use It and When Not to? When a request for mass upload is made, it is important to review this objectively based on strategic outcomes rather than tactical benefits. Each upload program needs to be evaluated for the following: 1. By providing the upload capability, will the business user be limited from using the ERP application? Will it make the ERP application a reporting database (record to report), instead of using the ERP application for the project/program/portfolio management capability and functionality it offers? 2. Is the mass upload functionality required to create/change/ update master data, reference data, or transaction data? 3. How much process efficiency can be achieved by providing the mass upload capability? 4. What will happen to these uploads when new functionality or enhancements are performed to the ERP application? 5. What happens if the key data structure in an ERP application is appended or deleted and how does this impact the upload and its templates? 6. How frequently are enhancements performed? How stable is the business process to perform a mass upload? Sometimes mass uploads are requested to such an extent that the SAP Project, Program, and Portfolio Management, in its entirety, is expected to be managed out of Excel spreadsheet, leaving superusers (or process administrators, finance controllers, or cost object controllers) the main consumer of the project, program, and portfolio management capability. This leads to accumulation of process issues and pseudoproject management (offline project management) happening external to the SAP application. It turns SAP into a reporting database. Slowly the usage of project management will be minimized to such an extent that only the data required for 301 Chapter 4 Industry Best Practices and Business Recommendations reporting is captured at the highest level, without detailing it to the lower level. This situation, in turn, leads to many other homegrown applications (MS Access or .Net applications) or other third-party products with competing priorities and is a perfect recipe for disaster. Heterogeneous architecture is good when applications complement each other’s capability, functionality, and usability. Root cause analysis shows that, if more and more Enterprise Portfolio and Project Management (EPPM) business users use the SAP applications, the quality of data will be better than working out of an Excel spreadsheet and then using mass upload functionalities to record data back into SAP. There could be a lot of useful information or messages that business users can have first hand access to, that are related to date relationships with other interlinked activities, status of other interlinked objects that have been initiated or commenced, and so on, when interacting with the SAP project, program, and portfolio management application. More direct interaction with SAP EPPM applications leads to better data quality, governance, and monitoring, as it is proven that mass upload functionalities adds multiple layers with respect to data capture and response to the upload log or messages generated by the SAP EPPM application. So does this mean that mass upload should not be made available to business users? The simple answer is it can be used. Refer to the recommendation section for more details. Recommendations Regarding Mass Upload When the enterprise’s business processes are stable and the likelihood of having change in the business processes is small, it is okay to consider new development request for mass update of attributes/status and not creation of documents/master/reference data functionality, for project management business. Consider mass update requests (new development request) from project management business if and only they bring process efficiencies. Creation of master/reference data objects has many onscreen functionalities and it will be prudent to use master data transactions in the SAP EPPM area. SAP EPPM solution areas with the latest version also provide options to create multiple items, initiatives, reviews, what if scenarios, and so on, and to perform collective processing of results analysis, settlement, network activity confirmation, and so on. SAP EPPM also provides mass update capabilities to update attributes of item, initiative, decision points, project definition, WBSE, network, activity, project definition, WBSE, network/activity status, milestone, and so on. 302 Chapter 4 Industry Best Practices and Business Recommendations However, if your enterprise chooses to create a mass upload transaction due to a pressing business demand, ensure that these mass uploads are restricted only to superusers or process/solution area admins. Mass update capability in SAP EPPM: 1. CNMASS – Mass Change in PS (Project Definition, WBSE, Network/Activity/Element, Milestone and Relationship) 2. CNMASSSTATUS – Mass Status Change in PS(Project Definition, WBSE, Network/Activity – System and User Status) 3. CJ8G - Collective Settlement Processing (Project/WBSE) 4. KO8G – Collective Settlement Processing (Orders – Network, Sales Order, Service Order, Plant Maintenance Order, Internal Order, etc.) 5. KKAJ – Collective Results Analysis Processing 6. CJ45 – Collective Actual Overhead Processing 7. CJR2 – Cost and Activity Input Planning – With Excel Integration 8. CN27- Collective Confirmation 9. Create Multiple What If Scenarios (On screen) 10. Create Multiple Review (On screen) 11. Create Multiple Initiative (On screen) 12. Create Multiple Initiative (On screen) 13. Mass Update of Item 14. Mass Update of Initiative 15. Item and Initiative: Mass Update of Decision Point 16. Item and Initiative: Move to Primary Bucket For initial data transfer/migration purposes, SAP Portfolio and Project Management systems provide the following initial data transfer tool, which can import data from Excel spreadsheets. These tools should not be exposed to end users for data maintenance, as they lack delta functionality and the message logs provided by these tools are not intuitive and are rudimentary. 303 Chapter 4 Industry Best Practices and Business Recommendations 1. CNMASSCREATE – Mass Creation of Project/WBSE 2. RPM_DX_ITEM – Transfer/Import Excel Data to PPM Item/ Authorization/Decision Point/DP Authorization 3. RPM_DX_INITIATIVE – Transfer/Import Excel Data to PPM Initiative/Authorization/Decision Point/DP Authorization/Phase/ Phase Authorization 4. RPM_DX_BUCKET- Transfer/Import Excel Data to PPM Bucket/ Authorization 5. RPM_DX_PORTFOLIO - Transfer/Import Excel Data to PPM Portfolio/Authorization 6. DPR_DX_PROJECT - Transfer/Import Excel Data to cProject Project/Phase/Checklist/Chk. Item/Task/Role/Staffing Commonly Asked Questions Four questions are included in this discussion. They resonate with the topics discussed so far in this book and with respect to the SAP solution roadmap. These questions are functionality and capability focused and have been picked based on their business impact and the benefits they can provide to business. hen a Project Involves an Internal Customer and W Deliverer, Should the Internal Customer and its Deliverers Be Housed in One Project? If your enterprise uses Work Breakdown Structure (WBS) based on the work performed and not based on cost breakdown and has integration with scheduling applications, it is better to have the project created with respect to each scheduling project. This allows seamless data exchange and provides better visibility, as projects are “like for like,” both in scheduling applications and in enterprise project management tools (SAP). In most cases, scheduling projects in P6 or MS Project are created individually for each delivery business unit for the purpose of ease of use, less interference from client/ customer, and to be discrete but share the correct/right level of details with the client/ customer. 304 Chapter 4 Industry Best Practices and Business Recommendations In order to have an overarching view of the projects delivered to the customer, these PS project/PPM items created by individual departments (including project for customer work) for delivering parts of the main project (in this case, program of work) can be grouped under the PPM initiative. Business rules should be defined when a project should be created and at what level. This has to be consistently followed, both in the scheduling application and the enterprise portfolio and project management application (SAP EPPM). Some enterprises and organizations—ones that do not use initiatives or use initiatives to represent some other reporting requirement and do not integrate with third-party scheduling applications—can consider creating one project for customer and its respective delivery partners. This will require more process maturity with respect to phases and decision point approvals, estimation, and planning (bottom up to the customer), budget allocations (top down to delivery area), and forecasting (bottom up to the customer). The customer also has to identify the delivery partners (internal or external) upfront or may make changes to the delivery approach/partners during the project lifecycle. Structuring projects based on phases should include a provision for these variations in identifying the delivery partners upfront or during the project lifecycle. Without maturity in these process areas, it is not recommended to have one project structure. The requirements related to the customer and delivery partner are called slightly different terms: 1. Asset owner and asset deliverer 2. Client and deliverer 3. Customer and delivery partner 4. Client and service provider 5. Responsible and requesting division/business unit/business area/department The requirements related to these terms are mostly the same. 305 Chapter 4 Industry Best Practices and Business Recommendations ariation Management Using Claims vs. CPM Change V Request vs. Version Management (Baselining)—Which Method Is Better? Variation or change request management is an important topic for project management. Within the SAP Enterprise Portfolio and Project Management (EPPM) solution, there are multiple ways in which this solution can be realized. Some enterprises and organizations use the Claim functionality with a few enhancements and are very happy with the solution offered via the Claim process for variation or change request management. With the introduction of S/4 HANA, claim management is not available in the perpetual scope. It is only made available in the compatible scope, which is deemed to expire by 2025 (as of now) for business continuity for the SAP business suite customer. Therefore, it is better to transition to the CPM Project Issue and Change Request management solution. PS version management, for the purpose of change requests, is a very basic and rudimentary way of capturing monetary changes in the project. This change request event can happen any time during the project lifecycle. Managing and tracking variation or change requests via snapshot or version management is cumbersome if you choose to create a PS version every time a variation or change request is approved and the cost plan is updated with the variation or change request monetary value. This method also does not provide a document view or a lifecycle of the change request. It simply provides a cumulative monetary value change once the change request is approved and the cost plans are updated. CO version provides similar capability as PS version does, and does not provide the document view, flow, or lifecycle of the change request. But it does provide the cumulative monetary value change once the variation or change request is approved and the cost plans are updated. Unlike PS version, it is not advisable to have CO version created for project variation or change requests. With two versions, original baseline and revised/updated baseline CO, the reporting requirements related to original and variation can be obtained. If further details are required, they can be obtained from the PS version created for every change request or variation. PS and CO versions are both very basic workaround solutions to be used only if reporting outcomes are expected. 