SAP Manufacturing Projects with Noveco ePM
- Complex Manufacturing (Mining Machines, Turbines, Production and Assembly Lines etc.)
Key challenges in managing complex manufacturing projects
In an Engineer To Order (ETO) environment customer requirements for a finished configurable product (e.g. ship, locomotive, turbine, mining machines, conveyors etc.) are always unique and require some degree of engineering and design. Manufacturing Companies must provide enough flexibility to be able to customize their products to satisfy customer specific requirements and at the same time be in control of engineering and design standards, costs, manufacturing delivery dates, resource requirements etc.
Complex Engineer To Order manufacturing processes are always managed as a project and usually go through the following lifecycle phases:
- Engineering and Design based on customer requirements
- Cost Estimation, Tendering and Customer Quotation
- Material Requirements planning
- Resource & capacity planning and load balancing
- Procurement of sub-contracted services and materials
- Advance Procurement of long lead items
- Production scheduling in relation to completion of engineering tasks and available capacities
- Production order execution coordinated by project dates and quantity requirements
- Forecasting of final estimated cost at completion, profits and revenues
- Engineering Change Management and Project Variations and Issue management
- Customer billing
- Profit recognition
- Monthly reporting of project KPIs, progress, variations and issues
In ETO manufacturing, the quotation process must be based on cost estimation of the complex product structures including engineering costs, costs of unknown components, risks and contingencies, price escalations etc. The cost estimation must be produced before MRP and production orders are created and must be used as a basis for project budgets and revenue plan.
While customer specific manufacturing is taking place, large portions of work on the shop floor, usually associated with manufacturing of standard components and assemblies, have no specific customer engineering requirements.
Every Engineer to Order process usually includes Make To Order (MTO) and even Make To Stock (MTS). The degree between ETO, MTO and MTS varies in different industries and companies.
Production orders of assemblies and sub-assemblies are scheduled and executed in coordination with project activities, which feed required quantity and completion dates down to production order management system.
The completed project final cost includes cost of engineering and design as well as production variances associates with production of customer specific production orders. Of course, production variances of Make To Order or even Make To Stock components may not be included in the project final cost if it is not desired.
The art of management in manufacturing projects is the ability to coordinate:
1. Engineering, Design and Cost Estimating
- Ability to perform cost estimation based on Bill Of Materials at various stages of a project’s lifecycle (from tender estimate to final detailed design)
- Break-up project WBS structure into assemblies and sub-assemblies, estimate costs on lowest WBS levels based on production costs of assemblies and components assigned to network activities.
- Allocate detailed budget on labour, materials, services to project WBS representing assemblies and sub-assemblies
- Create schedule of work in coordination with capacities available at the shop floor
- Define long-lead time equipment for advanced procurement
- … and much more
2. Production Order Coordination, Project Costs Forecasting and progress reporting
- Generate production orders from material requirements stemming from project network activities
- Ability to have a complete visibility on projects entire actual cost collected through production orders, engineering costs collected time sheets, purchasing commitments for materials and services purchased directly to project etc.
- Forecast cash flow to make sure projects stay cash positive at all times
- Accurately manage project cost to complete and at any time be able to generate project forecast cost and forecast profit at completion
3. Engineering Changes and Project Variations and Issue Management
- Keep track of all engineering changes and their affect on project costs and profitability
- Keep track of project variations, budget transfers and adjustments between WBS elements with complete audit trail history
- Estimate costs and revenue of budget variations and seamlessly integrate them into project revenue plan, budget and forecasts
- Ability to manage project contingencies and report them separately from variations affecting project budget
4. Reporting and analysis
- Report on project financial KPIs: cash, budget, forecast at completion, open orders, forecast profit margin etc.
- Project financial history snapshot and analysis: budget, forecasts at completion, revenue and profit changes over time
Here is the typical project structure used for manufacturing projects
- Represent: project organizational structure (e.g. Project Types, Phases, Major Assemblies)
- Used for: cost Planning and Forecasting, project budget control and progress reporting on a high level
- Represent: project tasks that define work or activity to performed on the site (e.g. fitting, testing)
- Used for: detailed dates scheduling, progress reporting, procurement of materials
SAP solution enhanced by Noveco ePM for complex manufacturing ETO projects
Leading companies are implementing complex SAP ERP solutions to manage their Engineer To Order processes.
SAP Project System is the key solution component that integrates Engineering, Manufacturing, Procurement, Customer Billing, Production Capacity Requirements, Inventory Management, Cost Control and Dates Scheduling together to control complex Engineer to Order tasks.
The aim to enhance effectiveness in the following areas:
- Accurate cost estimation against efficient project structures
- Effective Planning, accurate budgeting
- Clear, timely visibility of costs, revenues, cash position
- Forecasting of project costs, resources, revenues
- Measure/Report progress, earned value, productivity
- Efficient variations, escalations and seamless integration with cost forecasts and revenue planning
- Integration of subcontractors, monitoring of work performed, progress reporting
- Accurate billing and invoicing
- KPI monitoring and relevant reporting
SAP ERP, Project System enhanced Noveco applications provide the complete integrated solution suit to manage your manufacturing project in SAP seamlessly and effectively.
What Noveco does that SAP standard does not
Noveco solutions integrates production orders into project planning and forecasting, which means:
- Project Planning is done on project level: on WBS or Network Activities
- Detailed work planning, execution and confirmation is done though production orders assigned to project WBS
- Forecasting remaining work and costs to complete is performed on WBS taking actual work and costs from assigned production orders
Noveco ePM Project Manager Workbench and Project Manager Portal provide instant visibility into your Manufacturing Projects enabling you to analyze and forecast directly in SAP ERP
- Report on Key Performance Indicators: Cash in and out, Budgets, Cost to Complete, Variations, Actual Costs Forecast Total Costs, Cost To Complete, Work to Complete
- Automatic recalculation and distribution of Cost To Complete
- Cost and Work forecasts
- Purchasing Commitments
- Variations and Issues Register and report
- Contingency Management in complete integration with variations, budgets and forecasts
- Context Drill-down reports: point and click to get into underlying documents directly from ERP
- Built-in reports and analysis
- Automatic Project Forecast history tracking
Lets you perform Cost Forecasting
- Automatic forecasting based on overspend saves Project Manager time as he/she does not need to do this manually
- Perform manual forecasting of Cost to Complete on WBS, Network Activities or PM/SC orders by Cost Elements or network operation work quantity;
- Perform cost forecasting by value or quantity multiplied by labour rates;
- Instant Integration of forecast results with Project Results Analysis
Integrated Variation and Issues Management
- Plan Costs and Revenues within one variation document.
- Assign variation costs to multiple project elements (WBS, Network Activities and orders) within one variation document
- Variation status control, e.g. Pending, Approved with automatic cost allocation to assigned Project elements (WBS, Network Activities): update project current budget and Cost To Complete depending on variation status
- Sales Document update with revenue adjustment from variation document
- Full Integration with Project cost forecasting and reporting
- Full history of project Estimated at Completion, Cost to Complete, Commitments, Actual costs, Budget, Variation of costs and revenue values. See how your project was evolving during its lifecycle.
- Report Project Variations and Budget changes
- Report Original Project Estimation vs. Project Actual Costs at its completion