Table of Contentsextportal.vale.com/maint/sud/pdf/MGUID-14002.pdf · 2016. 11. 9. ·...

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MAINTENANCE STANDARD GUIDELINE BASE METALS

TITLES: Plant Maintenance Set Budget Setting a Maintenance Departmental Budget

VALE

MGUID-14002

Formerly MGUID-07002

PAGE

Page 1 of 14

DATED

2016-11-04 Ver.

2

Training Code (if applicable) N/A

Document Owner: Denis Deschamps Base Metals Maintenance Business Process Specialist

Table of Contents

1.0 PURPOSE....................................................................................................................................................................... 2

2.0 SCOPE ........................................................................................................................................................................... 3

2.1. EXCEPTIONS ................................................................................................................................................................ 3

3.0 REFERENCES .................................................................................................................................................................. 3

4.0 DEFINITIONS ................................................................................................................................................................. 4

5.0 ESTABLISH BUDGETING ASSUMPTIONS ........................................................................................................................ 5

5.1. WORK CENTERS ............................................................................................................................................................... 5 5.2. INDIRECT WORK CENTERS .................................................................................................................................................. 6

6.0 DETERMINING WORK ESTIMATES ................................................................................................................................. 6

6.1. NUMBER OF EMPLOYEES PER ACTIVITY TYPE:......................................................................................................................... 6 6.2. CALCULATE TOTAL HOURS FOR WORK CENTER ........................................................................................................................ 7 6.3. ARE AVAILABLE WORKGROUP HOURS AT TARGET BETWEEN MAX/MIN ......................................................................................... 8

7.0 ESTIMATE COSTS ........................................................................................................................................................... 8

7.1. DETERMINE COST FOR DIRECT LABOUR HOURS (INTERNAL) ...................................................................................................... 8 7.2. DETERMINE COST FOR DIRECT EXTERNAL LABOUR HOURS ........................................................................................................ 9

8.0 SETTING THE MAINTENANCE DEPARTMENTAL BUDGET ............................................................................................. 11

8.1. CALCULATE THE HOME COST CENTER STANDARD RATE............................................................................................................ 11 8.2. CALCULATE THE HOME EXTERNAL RESOURCES COST CENTER STANDARD RATE.............................................................................. 11 8.3. DETERMINE IF THE RESOUCE BUDGET CAN MEET THE DEMAND ................................................................................................ 11

9.0 APPENDICES ................................................................................................................................................................ 12

PLANT MAINTENANCE Set Budget

MGUID-14002 Setting a Maintenance Departmental Budget

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Maintenance Standard Guideline

1.0 PURPOSE

The purpose of this document is to outline how the superintendent responsible for the work center, with the assistance of his Business Partners (Controlling and HR) determines the charge out rates for each work center that executes work related to maintenance services Within SAP, when allocating costs to other areas of the business (for example, charging time for a Maintenance Industrial Mechanic who has undertaken a maintenance task on a Maintenance Work Order), that time will be charged as follows:

1. Cost Centers for specific groups of employees will be defined, where labour-related costs will be charged. These will include wages and benefits as well as general maintenance charges that cannot be identified with specific jobs e.g. Safety supplies. These are referred to as Home Cost Centers. This would be the All in cost for running your maintenance Department.

2. A standard charge out rate will be determined for each group. The Maintenance Cost

Elements within an Operating Cost Center will reflect actual hours at standard rates.

3. At the end of the month, over/under absorbed costs in each group will be reflected in the Plant Admin Cost Center to reduce the under/over absorbed amount to zero.

An example of how maintenance labour will be handled is illustrated in the following diagram:

Maintenance

Mobile

Workgroup

TH Drill

Replace

fittings

PayrollMOB1 TH Drilling

Source Costs Workgroup

Cost Centre

(Maintenance)

Work Order Production

Cost Centre

(Operating)

Labour costs on WO =

actual hours * std rate

WO closed – labour

costs settled to

Secondary cost element

“Maintenance Labour”

Time

recording

system

Primary cost elements

used to reflect payroll

related expenses.



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2.0 SCOPE

This document pertains to all cost centers where cost center / activity types have been designed to carry costs via a work center and related work order to another cost object (e.g. another cost center or a project). This includes all cost elements within a Maintenance Department’s Home Cost Center.

2.1. EXCEPTIONS

This document will not describe where the cost center / activity type combination has been assigned, but the standard rate is set to zero (e.g. we want to use work orders to plan and schedule the work, but we don’t need the system to move dollars as a result that work), or where production has a Cost Center /Activity type combination such as Tonnes. This document also does not include the development of an equipment based Maintenance budget which is covered in another document.

3.0 REFERENCES

The following references were used in the development of this document or are related to it. They shall be used in their most recent revision.