306 Chapter 4 Industry Best Practices and Business Recommendations etwork Costing vs. Easy Cost Planning—Which N Is Better? This topic was covered in Chapter 2 as part of the forecasting solution. From an overall project management perspective, network costing provides the structure and capability to plan, schedule, and forecast in an integrated manner. Network costing requires additional enhancements in its current form to plan or schedule quantities/forecast remaining quantities by period, as the SAP provided distribution keys are pretty basic. This planning method takes more time and effort to prepare and maintain plan, as is the case with any integrated planning method. Easy cost planning provides the bill of quantity, service, or material that’s required for the work package or high-level task. If ECP is adopted at the network activity level with no enhancements, it does not provide the period-based breakdown of quantities. Rather, the distribution key at the network activity will perform even distribution or any other basic level distribution based on the total ECP cost of the respective network activity. This method does move the cost based on the network dates, but does not move detailed resource requirements based on the scheduling and forecasting functionalities or network dates. This method is less integrated with scheduling and requires high maintenance if it’s used with no enhancements to ECP and execution service solutions. Enhancement options discussed in Chapter 2 can be explored. If scheduling plays a key role in your organization and you plan on integrating SAP resource management applications such as SAP Multi Resource Scheduling (MRS) and Portfolio and Project Management (PPM), it makes more sense to adopt network costing instead of easy cost planning. For more details on recommended planning methods by different types/levels of planning, by industry for managing or delivering projects, and based on project management maturity level, refer to Tables 2-2 and 2-3 in Chapter 2. How Do You Manage Narratives for a Project? SAP Enterprise Portfolio and Project Management provides an ability to capture notes at different levels—Item, Item Decision Point, Initiative, Initiative Decision Point, Reviews, What Ifs, and Collections. Additional long text functionality for Item and Initiative is also available. By using this functionality, you can configure multiple custom long text options. SAP PS also offers single long text functionality as part of its project hierarchy at each individual object—Project Definition, WBSE, Activity/Element, and Material Components. 307 Chapter 4 Industry Best Practices and Business Recommendations Although this capability is available in the SAP Enterprise Portfolio Project Management (EPPM) solution area, there is a requirement to record comments or narrative based on the fiscal year period, so that project and program financial, schedule, scope, risk and overall status related comments can be reported for project, initiative, bucket, and portfolio management. This periodic commentary or narrative, along with Red, Amber, and Green (RAG) statuses for each of the commentary headings, is derived based on the key performance indicators such as financial, schedule, risk, issue, and change requests. This capability can be built with workflow approvals, as detailed in Chapter 2, under the section titled “Project Commentary.” There is also a SAP delivered BI BO commentary solution, which offers comparable capability within the SAP landscape. Standard RICEFW List by Industry Table 4-2 provides the list of RICEFW (R- Report, I-Interface, C-Conversion, F-Form, and W – Workflow) by industry as a ready reference for solution and application consultants and for business partners engaged in SAP implementations and maintenance (this list is independent of SAP versions, whether they be S/4 HANA or existing business suite). 308 Custom Fields at Item Decision Points/WBSE and Other WBSEs Custom Fields at Initiative and Initiative DP Custom Fields at Network Activity (Integration with MRS) Project Forecasting Workbench Using Network Planning (Chapter 2) Enhancement to the Distribution Enhancement Keys – Network Planning (Chapter 2) 2 3 4 5 6 Enhancement Enhancement Enhancement Enhancement Enhancement Custom Fields at Project Definition/Item/Cproject 1 RICEFW Classification Development Object Name No. Table 4-2. Standard RICEFW List by Industry Cross Industry Cross Industry Profession Service and Telecom Cross Industry Cross Industry Cross Industry Industry • Project Forecast • Project Planning • Project Progress • Project Forecast • Project Planning (continued) • Project Delivery • Project Planning • Project Forecast • Project Resource Management • Program Initiation and Set Up • Program Delivery • Project Delivery • Project Delivery • Project Initiation and Set Up • Project Delivery Process Area Chapter 4 Industry Best Practices and Business Recommendations 309 310 Enhancement to Procurement via PFWB Using Network Planning (Chapter 2) • Refer to Items 13 to 20 on Enhancements Related to Procurement and Production Planning Easy Costing Planning Form and Enhancement Costing Structure Enhancement to Perform Project Forecast 8 9 Enhancement Enhancement Enhancement to MRS and Production Planning via PFWB Using Network Planning (Chapter 2) • Refer to Item 21 on MRS Development 7 RICEFW Classification Development Object Name No. Table 4-2. (continued) Engineering, Construction, and Operation, Homebuilding, Public Sector, Other Turnkey Projects (Aerospace and Shipbuilding), Heavy Machinery and Discrete Manufacturing– Pumps, Turbines, etc., Telecom, Mining, R&D, Pharma, Chemical, Professional Services, etc. Engineering, Construction, and Operation, Homebuilding, Public Sector, Other Turnkey Projects (Aerospace and Shipbuilding), Heavy Machinery and Discrete Manufacturing – Pumps, Turbines, etc., Telecom, Mining, R&D, Pharma, Chemical, Professional Services, etc. Profession Service and Telecom Industry • Project Forecast • Project Planning • Project Materials • Project Forecast • Project Planning • Integration with Procurement • Project Forecast • Project Forecast • Project Planning • Project Resource Management • Integration with MRS Process Area Chapter 4 Industry Best Practices and Business Recommendations Enhancement to the Time Distribution Keys for ECP (Chapter 2) Custom Report to Report Plan vs. Forecast, ETC, and EAC based on the Quantities and values Planned in ECP (Chapter 2) Enhancement for Project Commentary Management and RAG Status (Chapter 2) 10 11 12 Enhancement Report Enhancement • Project Forecast • Project Planning • Project Forecast • Project Planning (continued) Public Sector, Engineering, Construction • Project Reporting and Operation, Other Turnkey • Project Commentary projects, Utilities, R&D- New Product Development (NPD) and Information Communication and Technology Engineering, Construction, and Operation, Homebuilding, Public Sector, Other Turnkey Projects (Aerospace and Shipbuilding), Heavy Machinery and Discrete Manufacturing – Pumps, Turbines, etc., Telecom, Mining, R&D, Pharma, Chemical, Professional Services, etc. Engineering, Construction, and Operation, Homebuilding, Public Sector, Other Turnkey Projects (Aerospace and Shipbuilding), Heavy Machinery and Discrete Manufacturing – Pumps, Turbines, etc., Telecom, Mining, R&D, Pharma, Chemical, Professional Services, etc. Chapter 4 Industry Best Practices and Business Recommendations 311 312 Project Specific Material – Enhancement External Procurement Enhancement to Purchase Order (E1) to Hold the Schedule of Quantities by Date/Period Once Forecasting Cycle Is Completed for the Period or Rolled Over to the Next Cycle (Chapter 3) Project Specific Material – Workflow External Procurement Workflow Email Notification (W1) by Supplier or Service Provider by Project or Construction Zone/ District to be Triggered Once The Forecasting Is Completed/Rolled Over to the Next Period by the Scheduler/Project Manager for all the Service and Materials of the Project (Chapter 3) 13 14 RICEFW Classification Development Object Name No. Table 4-2. (continued) Engineering, Construction, and Operation, Homebuilding, Public Sector, Other Turnkey Projects (Aerospace and Shipbuilding), Heavy Machinery and Discrete Manufacturing – Pumps, Turbines, etc., Telecom, Mining, R&D, Pharma, Chemical, Professional Services, etc. Engineering, Construction, and Operation, Homebuilding, Public Sector, Other Turnkey Projects (Aerospace and Shipbuilding), Heavy Machinery and Discrete Manufacturing – Pumps, Turbines, etc., Telecom, Mining, R&D, Pharma, Chemical, Professional Services, etc. Industry • Project Materials • Project Forecast • Integration with Procurement • Project Materials • Project Forecast • Integration with Procurement Process Area Chapter 4 Industry Best Practices and Business Recommendations Project Specific Material – Inhouse Production (Long Lead times) - Enhancement to Reservation (E2) for Network or WBSE to Hold the Spread or Distribution Based on the Forecasting Information (Chapter 3) Project Specific Material – Inhouse Production (Long lead times) – Enhancement to Update Planned Order (E3) Automatically by Distributing Reservation Evenly by Period, at the Time of the Next MRP Run for the Project Based on the Lead Times Defined for the Material (Chapter 3) 15 16 Enhancement Enhancement Engineering, Construction and Operation, Homebuilding, Public Sector, Other Turnkey projects (Aerospace and shipbuilding), heavy machinery and discrete manufacturing – pumps, turbines, etc., Telecom, mining, R&D, Pharma, Chemical, Professional Services, etc. Engineering, Construction and Operation, Homebuilding, Public Sector, Other Turnkey projects (Aerospace and Shipbuilding), Heavy machinery and Discrete Manufacturing – Pumps, Turbines, etc., Telecom, Mining, R&D, Pharma, Chemical, Professional Services, etc. (continued) • Project Materials • Integration with Production Planning • Project Materials • Project Forecast • Integration with Production Planning Chapter 4 Industry Best Practices and Business Recommendations 313 314 Common Materials – External Workflow Procurement - Workflow