Earned Value Management made Simple Keith Lee, SAP Systems Integration America Jay Wilson, SAP Labs...
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Earned Value Managementmade Simple
Keith Lee, SAP Systems Integration AmericaJay Wilson, SAP Labs
Session 3802Monday May 19, 200311:20 AM to 12:50 PM
Content Area: Project Systems
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Objectives
Understand Basics of Earned Value Management Systems (EVMS)
Understand SAP/R3 approach to EVMS
Learn Simple steps to configure EVMS in SAP/R3
Become Aware of Options to approaching EVMS in SAP/R3
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Earned Value Management is the analysis of work completed compared compared to the amount of work planned and the cost of the work.
Simple example: The task is creating a 10 foot Wall and takes $1000 (material and labor)
1. Prepare Ground – 10%2. Pour Concrete Base – 20%3. Every foot of wall – 7%
In this example, when completed with the first 2 steps and 3 feet of wall the amount of work complete is 30% + 21% = $510.
What is Earned Value?
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What is Earned Value?
• There are lots of ways to measure Earned Value.
• The wall example uses a combination of milestones (first 2 steps) and counts (feet of wall)
• The simplest approach is to use “estimate”. I am 70% complete because I say so.
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Why use EVMS?
• Given: – total budget of $1000– 5 months effort– produce 10’ brick wall
• Status:– spent to date: $700– time elapsed: 4 months– Wall in process
• How are you doing, and how do you know how you are doing?
• How far along are you? (75%, 50%, >40%)
Life without EVMS
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Why use EVMS?
• Early and accurate identification of trends and problems
• Accurate picture of contract status– cost, schedule, and technical
• Basis for course correction• Supports mutual goals of contractor and
customer– bring project in on schedule and cost
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Five Basic Elements
BCWS Budgeted Cost of Work Scheduled
BCWP Budgeted Cost of Work Performed
ACWP Actual Cost of Work Performed
BAC Budget at Completion
EAC Estimate at Completion
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A Spectrum of Implementation
Where
When
Core EV PrinciplesANSI/EIA-748-1998
(32 criteria)Tailored Applications
Small Companies Larger Companies
Major Defense
Contractors
as desired
Government Organic
Reports
Foreign Countries
streamlined, no paper?
corporate policy,
“enterprise wide”
DoD Non-Major Contracts
(>12 months)
<$6M* >$6M
DoD Major Contracts
>$70M RDT&E
>$300M Prod
tailored to needs C/SSR CPR
FFP contracts?
Commercial or Defense
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SAP Approach to EVMS
• Integrated with all financials and schedule.
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SAP Approach to EVMS
• Calculate both BCWS and BCWP based on a “Baseline” cost Plan using an Earned Value Method.
Period Plan $ BCWS % BCWP % BCWS $ BCWP $1 300$ 30% 10% 300$ 100$ 2 150$ 15% 20% 150$ 200$ 3 200$ 20% 14% 200$ 140$ 4 200$ 20% 7% 200$ 70$ 5 150$ 15% 150$
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SAP Approach to EVMS
• Calculate ALL elements of cost for an object using the same percentage
Period Plan Mat $ Plan Lab $ BCWP % BCWP Mat $ BCWP Lab $1 200$ 100$ 10% 35$ 65$ 2 50$ 100$ 20% 70$ 130$ 3 50$ 150$ 14% 49$ 91$ 4 50$ 150$ 7% 25$ 46$ 5 -$ 150$
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CONFIGURATION
• Statistical Key Figures (SKF’s)– Use SKF’s to store the planned and actual percent
complete• Versions – Baseline, Progress, EAC, …• EV Methods
– Methods can be tailored and named to suite the client• EV Cost Elements
– Create cost elements that summarize the planned cost elements into groups (ex: Engineering labor, Manufacturing Labor, Materials, G&A, …)
• Value Categories– Make Value categories consistent with the EV cost
elements for ease of reporting
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3 different SKF’s are required
Aggrigated – Summary of all percents up the structure based on weighting
Non-Aggrigated – the individual object’s percent complete
Results Analysis – Percent complete used in results analysis (revenue recognition based on EV)
SKF Configuration
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Version Configuration
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Version Configuration
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EV Methods Configuration
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EV Cost Elements
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EV Cost Elements
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Value Categories
Cost Element group should containAll normal cost elementsANDThe earned value cost element
This is the same cost element group as associated with the EV cost element
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A Simple Example
• With these few basic configuration settings it is now possible to do Earned Value.
• Now let’s see a simple example– A project with 1 network activity that is 40%
complete– Run EV using CNE1 (Calculate Progress)– See the results
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Project Example
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Calculate Earned Value
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Report
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40% of BCWS
Report
What is the good news?What is the bad news?
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Questions
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Thank you for attending!
Please remember to complete and return your evaluation form following this session.
Session Code: 3802Keith Lee – [email protected] Wilson – [email protected]