Asset Management Framework (AMF) TA 7.0 and all related sub Task Assignments

Asset Management Framework (AMF) TA 1.0 Set Asset Performance Targets

Asset Management Framework (AMF) TA 5.0 Set Service Strategy

Asset Management Framework (AMF) TA 6.0 Set Operating Master Schedule



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4.0 DEFINITIONS

Activity Type – The type of resource represented

Standard Rate – The hourly cost of the specified resource, used for planned and actual costs

Home Cost Center – The primary cost center used for labour costs, which is assigned to a

Work Center

Plant Admin Cost Center – The primary cost center used monthly to account for the difference

between planned and actual costs

Operating Cost Center – A primary cost center to facilitate product costing

Cost Element – A grouping of a type of cost, such as labour, salaries, supplies

Primary Cost Element – Costs that result in a cash outflow from the company and result in a

direct cost affecting the income statement of the company

Secondary Cost Element – Costs that result from the internal exchange of activities and have

no external financial impact, used to differentiate maintenance costs from operating costs

(such as identifying maintenance supplies and services)

Work Center – A grouping used to assign work, perform capacity planning and scheduling,

representing employees (internal or external) of a specific type of resource



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5.0 ESTABLISH BUDGETING ASSUMPTIONS

5.1. WORK CENTERS

Each Home Cost Center that you are budgeting for will have one or more Work Centers within it, and thus, one or more Activity Types. Each Work Center will have a single Cost Center/Activity Type combination. This relationship is only created at the lowest level of the Work Center hierarchy. The first step is determining if any additional internal or external resources, different from what currently exist, is required for this Cost Center. Once this is determined, you can start identifying the head count for each work center. For your headcount information, refer to the annual planning timetable from your Controlling Business Analyst. Consider the following:

Labour headcount budget for next year

Organizational structure (historical and expectations for next year)

Are we bringing new trades to the organization?

What are the HR System Departments that relate to your Cost Center/Activity Types?

To understand current master data setup in SAP:

Review Cost Centers in SAP (receiving labour related costs from People systems) using S_ALR_87013611. Refer to your Controlling Business Analyst or the cheat sheet “Reports - Cost Centers Actual Plan Variance using ZVC_MTC -S_ALR_87013611” available on the P2D Maintenance Web site.

Consider: Do we have the Activity Types to Support the Work Centers (Cost Center/Activity Type/Standard Rate)? Contact your Controlling Business Analyst for the full list of Activity Types and the current Cost Center/Activity type combinations.

Review related work centers using CR23. Refer to your Maintenance Divisional Support resource or the cheat sheet “Work Center - Display Work Center Hierarchy – CR23” available on the P2D Maintenance Web site.

Consider: What business issues do we have with the level of detail in SAP today?

o Do we have the right granularity for tracking labour resources (e.g. electrical apprentices vs. electricians vs. Co-Op’s)?

o Is the Cost Center structure related to labour consistent with our current organizational structure and does it allow for the appropriate accountability conversations?

o What business value could be gained from making changes?

Determine what changes to master data are required?

http://teams02.valeglobal.net/gbl/OVW3P2DAwareness/CheatSheets/Cheat%20Sheets/Reports%20-%20Cost%20Centers%20Actual%20Plan%20Variance%20using%20ZVC_MTC%20-S_ALR_87013611.pdf



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o Do you need new Cost Centers?

Internal and External resources must have separate Cost Centers for budgeting purposes

The existing list of Work Centers to be budgeted would be obtained by running CR08 and exporting to Excel filtering by plant and Lowest Work Centers

o Do you have new trades / new Activity Types?

What’s the list of Cost Center / Activity Type / rates that is required?

5.2. INDIRECT WORK CENTERS

Are there resources that are an indirect cost? Consideration should be taken for the requirement of Indirect Work Centers, for resources that are required whether the work is being done by internal or external resources. These resources would not be included in the charge out rate for the internal resources. Resources should be filtered out either by having a separate Cost Center or Cost Element

6.0 DETERMINING WORK ESTIMATES

6.1. NUMBER OF EMPLOYEES PER ACTIVITY TYPE:

The number of resources required to execute the work is reliant on the Operating Master schedule, the Service Strategy changes, the aging of the equipment and the planned overhauls or upgrades to the equipment. All these items are detailed out in the AMF flows and Task Assignments. Based on the analysis done, the required resource hours can now be determined. The starting point for determining the number of the resource and thus the Work Center requirement would be the existing resources in the current year budget. This would be obtained as detailed below: Request your HR Business Partner to provide you with the following information from HR Business System and match it to your SAP Work Center:

The total number of unit employee resources for each Work Center within the Cost Center being budgeted and related hours from the previous year. Receive the headcount and regular hours worked from your HR Budget file by Crew ID, including Description for your plant.

The Overtime hours from the previous year’s actuals using the headcount and Overtime hours worked from your HR Budget file by Crew ID, including Description for your plant.