Email Notification (W2) by Supplier or Service Provider by Project or Construction Zone/District to be Triggered Once the Forecasting Is Completed/Rolled Over to the Next Period for All the Service and Materials of the Enterprise (Chapter 3) 18 Enhancement Common Materials – External Procurement - Enhancement to update Schedule Agreement (E4) Based on the Various Reservations Generated from Different Projects, Once the Forecasting Cycle when the Enterprise Is Completed (Chapter 3) 17 RICEFW Classification Development Object Name No. Table 4-2. (continued) Process Area Engineering, Construction, and • Project Materials Operation, Homebuilding, Public • Project Forecast Sector, Other Turnkey Projects • Integration with Procurement (Aerospace, Shipbuilding, Heavy Machinery and Discrete Manufacturing, Telecom, Mining, R&D, Pharma, Chemical, etc. Engineering, Construction and • Project Materials Operation, Homebuilding, Public • Project Forecast Sector, Other Turnkey Projects • Integration with Procurement (Aerospace, Shipbuilding, Heavy Machinery and Discrete Manufacturing, Telecom, Mining, R&D, Pharma, Chemical, etc. Industry Chapter 4 Industry Best Practices and Business Recommendations Common Materials – In-House Enhancement Production (Short Lead Times) – Enhancement to Manually Create Planned Order Using the Distribution of Quantity for the Forecasted Week/Month by Site Engineers (E5) for the In-House Ready-Mix Production Plant on a Day-to-Day Basis or on an AsNeeded Basis (Chapter 3) Common Materials – In-House Report Production (Short Lead Times) – In-House Ready-Mix Concrete Plants Can View Reservations by Period (via Report) R1 for Their Plant So That They Can Forecast Their Raw Material Quantities like Cement, Aggregate, Sand, and Additives, etc. (Chapter 3) 19 20 (continued) Engineering, Construction, and • Project Materials Operation, Homebuilding, Public Sector • Project Forecast (Councils with Quarry), etc. • Integration with Production Planning Engineering, Construction, and • Project Materials Operation, Homebuilding, Public Sector • Project Forecast (Councils with Quarry), etc. • Integration with Production Planning Chapter 4 Industry Best Practices and Business Recommendations 315 316 Forecasting Information to Multi Enhancement Resource Scheduling (MRS) – Standard MRS Integration Is Based on Start and End Data and Distribution Profile/Key Captured in the Network Activity. As the project manager / scheduler has provided the detailed distribution of effort based on the forecasting periods, this information can be readily taken via enhancement (E6) for the determination of demand instead based on the normalised distribution key that the standard SAP PS – MRS integration offers (Chapter 3) 21 RICEFW Classification Development Object Name No. Table 4-2. (continued) Profession Service and Telecom Industry • Project Forecast • Project Resource Management • Integration with MRS Process Area Chapter 4 Industry Best Practices and Business Recommendations PS Project Validations (Using Form Routines) PPM Item cProject Validations (BADI Enhancements) PPM Initiative Validations (BADI Enhancements) Advance Search and Match Code Enhancements Period Lock for PPM Financial Views and Access and Control for Financial Views 22 23 24 Enhancement Enhancement Enhancement Cross Industry Cross Industry Cross Industry (continued) • Project Period End Close • Project Planning • Project Budgeting • Project Forecast • Project Initiation and Set Up • Project Delivery • Project Execution • Project Initiation and Set Up • Project Delivery • Project Closure Chapter 4 Industry Best Practices and Business Recommendations 317 318 Fiscal Period Roll Over for Enhancement Projects and Programs with Checklist Items by Company Code or Profit Center (Business Units) • Change Request Approval • Activity and Milestone Confirmation • Timesheet Approval • Scheduling Updates • Forecasting Automatic Run and Forecast Updates • KPI and Deliverables updates • Statistical Key Figure Updates • Overhead Run • Results Analysis and Settlement 25 RICEFW Classification Development Object Name No. Table 4-2. (continued) Cross Industry Industry • Project Period End Close • Project Planning • Project Budgeting • Project Forecast Process Area Chapter 4 Industry Best Practices and Business Recommendations Project and Program Factsheet and Status Reports • Project and Program Performance Report • Project and Program Profitability Report Proposal/Project Identification, Set Up and Approval workflow (To Cover Project/Proposal Identification, PS Project Creation, and Release Approval to Commence Execution) Change Request Identification, Set Up and Approval Workflow (To Cover Change Request Approval Workflow) • Timesheet Submission and Approval • Work Confirmation and Completion • Financial Closure of WBSE and Project Closure 26 27 28 29 Workflow Workflow Workflow Cross Industry Cross Industry Cross Industry (continued) • Project Progress • Project Time Recording • Project Closure • Project Variation Management • Project Initiation and Set Up • Project Release Adobe Forms and Engineering, Construction, and • Project Reporting Reports Operation, Homebuilding, Other Turnkey Customer projects (Aerospace, Shipbuilding, Heavy Machinery and Discrete Manufacturing, Telecom, Pumps, Turbine, Power Station, etc.), Professional Services (ICT, etc.) Chapter 4 Industry Best Practices and Business Recommendations 319 320 • Revenue Recognition Request Workflow Approval • Billing Request to Invoice Approval Decision Point Approval Workflow Workflow – Project and Program • Project and Program Status Update • Project and Program and its DP Status Update • Project and Program Attribute Update • Project and Program and its DP Attribute Update 30 31 RICEFW Classification Development Object Name No. Table 4-2. (continued) Process Area Engineering, Construction, and • Project Execution Operation, Homebuilding, Public • Project and Program Stage Sector, Other Turnkey Projects Gate (Aerospace, Shipbuilding, Heavy Machinery and Discrete Manufacturing, Telecom, Mining, R&D, Pharma, Chemical, etc. Engineering, Construction, and • Project Billing Operation, Homebuilding, Other • Project Revenue Recognition Turnkey Customer Projects (Aerospace, Shipbuilding, Heavy Machinery and Discrete Manufacturing, Telecom, Pumps, Turbine, Power Station, etc.), Professional Services (ICT, etc.), Pharmaceutical (FDA, TGA for Drug Approval) Industry Chapter 4 Industry Best Practices and Business Recommendations Project Procurement workflow • Shopping Request or Purchase Requisition Approval • Purchase Order Approval • Purchase Order Change of Value or Quantity Approval • Invoice Verification Approval Resource Management workflow • Resource Request and Fulfilment Workflow Project Travel and Expense Workflow • Claim to approval Project Leave Request Workflow Workflow • Request for approval 33 34 35 36 Workflow Workflow Workflow Change Request (via Claim Enhancement or CPM Change Request) to Transfer and Update the Project Structure (if Network Planning Is Used) and Costing Structure (if ECP Is Used) 32 Cross Industry Cross Industry Profession Service and Telecom Cross Industry Cross Industry (continued) • Project Resource Management • Project Resource Management • Project Resource Management • Project Procurement • Project Variation Management • Project Forecast Chapter 4 Industry Best Practices and Business Recommendations 321 322 Project and Program Factsheet Report/ and Status Reports Enhancement • Project and Program Performance Report • Project, Program, and Portfolio Balancing Report – Target vs. Actual vs. Forecast vs. Forecast Simulation vs. Budget/Plan • Investment Decision: Cost Benefit and NPV Reports • Investment Ranking and Prioritization Report/Framework 38 Report Project Site Inventory Analysis Report • Ageing Analysis of Inventory (A&B Types) • Inventory Consumption Analysis (B&C Types) • Forecast Prediction for Reorder (B&C Types) 37 RICEFW Classification Development Object Name No. Table 4-2. (continued) Process Area Public Sector, Other Turnkey Capital Projects, Engineering, Construction and Operation, Utilities, R&D- New Product Development (NPD) and Information Communication and Technology) • Project Reporting Engineering, Construction, and • Project Procurement Operation, Homebuilding, Public Sector (Council, etc.) Industry Chapter 4 Industry Best Practices and Business Recommendations Project Work Health and Safety Report Dashboard • Incidents, Accidents, Injuries, Illness, Exposures, etc. by Project Site • Surveillance Protocol, Test, Examination, Risk Assessment, etc. by Project Site 40 Report Product Portfolio Performance Reports • Key Performance Report – Target vs. Actual by Product or by Proposal 39 Cross Industry R&D- New Product Development (NPD), Pharma R&D, Chemical R&D, Discrete Manufacturing Industries R&D, etc. • Project Work, Health, and Safety • Project Reporting • Project Reporting Chapter 4 Industry Best Practices and Business Recommendations 323 Chapter 4 Industry Best Practices and Business Recommendations Standard Functionality List by Industry Table 4-3 provides the list of functionality by industry as a ready reference for solution and application consultants and for business partners engaged in SAP implementations and maintenance (this list is independent of the SAP versions, whether they be new S/4 HANA or existing business suites). 324 or Business Case Investment Briefs Documentation and Project Collaboration Project Y Y Project) Y; N (Customer Y Y wind farms, advertising, firms, media – agement, audit Project) Y; N (Customer pumps, etc.) ment, turbines and Project) Y; N (Customer Y ment, etc.) defense equip- etc.) authorities, ment systems, waste manage- property man- service, legal, electricity, etc.) and buildings, development projects – sewer, commissioning heavy machinery – airports, Home ture, regional projects) ship building, station, tunnels, of infrastruc- technology water, gas, electric, power department design, procure- large customer ment and erection, (IT), IT enabled projects and (Information Services Professional department, oil rig, hydro- eral, transport, (Engineering, Projects Other Turnkey Airplane assembly, event manage- plant, offshore state, fed- Classifications (Infrastructure Water Electricity, and Telecom, Gas, Utilities: public works (Road, rail, (Councils, Further Construction and Mining Public Sector Industry Functionality \ Table 4-3. Standard Functionality List by Industry Project) Y; N (Customer etc.) drug approvals, Administrations– Therapeutic Goods administrations, Food and Drug pharma R&D, (Paint R&D, NPD and R&D Pharmaceutical: Chemical and Y Y Works) Programs/ (Major Periodic (MRO) Projects Operations Repair, and Maintenance, (continued) Y and N Y projects, etc.) development ect, training and restructure proj- Organization TQM projects, projects, (6 Sigma Projects Internal Chapter 4 Industry Best Practices and Business Recommendations 325 326 Y Stakeholder and Y Testing and Resource Calendar Project and Scheduling Y Y Project Date Planning or Y Meeting Minutes Documentation Handover Y Bill of Quantities Managements Y Y Y Y Y Y Y Specification with Version Y Y Y Design Documents Y RACI Matrix Y Project Charter Y Y Schedule and plan High Level Project Construction and Mining Public Sector Industry Functionality \ Table 4-3. (continued) Y Y Y Y Y Y Y Y Y Y Water Electricity, and Telecom, Gas, Utilities: Y Y Y Y Y Y Y Y Y Y Projects Other Turnkey Y Y Y Y Y Y Y Y Y Y Services Professional Y Y Y Y Y Y Y Y Y Y NPD and R&D Pharmaceutical: Chemical and Y Y Y Y Y Y Y Y Y Y (MRO) Projects Operations Repair, and Maintenance, Y and N Y and N Y and N Y and N Y and N Y and N Y and N Y and N Y and N Y and N Projects Internal Chapter 4 Industry Best Practices and Business Recommendations Y Y Gantt Chart Connection with Based Billing Project Delivery N N Project Milestone Based Billing work) Related Billing Y Y Y (Intercompany Y Y Y Project Resource Recognition and Revenue Project Billing Application Scheduling N (Managing) Network Diagram Third-Party and N CPM or PERT - Y Y Y (Deliverer) Task Planning - Y Y Y Milestone Planning Y Planning (Stage Gate) Decision Point Phases and Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y N (Managing) Y (Deliverer) and Y Y Y Y Y Y Y Y Y Y Y Y; N (NPD; R&D) Y; N (NPD; R&D) Y; N (NPD; R&D) Y Y and N Y Y Y Y N N work) (Intercompany Y N Y and N Y Y Y Y (continued) N N work) Y (Intercompany N Y and N Y and N Y and N Y and N Y and N Chapter 4 Industry Best Practices and Business Recommendations 327 328 Y Project Funding Funds Management of Request and Y N N N Project Grant and 15) Item Method s14 (Dynamic Line Recognition Project Revenue 9) Completion Method (Contract Recognition Project Revenue and 7) methods - 1, 3, Recognition (POC Project Revenue N N N Y Y Y Y Billing Project Periodic Construction and Mining Public Sector Industry Functionality \ Table 4-3. (continued) N N Y Y Y Y Water Electricity, and Telecom, Gas, Utilities: N N Y Y Y Y Projects Other Turnkey N N Y Y Y Y Services Professional Y (R&D) Y Y; N (NPD; R&D) Y; N (NPD; R&D) Y; N (NPD; R&D) Y; N (NPD; R&D) NPD and R&D Pharmaceutical: Chemical and N N N N N N (MRO) Projects Operations Repair, and Maintenance, N N N N N N Projects Internal Chapter 4 Industry Best Practices and Business Recommendations Y (Deliverer) Y and N Travel and Expense Y Timesheet Allocations Overhead and Receipts Y Y Cash flow Planning: Payment (Managing) Value Quantity and Dollar and N Forecasting: Down) and Current (Top Budgeting: Original Y Up) Y Y N Y Y Y Y Y Planning (Bottom Estimation and N Y Y Project Financials Y Other Grants State, Federal, and Funding Reporting- Project Grant Y N Y Y Y Y Y Y N Y Y and N Y Y N (Managing) Y (Deliverer) and Y Y Y N Y Y Y Y Y Y Y Y N Y Y Y Y Y Y Y Y Y (R&D) Y N Y Y Y Y Y Y N (continued) Y Y N N Y and N Y Y and N Y N Chapter 4 Industry Best Practices and Business Recommendations 329 330 Y Booking Soft and Hard N Work) Management Resource Request: N Y (Maintenance Y Y Y Project Resource Payment to Delivery to Agreement Scheduling Purchase Order/ M&S Procurement: Y Request Shopping Cart to Procurement: Service (M&S) Material and Procurement Y Y Project Construction and Mining Public Sector Industry Functionality \ Table 4-3. (continued) N Y Y Y Water Electricity, and Telecom, Gas, Utilities: N Y Y Y Projects Other Turnkey Y Y Y Y Y Services Professional N Y Y Y NPD and R&D Pharmaceutical: Chemical and Y Y Y Y Y (MRO) Projects Operations Repair, and Maintenance, Y and N Y Y Y Y Projects Internal Chapter 4 Industry Best Practices and Business Recommendations Y and N (Managing) Y (Deliverer) and N Books and Actual POC Earned Value Analysis (Managing) Y (Deliverer) Measurement Updated and Deliverables indicator Updates Key Performance Work Confirmation, Y Tracking Project Progress Completion after Project Work Management to Talent Integration N Y Y Y Y (Manual) Y and N (Manual) with Recruitment Y and N N Y and N N Request Integration (Manual) Project Resource Demand Rank, and Fulfil Fulfilment: Qualify, Resource Y Y (POC) and N Y Y (Manual) Y and N (Manual) Y and N N N (Managing) Y (Deliverer) and N (Managing) Y (Deliverer) and Y Y Y and N (Manual) Y and N (Manual) N Y Y (POC) and N Y Y Y Y Y Y Y (POC) and N Y Y Y and N (Manual) Y and N (Manual) N Y Y Y Y Y Y Y (continued) Y and N Y and N Y and N Y Y and N Y and N Y and N Chapter 4 Industry Best Practices and Business Recommendations 331 332 Register by Site and Safety Issue Work, Health, Customer Internal and (Variation Register): Change Request Y Y Y Issue and Action Register Y Y Y Y Risk Register Management Project Risk Variance Analysis Plan vs. Actual - Analysis Milestone Trend Y Y Y Y Y Y Y Y N Realized Confirm Benefits Construction and Mining Public Sector Industry Functionality \ Table 4-3. (continued) Y Y Y Y Y Y Y N Water Electricity, and Telecom, Gas, Utilities: Y Y Y Y Y Y Y N Projects Other Turnkey Y and N Y Y Y Y Y Y N Services Professional Y Y Y Y Y Y Y Y NPD and R&D Pharmaceutical: Chemical and Y Y Y Y Y Y Y N (MRO) Projects Operations Repair, and Maintenance, Y and N Y and N Y and N Y and N Y Y and N Y and N Y and N Projects Internal Chapter 4 Industry Best Practices and Business Recommendations Dashboard Manager Commercial Finance, and Procurement, Resource, Dashboard Manager Y Y Y Y and Portfolio Project, Program, Y N Y Benefit Realization Y Reporting Regulatory Statutory and Reporting and Milestone Schedule, Y Y Stage Gate, Y Y Y Y Financial Reporting Y Reports RAG Status Reports, Including Health Check and Dashboard Project Reporting Y Y Y N Y Y Y Y Y Y Y N Y Y Y Y Y Y Y N Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y N Y Y Y Y Y (continued) Y and N Y and N Y Y and N Y and N Y and N Y and N Y Chapter 4 Industry Best Practices and Business Recommendations 333 334 (Maintenance Work) Workflow and Delegations N; Y Request Approval Y Y Y Y Resource Booking Delegations Workflow and Variation Approval and Delegations Approval Workflow RAG Reporting and Delegations Approval Workflow Purchase Order and Delegations Approval Workflow Purchase Request Delegations Workflows and Approval N Y Y Y Y Y Y Project Related Construction and Mining Public Sector Industry Functionality \ Table 4-3. (continued) N Y Y Y Y Y Water Electricity, and Telecom, Gas, Utilities: N Y Y Y Y Y Projects Other Turnkey Y Y Y Y Y Y Services Professional N Y Y Y Y Y NPD and R&D Pharmaceutical: Chemical and Y Y Y Y Y Y (MRO) Projects Operations Repair, and Maintenance, Y and N Y and N Y Y Y Y Projects Internal Chapter 4 Industry Best Practices and Business Recommendations and Delegations Request Workflows Request and Billing Recognition Revenue Delegations Workflows and Approval (Stage Gate) Decision Point Phases and Up Initiation and Set Project/Proposal and Delegations Request Workflow Member Leave Project Team Delegations Workflows and Approval Vendor Invoice and Delegations Approval Workflow Timesheet N Y Y Y Y Y Y Y Y Y Y N Y Y Y Y Y N Y Y Y Y Y N Y Y Y Y Y Y Y Y Y Y Y Y N Y Y Y Y N (continued) N Y and N Y Y Y Y Chapter 4 Industry Best Practices and Business Recommendations 335 336 Y Y Y App Work Confirmation Y Approval App Timesheet Mobile Management on Project Delegations Workflows and Financial Closure Delegations Workflows and Work Completion Delegations Workflows and Y Y N Y Y Y Y Claim Approval Travel and Expense Y Construction and Mining Public Sector Industry Functionality \ Table 4-3. (continued) Y N Y Y Y Y Water Electricity, and Telecom, Gas, Utilities: Y N Y Y Y Y Projects Other Turnkey N Y Y Y N Y Services Professional N Y Y Y N Y NPD and R&D Pharmaceutical: Chemical and Y N Y Y Y Y (MRO) Projects Operations Repair, and Maintenance, N Y Y Y N Y Projects Internal Chapter 4 Industry Best Practices and Business Recommendations Commuting or Offshore or Working Remote Information When Ability to Capture Accessibility Application Community Management Project View App and Single Project Multi Project View App Project Reporting Commentary App Project Approval App and Invoice Request, Order, Procurement Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y (continued) Y Y Y Y Y Y Chapter 4 Industry Best Practices and Business Recommendations 337 338 Types). Employment Employees (All Worker and Planner, Field Maintenance Members, Project/ Project Team Managers, Resource Procurement, Commercial, Cost Controller, Controller, Project Admin, Finance PMO, Support Managers, and Portfolio Project, Program, Y Y Availability to Application Construction and Mining Public Sector Industry Functionality \ Table 4-3. (continued) Y Water Electricity, and Telecom, Gas, Utilities: Y Projects Other Turnkey Y Services Professional Y NPD and R&D Pharmaceutical: Chemical and Y (MRO) Projects Operations Repair, and Maintenance, Y Projects Internal Chapter 4 Industry Best Practices and Business Recommendations Y Portfolio intercompany Distribution Logistic Execution Management, and Materials Logistic General, N; Y (any Sales and Y work) Y Project Systems Management and Project and CR) Management Commercial Project Y (Risk, Issue, Y Y Y Y Y Y Y Enterprise Project Connector work) Scheduling (MRS) Y Y (Maintenance Y N Y Multi-Resource Reporting (RAR) Accounting and Revenue Other Applications SAP Add-ons/ Integration with Y Y Y Y Y Y Y Y Y Y Y Y Y Y N Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y N Y Y N Y Y and CR) Y (Risk, Issue, Y Y N (continued) Y N Y Y and CR) Y (Risk, Issue, N N N Chapter 4 Industry Best Practices and Business Recommendations 339 340 Y Interface to InEight Y Project (MSP) Interface to MS Primavera (P6) Interface to Oracle Products Y Y Interface with Third-Party Y Y Human Resources Management Health, and Safety Environment, Y Y Y Y Y Y nance work) nance work) Y Y; N (mainte- Y Plant Maintenance Y; N (mainte- Management Quality ready-mix Planning plant) Y Y (quarry or Production Construction and Mining Public Sector Industry Functionality \ Table 4-3. (continued) Y Y Y Y Y Y nance work) Y; N (mainte- Y N Water Electricity, and Telecom, Gas, Utilities: N N Services Professional Y Y Y Y Y Y work) N Y N Y Y Y and N Y; N (maintenance N Y Y Projects Other Turnkey N Y N Y Y Y N Y Y NPD and R&D Pharmaceutical: Chemical and Y Y Y Y Y Y Y Y N (MRO) Projects Operations Repair, and Maintenance, N Y N Y Y Y and N N N N Projects Internal Chapter 4 Industry Best Practices and Business Recommendations iTWO Interface to RIB Autodesk BIM360 Interface to Estimating) Pricing and (Integrated Project Interface to iPE Prism Interface to ARES Y Y N Y Y Y N Y Y Y N Y Y Y Y (Aerospace) Y N N Y N N Y Y Y Y N N N N N ECP) Y; N (Use PS N Chapter 4 Industry Best Practices and Business Recommendations 341 Chapter 4 Industry Best Practices and Business Recommendations Legend: • Y – Yes • N – No • ECP – Easy Cost Planning • NPD – New Product Development • R&D – Research and Development • CR – Change Request (Variation Management) Activities for this Chapter 1. For your enterprise, list the detailed list of best practices that are currently in place. List other industry best practices that you think are being used by your enterprise and the reason that you consider them industry best practices. 