The hours worked on administrative tasks (Overheads) – that would not be expected to land on a Work Order. This would include all training, meetings, delays, as well as Parts men’s time where they are not repairing/inspecting equipment.



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Identify Vacation (Regular and Specials) hours for the next year. Obtain the headcount and hours charged to Vacation from your HR business Partner by Crew ID including Description for your plant. Use this to match to your SAP Work Center

6.2. CALCULATE TOTAL HOURS FOR WORK CENTER

Use Specification MSPEC-10001 “Calculating Standard Rate for Resource Activity Types” and populate Hours into the Setting Activity Rate Spreadsheet as per the specification. By populating the spreadsheet included within the guideline with your headcount and other assumptions you will get Total Available hours. The total hours are the available hours, without adding or deleting resources, to execute the work identified in the Operating Master schedule. An example is shown below:

It would be important at this time to review the available hours against the required hours (based on the master operating schedule) and highlight any critical issues.

Maintenance Cost Center Group

Cost Centers 3810578 3811257 3811268

Annual Budget for CC Group

Trade - Activity Type

Applicable Cost Center per Activity Type 3810578 3811257

Hours Hours

# of employees in Activity Type 20 41600 18 37440

Planned OT percentage 5% 1387 5% 1248

Vacation 400 3200 360 2880

Partsmen (# of employees) 2 4160 1 2080

Training 5% 2080 5% 1872

Shop work (Cleanup, Non Work Order related) 0% 0%

Meetings (Safety, etc.) 1% 416 1% 374.4

Travel time 10% 4160 10% 3744

Other Leave(bereavement AWOL etc.) 1% 416 0

Total Hours to Calculate activity type 28555 27738

Average Vacation in Days 20 20

Average Vacation shift Duration in Hours 8 8

19,454,667.68$

BAR_NT1780

Electricians - MTN503 Millwrights - MTN501



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6.3. ARE AVAILABLE WORKGROUP HOURS AT TARGET BETWEEN MAX/MIN

The Operating Master schedule is the source of the work the Maintenance Departmental Work Group will be performing and needs to be resourced to. It is developed from setting a Service Strategy, planned component replacements, overhauls and expected or typical equipment repairs, as well as modifications and installations caused by normal usage of the equipment. These all should be obtained from the following Base Metals Maintenance Standard: MGUID-07003 Setting an Operating Department Equipment Maintenance Budget. In addition to the known equipment maintenance requirement, existing work done by contractors should be examined to determine suitability for internal resources to perform.

Using IW37N and cheat sheet “Work Order –Review External Work Center Operations – IW37N” from the P2D Maintenance Web site, obtain the contracted out hours from Operations assigned to External Work Center resources.

Using IW37N and cheat sheet “Work Order – Review YPM3 Operations – IW37N” from the P2D Maintenance Web site, obtain the contracted out hours from Work Order Operations that were created using Control key YPM3.

Using S_ALR_87013611, verify the dollars that have been charged directly against operating cost centers to Cost Elements 5030400001 to 5030400099 to determine if they are appropriate.

7.0 ESTIMATE COSTS

7.1. DETERMINE COST FOR DIRECT LABOUR HOURS (INTERNAL)

The Home Cost Center should not include any expense that has significant value and is incurred as a consequence of a specific work package executed on equipment or workplaces outside of the Home Cost Center. Such expenses should be included in the costs of the Work Order for the specific work package.

The intent here is to determine what should be included in the Home cost center and thus be included in the charge out rate. Consumables, as they are commonly called, would include items you need to run your shop as well as materials that you cannot reasonably charge to a Work Order since pack sizes and volume purchases dictate how they are managed by Procurement and or warehousing and your shop. They should also only include items that are to be used mostly within your shop or the maintenance department in general.

Run S_ALR_87013611 for your Cost Centers using the previous year either by using the MTC_BM Cost Center grouping and ZVC_EXP Cost Element grouping and drilling down or by entering your Cost Centers individually.



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Use this to understand what the Cost Elements within your Home Cost Center are being used for:

o If you have budget against a Cost Element that has no actuals, is the Budget appropriate for your Cost Center? The document posted on the P2D maintenance Website will help you understand what the appropriate Cost Elements are to use for your Maintenance Home Cost Center.

o If you have a large variation between budget and actuals, determine if the spend was appropriate (using the SAP Cost Elements - GL accounts list)

Was the spend to your home Cost Center instead of a Work Order?

Was the spend against Work Orders instead of the Home Cost Center?

Was there spend to Services Cost elements?

o Do you have spend against a Cost Element that you have no budget for?

This would be accomplished by reviewing the details from the S_ALR_87013611 Report and drilling down to the actual transactional items in KSB1. When reviewing the charges, take into account

Are the charges appropriate for your Cost Center?