342 Chapter 4 Industry Best Practices and Business Recommendations 2. What are the business challenges faced by your enterprise from the list discussed in this chapter? List any other business challenges faced by your enterprise that you think are across industry or are specific to your industry. Test Your Learning 1. How is the milestone trend analysis performed? Are milestone dates reported on the y-axis shown oldest to most recent (at the top) or most recent to oldest (at the top)? 2. EAC = ACWP (Actual Cost) + ________ 3. A WBS structure based on work or cost offers better outcomes? 4. Percentage of Completion (POC) and revenue based valuation methods integrate with revenue accounting and reporting. a. True b. False 343 Chapter 4 Industry Best Practices and Business Recommendations 5. Earned Value Analysis can be applied to projects where the budgeted cost is well detailed based on the project scope and deliverables. EVA provides a method that permits the project to be measured by progress achieved. Is this statement correct? a. True b. False Answer: 1. Oldest to most recent (at the top) 2. ETC (Estimate to Complete) 3. Work 4. True 5. True Summary In this chapter, you learned about the following: • Industry best practices • Business challenges and recommended solutions • Commonly asked questions during SAP EPPM deployment • List of development objects by industry • List of EPPM capabilities by industry In the next chapter, you learn about SAP EPPM’s operational and strategic reporting features. 344 CHAPTER 5 Reporting and Analytics: Operational and Strategic This chapter covers project, program, and portfolio management reporting needs for operational planning as well as executing and completing projects and programs. It also covers strategic analytics for the purpose of continuous improvement, corrective actions, decision making, and alignment to strategic objectives. This chapter covers in detail operational reports that are required for real-time reporting and are used on a day-to-day basis for successful project, program, and portfolio management. Along with these, period end/monthly operational reports are covered, including exception reports, progress reports, performance reports, and variance reports. This chapter also covers, under strategic reporting, different forms of descriptive and diagnostic analytics that measure and report on current project, program, and portfolio key performance figures, metrics, deliverables, and benefits. These analytics provide greater control over projects, programs, and portfolios and help identify projects and programs that are performing well and poorly. Predictive analytics provide insight into future performance of projects, programs, and portfolios and allow the enterprise to take corrective actions. Predictive analysis allows enterprises to establish common themes among historic and current successful projects and programs based on location, solution area, products, project/program portfolios, project teams, divisions, and so on. Similarly it provides insights on the common issues that caused historic and current projects and programs to fail. This chapter is structured in this fashion so that solution consultants and business subject matter experts (SMEs) can use it as a reference for documenting their reporting needs. They can use these structured benchmarks to validate operational and strategic reporting and analytics. © Joseph Alexander Soosaimuthu 2022 J. A. Soosaimuthu, SAP Enterprise Portfolio and Project Management, https://doi.org/10.1007/978-1-4842-7863-5_5 345 Chapter 5 Reporting and Analytics: Operational and Strategic The SAP Portfolio, Program, and Project Management (PPM) system is very well integrated with operational and strategic reports and analytics. It has prebuilt queries, extractors, analytic apps* (embedded analytics*), embedded BW*, standalone BW, and BW on HANA or BW/4 HANA. *Possible with S/4 HANA versions Operational Reporting Operational reports and basic analytics are used for the following purposes: 1. To view and list to-do activities, milestones, and tasks. 2. To view and list checks to be performed (safety and quality checks). 3. To review stock and daily requirements and perform reorders, as appropriate. 4. To review and okay approvals, workflows, and other requests. 5. To review daily performance of tasks and checks performed on the previous day or today. 6. To review and update project and program data (attributes and statuses). 7. To perform operational analysis so that action can be taken immediately. 8. To review and analyze periodic performance at a detailed level/ area for summarized periodic reporting. 9. To save time and money by improving efficiency in a number of key operational areas. 10. To report production, construction, and productivity performance trends and prepare corrective actions to improve the day-to-day running of the business. SAP provides the following forms of operational reports: 1. Factsheet apps 346 Chapter 5 Reporting and Analytics: Operational and Strategic 2. Other basic analytics apps 3. Transactional apps (to perform actions) 4. ALV (ABAP list view) list views 5. ALV grid views 6. Adobe forms These operational reports are available on a real-time basis for the day-to-day functioning of business functions/areas. Period-end close/monthly operational reporting is used to review and measure periodic or monthly performances of projects, programs, and portfolios. These reports sometimes provide drill-down capability to perform additional actions such as releasing a project, changing the status of the WBSE, approving timesheets, updating attributes of the master data objects, reviewing planned vs. actual period variances, and so on. Real-Time Operational Reporting Real-time operational reporting refers to reports that are used on a day-to-day basis and are timely, without any delay in the reported information. These reports and apps can be classified into the following groups: 1. Structure overview and other overview apps and reports a. Project definition (app and report) b. WBS element (app and report) c. Order/network activity (app and report) d. Milestone (app and report) e. Material component (app and report) f. Partner overview g. Project settlement rule overview 2. Dashboard reporting a. Risk, Issue, and Change Request Report 347 Chapter 5 Reporting and Analytics: Operational and Strategic b. Proposal/Project (Item) Dashboard Report c. Program (Initiative) Dashboard Report d. Phases and Decision Point Report ( Project and Program) e. Checklist Dashboard Report f. Task Dashboard Report g. Resource and Staffing Dashboard 3. To-do apps a. My Checklist Items b. My Tasks (PPM) c. My Projects: Active/Planned/Critical/Project Manager/As a Substitute d. My Projects: Upcoming Milestones/Project Task Confirmations e. Confirm Project Tasks f. Report Issues g. My Timesheet 4. Approval and release apps: a. Approve Decision Points b. Release Billing Requests c. Approve Timesheets (Version 2) d. Approve Leave Requests (Version 2) 5. Audit trail reports: a. Change Log Reports 6. Variance and other comparison reports a. Plan vs. Budget vs. Actual: Dollar value and quantity b. Project Version Comparison 7. Line item report with detailed drill-down capability a. Actual 348 Chapter 5 Reporting and Analytics: Operational and Strategic b. Plan c. Commitment d. Payments 8. Procurement and inventory related reports: a. Purchase Requisition Report by Project b. Purchase Order Report by Project c. Project Oriented Procurement Report d. Stock/Requirement List Report Period End/Monthly Operational Reporting Period end/monthly reporting refers to reports that are used at the time of period end or on a monthly basis to review and report the performance of projects, programs, and portfolios at the end of the reporting period, once roll over to the next period has happened, or as part of the roll over to the next period. These reports are operational because reporting can be performed at the smallest business unit or business entity level by the responsible person with an ability to drill down for more details and analysis. These reports are mostly related to financials, schedules, progress, status, and other key performance indicators that the enterprise has to report on, at a business unit level, at the end/close of the reporting period or on a monthly or weekly basis. Some of the real-time operational reports used for reporting daily progress or point- in-time progress can be used for period end/monthly/weekly reporting. Operational performance reporting does not only allow you to measure the performance of project, programs, and portfolios, but it also allows you to measure the performance of people and organizations. In addition to using these reports at period end, they are also used at year end to determine performance and performance benefits (such as bonuses) for people and organizations involved in delivering these performance key figures. These reports can be classified into the following groups: 1. Variance and comparison reporting (project, program and portfolio): a. Variance Report: Plan vs. Budget vs. Forecast vs. Actual: Cost and Revenue 349 Chapter 5 Reporting and Analytics: Operational and Strategic b. Variance Report: Plan vs. Forecast Vs. Actual: Schedule c. Period Comparison Report d. Version Comparison Report 2. Progress and status reporting: a. RAG Status Report (project, program, and portfolio) b. Descriptive Reports c. Progress Analysis Report (Project, Program and Portfolio) d. Project and Program Status Report 3. Profitability reporting: a. Profitability Analysis Report by Project and Program b. Profitability Analysis Report by Portfolio c. Profitability Analysis Report by Product d. Profitability Analysis (PA) Report by Service Line or Line of Business e. PA Report by other dimensions such as Geography, Country, State, and so on 4. Performance reporting (people and organization structure): a. Project billing/revenue recognition account executive, industry vertical, delivery horizontal, sales/delivery team, head of department, and so on: target vs. actual b. Number of billable days by resource, resource manager, vertical, horizontal, and so on: target vs. actual c. Success ratio of change request claim for project and program d. Performance achieved by activity (concreting in m3, scaffolding in m2, etc. at a construction site) or by department (design priority open items closed) by period 350 Chapter 5 Reporting and Analytics: Operational and Strategic Strategic Reporting This section discusses non-operational reports and analytics that are used for diagnostic purposes. Diagnostic analysis has to be descriptive to provide more context for further interpretation and tactical analysis. Senior management and statutory authorities require insight into the enterprise, business and strategic projects, programs, and portfolios. Therefore, enterprises and organizations should have analytics and reporting capabilities that provide future insights to measure, analyze, and predict project, program, and portfolio outcomes based on their strategic objectives (mission and vision) and outcomes. These measurement, analysis, and predictions are performed on certain criteria that directly or indirectly deliver strategic outcomes and align to the strategic objective. Therefore, in this section, tactical (non-operational) and strategic reports and analytics are discussed that are related to projects, programs, and portfolios. To summarize, strategic reporting is performed for the following major reasons: 1. To report, review, and analyze projects, programs, and portfolios based on their strategic objectives (market share, customer satisfaction index, benefit to citizens, etc.). 2. To report, review, and analyze key operational efficiencies (high priority safety incidents, timely completion, zero rework, etc.) that are important to the bottom line of the enterprise. 3. To report, review, and analyze key indicators (baseline and forecast accuracies) that are indirectly related to the overall performance and alignment to the strategic outcomes. Evaluating these key indicators brings transparency and allows you to predict/forecast outcomes of ongoing and future projects and programs. 4. To perform diagnosing analysis of the inter-departmental functioning (incorrect estimates, design defects, no. of drawing revisions, quality issues, erection and commissioning errors, etc.) to determine future operating model which is aligned with the strategic outcome. To determine the tactical (equipment modernisation - Autonomous Paver/Dozer, Automated Construction - Slip Formwork, Prefabrication/Modular 351 Chapter 5 Reporting and Analytics: Operational and Strategic Construction) and strategic measures (adoption of state of the art construction technologies such as 3D printing, Augmented Reality/Visualisation, Wireless Safety Monitoring Equipment, etc.) to be adopted to align with the future operating model. Measures relating to optimisation & synergy of resources and headcount are reviewed to determine how they could improve internal operational efficiencies and bottom line and also bring more business due to the usage & adoption of cutting edge technologies. 5. To perform predictive analysis of project, program, and portfolio performances. 6. To determine and predict the worst and best possible outcomes of projects, programs, and portfolios during their lifecycle. Using this information, you can prepare road to recovery plan, by considering possible synergies and optimizations of the involved teams. 7. To save time and unnecessary investment through intelligent insight and benchmarking. Reference: https://www.ecosys.net/blog/project-analytics-benefits-challenges-and- first-steps/ https://www.datapine.com/blog/strategic-operational-analytical-tactical- dashboards/ https://gocontractor.com/blog/construction-industry-technology/ Diagnostic and Descriptive Analytics As the name denotes, these analytics are used for diagnostic purposes (root cause analysis). In many cases, diagnostic analytics need to be supplemented by descriptive narratives and commentaries in order to provide reasons or justification for the changes. The narratives can be used to describe financials, schedule, safety, quality, benefits, progress, key achievements, and so on. Unlike period end/monthly operational reports, these reports are summarized at the responsible area (departments of government, divisions, service lines, etc.), strategic unit, statutory reporting hierarchy level, and 352 Chapter 5 Reporting and Analytics: Operational and Strategic so on. These narratives sometimes have to be scrutinized and endorsed before they are published for senior management or statutory reporting. These diagnostic and descriptive reports allow senior management and other statutory organizations and sponsors to review projects, programs, and portfolios that are performing well and see those that are performing badly. Most of the time, diagnostic and descriptive analytics are extracted from different data sources, such as project, program, and portfolio data, their phases and decision points, financials, schedules and dates, deliverables, key figures (benefits), change requests, issues, risks, reviews, collections, snapshots, notes, custom long text, and so on. • Since this information is recorded separately in different individual transactions and has to be collated and summarized, these diagnoses may not be real-time. • If it involves descriptive analytics, these reports are expected to be reviewed, scrutinized, and endorsed before being reported and this also makes them not real-time. • The volume of data that is processed in a comprehensive diagnostic and descriptive analytics by summarising and cumulating key figure does require specialised warehousing and intelligence tools, so it may not be a good idea to use embedded analytics or BW. The following use cases for diagnostic and descriptive analytics are considered by enterprises and organizations: 1. Profitability analysis reporting: Every enterprise and organization is keen to know how profitable their projects, programs, and portfolios are. If the enterprise is a project delivery organization, all other indirect costs associated with project management are allocated and apportioned to the project as part of the month-end close, so that accurate profitability can be analyzed by project, program, portfolio, industry vertical, delivery team, sales team account executive, and so on. Project/ WBSE or SAP PPM item holds all stakeholder or responsibility attributes based on which project revenue, cost and profitability can be sliced and diced. In addition to profitability, many organizations also measure customer satisfaction indexes and net promoter scores. 353 Chapter 5 Reporting and Analytics: Operational and Strategic 2. Contingency management reporting: Contingencies are managed at the project level and the same can be reviewed (remaining amount) using operational PS Cost Element based reports. Most enterprises want to know the contingency position based on the current project base. This allows the enterprise to decide on the index used for the contingency management that should be used for future project proposals and bids, depending on the project type/category and project location. Contingency index can be used as a key figure for the purpose of trend analysis, in order to track and monitor its position based on region, geography, and type of project work. 3. Project RAG status reporting: As part of the gateway review and during the different phases of the project lifecycle, senior management want to know the Red (R), Amber (A), and Green status of the projects and programs with descriptive commentary to support the numbers and key figures provided in the status report. Sometimes explanations have to be provided about risks, delays, and the next steps being taken to overcome them. Different organizations perform similar sorts of narrative-based reports for the following. The commentary/narrative and heading/ topics provided to the stakeholders can be different and have to be reviewed and endorsed before they are consumed by the stakeholders. a. Strategic Project Reporting b. High Risk High Profile Project/Program Reporting c. Special Project of Lord Mayor/Chief Minister/Premier Reporting d. Statutory Reporting (Treasury Reporting ) or Gateway Review (Sponsor) Reporting 4. Cash flow reporting: Cash flow reporting at the project level is covered under operational reporting and can also be accessed under PS payments. Cash flow reporting at the enterprise level or at the level of strategic business unit or division level can be performed based on cumulative invoices, receipts and expenses 354 Chapter 5 Reporting and Analytics: Operational and Strategic at these organization unit levels, along with the payment terms of each of these transactions, thereby providing an accurate level of information. 5. Resource management reporting: At the enterprise level or at the level of strategic business unit or resource management organization level, project human resource demands can be cross-examined based on qualifications. This diagnosis provides insight on the next steps related to training and development, emerging technologies, and deficiencies in knowledge base. Key figures related to skill, adaptability, and qualification quotient can be measured by using this analytic, which can be tracked and monitored by performing trend analysis. Long-Term Trend Analysis Trend analysis is the process of comparing project, program, and portfolio data over time to identify consistent results or trends, so that strategies can be developed to respond to these trends in line with the enterprise’s goals and objectives. Trend analysis helps the enterprise understand how it has performed in managing projects, programs, and portfolios and predict where current or ongoing projects, programs, and portfolios will go. This analysis gives the decision makers ideas about how they might change things to move the enterprise’s projects and programs in the right direction. Trend analysis helps improve the enterprise in the following ways: • Identify areas where projects, programs, and portfolios are performing well so that the success can be mirrored. • Identify areas where projects, programs, and portfolios are underperforming. • Provide evidence to inform decision making. Trend analysis is aimed at projecting current and future movement of events of projects and programs through the use of time series data analysis, which involves comparing data over a sequential period of time to spot a pattern or trend. Milestone trend analysis is an operational form of the trend analysis and it is performed at the project or program level. The following use cases are applicable at the enterprise level or organization-wide, across regions, project phases, geography, project types, and categories. 355 Chapter 5 Reporting and Analytics: Operational and Strategic 1. Based on historical project data, trend analysis can be performed to determine unit cost of activity types by region, geography, project type and category, work package, activity type (civil – excavation, civil-shuttering, civil – concreting), and so on. Historical data can be used to extrapolate (to determine pattern or trend or year-on-year growth rate) costing information for the next ten years when working on estimations or when forecasting ongoing project or project proposals for construction, operation, and maintenance. This trend analysis of the unit cost of work (maintenance), job (media), and activity type (cross industry) can be performed across industries. 2. Price trends of raw construction material such as steel, reinforcement bar (rebar), cement, asphalt, bitumen, aggregates, and so on, by region and country based on historic data and external local commodity price sources. Using historic and external data, home building and construction enterprises can operate strategic long duration projects in a specific region and use trend analysis to extrapolate commodity prices. This enables them to predict seasonal variations for optimal bulk purchases. 