Are they appropriate for that Cost Element?

o Interact with the Business Analyst to finalize the cost to budget against your Cost Center.

o Do this for each Cost Element within your Cost Centers.

If all actuals to your cost center are correct, this would be your starting point for your next year’s budget. However, in most cases there will be changes or errors in the previous year’s budget, changes or errors in previous year actuals and this must be reconciled.

In a lot of cases, or if there is a new Cost Center added, there is no historical data to use as your starting point. As a first pass, pro rate the budget from existing Cost Centers to the new or unpopulated Cost Centers based on the resource allocation.

7.2. DETERMINE COST FOR DIRECT EXTERNAL LABOUR HOURS

The Home External resources Cost Center should not include any expense that has significant value and is incurred as a consequence of a specific work package executed on equipment or workplaces outside of the Home Cost Center. Such expenses should be included in the costs of the Work Order for the specific work package.

Run S_ALR_87013611 for your Cost Centers using the previous year either by using the MTC_BM Cost Center grouping and ZVC_EXP Cost Element grouping and drilling down or by entering your Cost Centers individually.

Use this to understand what the Cost Elements within your Home Cost Center are being used for:

http://teams02.valeglobal.net/gbl/OVW3P2DAwareness/CheatSheets/Cheat%20Sheets/SAP%20Cost%20Elements%20-%20GL%20accounts.xls



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o Do you have Internal Labour charges to this cost center?

o If you have budget against a Cost Element that has no actuals, is the Budget appropriate for your Cost Center? The document posted on the P2D maintenance Website will help you understand what are the appropriate Cost Elements to use for your Maintenance Home Cost Centers

o If you have a large variation between budget and actuals, determine if the spend was appropriate (using the SAP Cost Elements - GL accounts list)

Was the spend to your home Cost Center instead of a Work Order?

Was the spend against Work Orders instead of the Home Cost Center?

o Do you have spend against a Cost Element that you have no budget for?

This would be accomplished by reviewing the details from the S_ALR_87013611 Report and drilling down to the actual transactional items in KSB1. When reviewing the charges, take into account

Are the charges appropriate for your Cost Center?

Are they appropriate for that Cost Element?

o Interact with the Business Analyst to finalize the cost to budget against your Cost Center.

o Do this for each Cost Element within your Cost Centers.

If all actuals to your cost center are correct, this would be your starting point for your next year’s budget. However, in most cases there will be changes or errors in the previous year’s budget, changes or errors in previous year actuals and this must be reconciled.

In a lot of cases, or if there is a new Cost Center added, there is no historical data to use as your starting point. As a first pass, pro rate the budget from existing Cost Centers to the new or unpopulated Cost Centers based on the resource allocation.

Calculate the Rate

- Conduct a sanity check – compare to historical rate

- If the difference exceeds historical rates by more than 10% discuss with your Manager.

- Who needs to approve? What happens with them now? In what form?

http://teams02.valeglobal.net/gbl/OVW3P2DAwareness/CheatSheets/Cheat%20Sheets/SAP%20Cost%20Elements%20-%20GL%20accounts.xls



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8.0 SETTING THE MAINTENANCE DEPARTMENTAL BUDGET

8.1. CALCULATE THE HOME COST CENTER STANDARD RATE

Now that you have the total financial budget you can use Specification MSPEC-10001 “Calculating Standard Rate for Resource Activity Types” to calculate the Home Cost Center standard rate. As a final check, use this calculated value and compare to the previous years to validate.

8.2. CALCULATE THE HOME EXTERNAL RESOURCES COST CENTER STANDARD RATE

Now that you have the total financial budget you can use Specification MSPEC-10001 “Calculating Standard Rate for Resource Activity Types” to calculate the Home Cost Center standard rate for your External resources.

8.3. DETERMINE IF THE RESOURCE BUDGET CAN MEET THE DEMAND

Using the equipment maintenance budget created from the Equipment Maintenance Budget guideline, the labour component, compare the total labour requirement for Maintenance with that labour available and adjust accordingly.



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9.0 APPENDICES

APPENDIX A: Revision Notes and Approvals



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Appendix A: Revision Notes and Approvals

The Revision Notes and Approvals table only displays the latest revision number and a list of the last revisions made to the document. For details on previous revisions contact the document owner.

Ver. Revision Notes

Last revised by: Denis Deschamps

1

New standard

2

Formerly MGUID-07002 - Administrative change in numbering of document to MGUID-14002 –to align with document management filing system in jDMS

Approvals

Name and Position

Date

Base Metals

Denis Deschamps Base Metals Business Process Specialist

2016-11-04

Base Metals

Heiko Leers Base Metals Maintenance Focal Point

2016-11-04



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NOTES

Table of Contentsextportal.vale.com/maint/sud/pdf/MGUID-14002.pdf · 2016. 11. 9. ·...

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