3. Trend analysis of cost performance index by project phase based on the number of months into that specific project phase and using weighted average of historic project data by size, location (region and country), project type and category, technology, and so on. With this trend analysis as a basis, future predictions can be performed for ongoing projects based on the respective project phase and number of months into the phase. This allows enterprises to extrapolate cost variance and Estimate to Complete (ETC), and compare it to the Earned Value (EV) analysis. 4. Trend analysis of schedule performance index by project phase based on the number of months into that specific project phase and using weighted average of historic project data by size, location (region and country), project type and category, technology, and so on. With this trend analysis as the basis, future predictions can be performed for ongoing projects based on the 356 Chapter 5 Reporting and Analytics: Operational and Strategic respective project phase and the number of months into that specific phase. This is used to extrapolate schedule variance and compare it to the Earned Value (EV) analysis. 5. Trend analysis of project warranty defects by defect type, project type, category, and component within the system (power plant, fractional distillation, cooling tower, boiler, coal feeder, etc.). This is based on the number of months in operation. Enterprises can extrapolate the defect occurrence pattern, frequency, and periodicity in the future based on the trend. This trend analysis is based on historical data of warranty defects of similar size projects that belong to the project category, group, and technology. 6. Growth trends in projects, programs, portfolios, and products based on region, country, project type, project category, and team. This also helps senior leadership and the management team in setting strategic targets and objectives for the enterprise and to cascade it down to different teams. 7. Trend analysis of operational efficiency in estimation and forecasting. Trend analysis is performed based on when during the project lifecycle (timeline), the project forecast was able to determine the final project total cost, based on historic completed projects. This point in time in the project lifecycle can be captured for different projects based on size, location, project type, and category. A trend analysis can be prepared to determine when more accurate estimates and forecasts are developed. This trend analysis information can be used in predictive analytics to determine the accurate final project total cost. 8. Benchmark price and quality trends with competitor projects, products, and technologies. To know how competitive projects, programs, and products are delivered by the enterprise, benchmarking them with the competitor’s projects, programs, and product is the right way. This requires information about the competitor’s projects and products that is available externally. These external inputs can be used to perform benchmarking 357 Chapter 5 Reporting and Analytics: Operational and Strategic exercises. By performing trend analysis of the benchmarked data, the enterprise can periodically see how they are performing against their competitors. Reference: https://www.business.qld.gov.au/running-business/growing-business/trendanalysis/analysing-trends P redictive Analytics The Project Management Institute (PMI), in its eighth project management survey (with the report titled “Pulse of the Profession – 2016,” under the heading “The High Cost of Low Performance”), mentions that fewer projects are meeting original goals and business intent or are being completed within budget. More projects are failing and creating substantial monetary loss for their organizations. More critical is that the money continues to be wasted when projects aren’t managed well. Approximately US$122 million is wasted for every US$1 billion invested due to poor project performance (a 12% increase in one year). It also mentions the following in the project performance statistics: • 62% of projects met their original goals/business intent • 53% were completed within the original budget • 49% were completed on time • 45% experienced scope creep • 32% of failed project’s budget were lost (reallocated to other successful projects) • 16% projects were deemed failures Another survey and report from PMI mentioned that “44% of high-performing organizations use predictive approaches.” High-performance enterprises that manage projects, programs, and portfolios can use some of the following use cases for predictive analytics: 1. Predictive analytics to determine the estimate at completion (EAC) by performing weighted costing of risks and issue and change requests and adding this to the original estimate at 358 Chapter 5 Reporting and Analytics: Operational and Strategic the WBS element level. Using worst and best case estimates for initial and additional scope (including ongoing issues and risks), it predicts the worst and best case project plan and budget throughout the lifecycle of the project. This will provide the enterprise with intelligent insight on the project budget overrun and allow better control of strategic projects and programs by managing its risk, issue, and change request better. 2. Perform earned value (EV) analysis to predict estimate at completion (EAC) and estimate to complete (ETC). This predictive approach allows you to determine the schedule variance (SV), the cost variance (CV), and the indices such as the cost performance index (CPI = 1, the cost and performance are in line with the plan; CPI < 1, the project has a cost overrun compared to the plan; CPI > 1, the project has incurred less cost than planned), and schedule performance index (SPI = 1, the project is on schedule; SPI < 1, the project is behind schedule; SPI > 1, the project is ahead of schedule) at the level of WBS element. 3. Predictive analytics based on trend analysis and diagnostic analysis performed on process efficiency. Based on the diagnostic and trend analysis, planning, budgeting, and forecasting process efficiency quotients can be determined. These depend on the different project types, categories, geography, regions, and so on, for different work packages (land acquisition, excavation, construction, etc.). Based on historic data and trends, process efficiency quotients and standard deviation can be determined during the different lifecycles of the projects and programs. Using these accuracy quotients, standard deviations, and weightages (cost and schedule), enterprises can predict and determine cost overruns, estimate to complete (ETC), and determine the remaining duration to complete the project. 359 Chapter 5 Reporting and Analytics: Operational and Strategic 4. Simulation of benefits, NPV, ROI, and BCR based on predictive analytics. Based on these three predictive analytics use cases, estimate at completion (EAC) can be determined. In the case of non-profit projects and programs, based on historical data, predictive analytics can provide simulations of the benefit that the project or program can realize over the period of its operation. Using these key figures, further predictive analytics can determine the Net Present Value (NPV), Return of Investment (ROI), Benefit Cost Ratio (BCR), and profitability analyses by product, service line, business unit, or division, as appropriate. 5. Project and program related procurement insights. Tracking delivery progress of high value material components by overlaying their lead times and delivery date enables enterprises to predict delays contributed to the projects. These predictions can be supported with other possible alternative procurement options. 6. Project and program related resource management insights. Based on the remaining effort and percentage of completion by resource type and phase, comparisons can be performed to predict schedule delays and additional staffing requirements. During the testing phase of new product development or IT project, comparisons can be performed to determine remaining testing efforts by overlaying testing efforts until test phase completion date and the current cumulative test resource type assigned to the project. Schedule delays and additional staffing request can be predicted well in advance. Predictive analytics use insight from similar historical projects as a reference to predict delays and provide insights on whether to ramp up resourcing or maintain the status quo. 360 Chapter 5 Reporting and Analytics: Operational and Strategic 7. Project and program related quality and safety insights. Based on the defects, issues, and incidents reported on strategic projects and programs, comparisons can be performed with reference to resource qualification weighted averages, requested qualification weighted averages, safety indexes, and calculated quality indexes to determine safety and quality concerns with respect to highrisk and high-priority strategic projects and programs. Predictive analytics use insight from similar historical projects as a reference to predict worst and best case predictions about forecasted total number of safety and quality issues and cost and schedule delays due to quality and safety defects and incidents. 8. Insights on investment decisions to maximize citizen benefits. Predictive analytics can be used by government organizations to prioritize assets—bridges, council roads, community swimming pools, parks, bicycle paths, and so on—that have to be prioritized within the asset type and across asset types. They are prioritized based on the current condition of the asset, sustainability, cost of no action, benefit to the citizens and community, utilization rates, and so on. Reference: https://www.quora.com/What-are-the-best-examples-of-predictiveanalytics-in-project-management-for-large-projects PMI: The High Cost of Low Performance PMI: Success Rates Rise Activities for this Chapter 1. What are the different forms of operational and strategic reporting that are used by your enterprise? List any reporting requirements not covered in this chapter and try to classify them as operational or strategic reports. 361 Chapter 5 Reporting and Analytics: Operational and Strategic 2. From the list of use cases for project, program, and portfolio management predictive analytics, which one is most relevant to your enterprise? 362 Chapter 5 Reporting and Analytics: Operational and Strategic Test Your Learning 1. Long text and other forms of commentary and narratives cannot be reported in SAP Analytics Cloud (SAC) or SAP BW or SAP BW for HANA. a. True b. False 2. If SPI is greater than 1, it means that the project is ___________ of schedule. 3. Long-term trends use historic project and program data. a. True b. False 4. Period end/monthly operational reports are not real time. a. True b. False 5. Predictive analytics is used to provide future prediction of project performance, costs, and schedule. a. True b. False Answer: 1. False 2. Ahead 3. True 4. False. Period end/monthly operational reports are real time. Because certain business process steps related to the month/ period end would not have happened, more meaningful results are shown post month/period end. 5. True 363 Chapter 5 Reporting and Analytics: Operational and Strategic Summary In this chapter, you learned the following: 364 • Different operational reports for the purpose of evaluating project and program costs, commitments, budgets, forecasts, dates, and payments within SAP EPPM. • Use case of strategic reports, to perform diagnostics, trend analysis, and predictive analytics, in order to control and minimize cost/ budget overrun and delays, so that preventive and corrective actions can be taken. • Strategic reports to perform description analytics based on the captured narratives and Red, Amber, and Green (RAG) indicators, so that factsheets and status reports can be generated for various portfolio, program, and project management topics. Index A Access control lists (ACLs), 44 Accounting documents, 34, 35, 133 Activity elements, 4, 10, 50, 65 Activity input planning, 58 Actual costs, 113, 280 Actual earned value, 279 Annual budget, 87–89 Assembly processing, 159 Automatic requirement grouping, 17 Availability control, 87, 91–97 B Balance sheet, 2, 34, 36, 39 Bill of material (BoM), 19, 56, 152, 160–162, 164 Backward scheduling, 159, 188, 189 Budget carry forward commitments, 113 selection variant/carry forward re-run, 113 WBSE status, 114–116 Budgeting, project functionalities, 87 overall vs. annual budget, 87 release vs. current budget, 88–90 SAP project functionalities availability control, 91–97 budget return, 101–103 budget supplement, 103–105 budget transfer, 106–112 carry forward (see Budget carry forward) distributable and distributed budget, 98–100 tolerance control limit, 97, 98 tolerance control, 86 transactions, 116 Budget return, 87, 101–103 Budget supplement, 103–105 Budget transfer, 87, 106–112 Business challenge level of planning detailed plan, 298 estimates (BoQ/BoS/BoM), 297 recommendation, 299 mass upload, 300–304 remote work/offshore work, 299, 300 work breakdown structure vs. cost breakdown structure, 296, 297 C Capitalization, 164, 165, 169 Cash flow reporting, 354 Change management lifecycle, 125 Change request management, 306 Collective purchase requisition, 14 Commonly asked questions internal customer/ deliverer, 304, 305 narratives management, 307, 308 © Joseph Alexander Soosaimuthu 2022 J. A. Soosaimuthu, SAP Enterprise Portfolio and Project Management, https://doi.org/10.1007/978-1-4842-7863-5 365 INDEX Commonly asked questions (cont.) network costing vs. easy cost planning, 307 variation/change request management, 306 Confirm Network Activity transactional app, 246 Controlling (CO), 8, 11, 29, 270 Cost component structure, 22 Cost element, 36, 54–57 Costing variant, 20 Cost plan budget, 64 Cost variance, 276, 280, 356, 359 Cross application timesheet (CATS), 22, 133, 289 Current budget, 88–91 D Decision flow management (DFM), 288, 289, 293, 294 Detailed date planning, 183 Detailed plan, 59, 73, 93, 298 Diagnostic and descriptive analytics, 352, 353 Distributable budget, 99–101, 104 Distributed budget, 99, 100 Document management system (DMS), 117, 121 Dynamic line item processor (DIP), 149, 271 E Earned value analysis (EVA) actual costs, 280 actual earned value, 279 actual POC, 278, 279 definition, 276 366 ETC and EAC, 281 industry standard method, 276 planned costs, 279 planned earned value, 279 planned POC, 276, 278 value index, 280 value/cost variance, 280 work/schedule variance, 280 Easy cost planning constraints, 72 enhancement considerations, 72–86 with planning form, 71, 72 Engineering procurement and construction (EPC) project, 7, 227 Engineer-to-order (ETO) business scenarios, 19 Enterprise and organization structure, 2 Enterprise project connector (EPC), 183, 206 Enterprise service oriented architecture (eSOA), 204 Estimated costs at completion (EAC), 281 Estimated costs-to-complete (ETC), 280 Estimation and costing fundamentals external labor/service, 220, 221 external material, 224, 225 internal labor, 218–220 internal material, 223, 224 subcontracting, 222, 223 SAP interface classification matrix, 228 components, 230 design principles, 232–234 performing reasons, 226, 227 process industry estimate, 229 techniques, 227 tools, 231 INDEX Execution services, 130–132 Externally processed activities, 8, 9, 20, 222 F Fiori apps, 250–270 Fixed asset (FXA), 26, 34 Forecasting applications design principles, 236–238 SAP interface, project management solution, 235 Functionality list by industry, 325–343 G General ledger, 23, 26, 35, 36, 55 Generally accepted accounting principles (GAAP), 2, 12, 274 H Hierarchy planning, 54–63 Horizontal synchronization field group, 43, 44 item-leading vs. project-leading, 43, 44 pairs, 42 vs. vertical synchronization, 41 I, J, K, L Industry best practices decision flow management, 288, 289 integration with modules/third-party applications, 289–291 investment prioritization framework, 286, 287 management controls (see Project management controls) phases and decision points, 291, 293, 294 resource-related billing, 270, 271 revenue recognition, 272–275 Integration with controlling cost component structure, 22 costing sheet and overhead key, 24, 25 costing variant, 20 cost rates, 23 documents, 22 result analysis, 25 settlement, 26–28 valuation variant, 20–22 Integration with finance accounting documents, 34, 35 FUL settlement, 32 investment profile and capitalization, 31, 32 settlement processing types, 33 Integration with material management automatic requirement grouping, 17 collective purchase requisition, 14 project commitment, 15 project-oriented procurement, 17 purchase requisition, 14 purchasing info record stores information, 15 reporting, 18 valuated and non-valuated project stock, 15, 17 Integration with sales and distribution milestone billing, 12 quotation and sales pricing, 12 reporting transaction, 13 revenue rate card, 13 revenue recognition and result analysis, 12 367 INDEX Internally processed activities, 8 Investment prioritization framework, 286, 287 Investment profile, 4, 31, 32, 169 Investment proposals, 287 Issue management lifecycle, 125, 127 M Material requirement planning (MRP), 19 Material reservation, 19 Materials management (MM), 11 Milestones, 9, 10, 146 Milestone Trend Analysis (MTA), 281–284 N Network costing alternate solution, 70 easy cost planning constraints, 72 enhancement considerations, 72–86 with planning form, 71, 72 enhancement considerations, 66–70 standard SAP PS, 66 wireframe of project forecast workbench, 68 Network diagram, 16, 189, 191 Network planning, 132, 133 Non-valuated project stock, 15–17 O Operational reporting forms, 346 period end/monthly, 349, 350 purposes, 346 real-time, 347–349 368 Order-based billing, 159 Overall budget, 87–89 P, Q Partially distributed budget scenario, 99, 100 Percentage of completion (POC), 146, 273 Period end/monthly reporting, 349, 350 Periodic billing, 150, 151 Periodic settlement vs. full settlement month-end assessment and distribution cycles, 29 reporting, 29, 30 Period level budgeting, 86 Planned earned value (BCWS), 279 Planning and forecasting guidelines, 63, 65 hierarchy planning, 55–63 methods, 54, 55 network costing (see Network costing) standard SAP PS capability and limitations, 63 Plant maintenance (PM), 11, 290 Portfolio creation, 38 group of projects/work, 37 integration of project management, 39, 40 structure, 37, 38 Precedence diagram method (PDM), 7 Predictive analytics, 358–361 Prioritization framework, 44–48, 51 Procurement and production integration, 198–202 Procurement Overview Analytical app, 248 Production planning (PP), 11 INDEX BOM, 19 material requirement planning, 19 material reservation, 19 Production resource tools (PRTs), 7, 10, 11 Profitability analysis reporting, 353 Profitability segments (PSG), 26 Project categories, 6 creation, 5 definition, 4 quality and safety, 4 types, 5 WPS, 7 Project billing BoS, 160–162, 164 delivery-based billing, 152, 153, 155, 156, 158 order-based billing, 159 periodic billing, 150, 151 progress/milestone based billing, 146, 147 RRB, 147–149 Project calendar, 184, 186 Project closure, 174–178 Project commitments, 15 Project Definition Overview fact sheet app, 247 Project delivery-based billing, 152, 153, 155, 156, 158 Project issues and change management (PICM), 125–127 Project Management Body of Knowledge (PMBOK), 3 Project management controls EVA (see Earned value analysis (EVA)) milestone trend analysis, 281–284 variance analysis, 284, 286 Project management workforce, 204 Project oriented enterprises, 37 Project-oriented procurement, 17 Project RAG status commentary, 121–124 Project RAG status reporting, 354 Project resource planning internal activity entry screen, 134 network profile with flag, 135 person assignment, 138 PPM project definition, 143 PPM project role detailed view, 143 professional service industry, 142 project role detailed view, 145 required qualification, 137, 144 staffing overview, 144 view, 140 workcenter capacity header and assignment, 136 workcenter view, 141 workforce planning profile, 139 Project risk, 124–126 Project System submodule, 4 activities, 8, 9 activity elements, 10 milestones, 9, 10 project definition, 4 project network, 7 subnetworks, 11 work breakdown structure, 7 Project variation management, 116–120, 180 Purchase requisition, 14, 197, 199 Purchasing info record stores information, 15, 223 R Real-time operational reporting, 347–349 Recording actual work, 192, 193 369 INDEX Red Amber Green (RAG) status reports, 53 Release budget, 89, 99 Resource management integration, 202, 204 Resource management reporting, 355 Resource related billing (RRB), 147–149, 270 Results analysis, 25, 172, 272–274 Revenue accounting and reporting (RAR), 275 Revenue recognition, 272–275 RICEFW list by industry, 309–324 Risk matrix, 126 S Sales distribution (SD), 11 SAP Enterprise Portfolio Project Management (EPPM), 308 SAP Portfolio and Project Management (PPM), 287 Scheduling fundamentals forecasting, 195, 196 network diagram, 189, 191 project calendar, 186 project variations, 194, 195 recording actual work, 192, 193 type and scenarios, 187, 188 SAP interface design principles, 206–218 management applications, 204–206 project calendar, 184 Secondary cost elements, 36 Selection variants, 113 Settlement, 26–28 processing type, 170, 171 profile, 166 370 rule, 165, 166 scenarios cost projects, 173 customer projects, 172 investment/capital projects, 174 strategy, 166–168 types in settlement rule, 168–170 Settlement processing types, 33 Strategic reporting diagnostic and descriptive analytics, 352, 354, 355 long-term trend analysis, 355–358 predictive analytics, 358–361 reasons, 351 Subledgers, 36 Subnetworks, 11 T Textual comments, 121 Timesheet recording, 192 Tolerance control, 86, 87 Tolerance control limit, 97, 98 Transactional apps, 245 Trend analysis, 355–358 U Unit costing, 55, 56, 58, 59 Unit of measure (UoM), 58 Unused budget carry forward, 113 Unused carry forward budget, 112 V Valuated project stock, 17 Valuation methods, 273, 274 Valuation variant, 20–22 Variance analysis (VA), 284, 286 INDEX Vertical synchronization field group, 42 vs. horizontal synchronization, 41 item-leading vs. initiative- leading, 41, 42 pairs, 41 W, X, Y, Z Whole of life (WOL) cost, 5 Work Breakdown Structure (WBS), 7, 296, 304 Work/schedule variance (SV), 280 371

SAP Enterprise Portfolio and Project Management - Expertsoft

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