The majority of the companies using the SAP PS module (Project System – project management) takes advantage of only financial functions of this module. Yet, ABB in Poland went much further and since January 2007 has been using SAP for a complex management of the project activity – both in the area of finances and reporting and in the scope of logistics processes.
SAP system in ABB in Poland has a long, over a 10-year history. At the beginning, the system functionality was restricted to the basic scope of FI, CO, MM and SD. At the moment, the ABB employees take advantage of this system in a much broader scope, going beyond the functional area that is traditionally treated as a standard.
One of the very essential elements of the system is the management of the entire project cycle – starting with the calculation of costs of the future order and bidding, through the settlement of the component costs and analysis of the work progress, up to the sales and maintenance. The solution described in this article had been prepared by the SAP competence centre of ABB and BCC companies during a project that lasted almost one year.
Unification and adaptation
The functionality of PS module has been used in ABB factories, which, among other, are engaged in the production and delivery of the marine equipment, production of the power transformers and delivery of complex systems for the power industry. Each of these projects is implemented on an individual order of the customers and is characterized by a very high complexity of the product itself, as well as of the project management process. For example, the production of high power transformers is a complex process – lasting from two to six months. The PS system supports the production of such transformers, starting with the budgeting process through planning and updating of plans, to implementation.
In the process of execution, the PS module integrates the logistics areas (e.g. automatic generation of purchase requisition, project special stock) with the finances (registration of the expected costs, registration of the actual costs, registration of the revenues, payment analysis, interest calculation, calculation of the result according to the methods depending on the project size, cash-flow forecast – as an activity executed automatically by the system on the basis of the amounts and deadlines resulting from the plan of the costs and invoicing. In case of the transformers, the basic structure of the projects is repetitive. In turn, another ABB plant produces the equipment elements for the shipbuilding industry. Also in this plant, the production is performed product-based, but because of a very wide range of the assortment the project structure is not repetitive, and the project duration time is very diverse.
The challenge was to create a project system that is on one hand unified with regards to the reporting needs within the group, and on the other hand enables the processing that is adapted to the needs of a specific plant within ABB. In some plants, the projects last for several months and are partially repetitive, and in other plants the projects last for several years and each time they are a separate undertaking.
In the finance area, above all a unique reporting of the project results is provided to ABB by means of the project system. A high number of group reports has been defined that are common for all plants, regardless of the project production profile.
PS module is also responsible for the calculation of the project finance result (for long-term projects, the result of the projects is calculated on the basis of the cost advancement). So at the end of the month, the system calculates the amounts of the postings in the financial accounting correcting the result in compliance with the accounting law and with US GAAP (Generally Accepted Accounting Principles in the United States – American accounting standards).
Another financial functionality that is used by ABB is the interest calculation. These are the interests calculated for each project separately, allowing the estimation of the cost of the capital engaged in the project.
It means that if, for example, at the beginning of the project we bear expenses, and the incoming payments are received after its completion, the system will calculate the cost of the engaged capital for the project (according to the specified interest rate). If payments had the opposite schedule, the system would calculate the revenue connected with the engaged capital. A very important feature of the implemented solution is the possibility of budgeting and planning the projects in many versions, and then comparison of the plan with the execution.
In the area of the logistics, the project system facilitates the ordering of the elements necessary for the execution of the project (at the same time, you can use the data entered during the planning). The project manager creates a purchase order by means of a universal transaction of the project review (the account assignment of the purchase order is performed automatically).
The delivery of a material purchased in this way is transferred to the special warehouse of the project (whose value may be seen in the result reports of the project). Therefore, no one shall unconsciously use in the A project the material purchased for the B project. After creation of the purchase order, its further processing is controlled by the purchasing department, but the project managers may see the status of the purchase order execution on a current basis. Another function used in particular ABB plants is scheduling. The system supports the scheduling of the project on the basis of the dependencies and assigned algorithms for spreading the works out.
The particular stages of the project “life” are related to so called statuses of the project, specifying, which operations may be performed in the given time.
The entire cycle
An example for the wide usage of SAP PS module for the project management is the production of the power transformers.
PS module – as a tool supporting the project manager in the project management process – provides information necessary for the decision making. The essential element of the project management is the valuation and analysis of the risk in the project – in the PS module in the transaction dedicated for the risk management.
The project is created in the system upon receiving the purchase order from the customer. During creation of the project in the system, the model project structure is created that has been worked out during the business blueprint of the SAP PS module implementation. This structure is properly modified and completed with the elements specific for a particular purchase order.
The design of the project structure elements reflects the main stages of the purchase order execution: development, production (refined for the particular production departments), dispatch, assembly and launching as well as auxiliary elements, such as: risks, gaps and guarantees.
Such a solution enables an analysis and control of the entire cycle of the purchase order execution, starting with receiving of the purchase order to the expiry of the guarantee period. The main stages of the project execution are described in more detail on subsequent levels of the project structure through the network activities up to the level of the specific materials constituting the product, including the purchase of the external services and own works in it.
The entered approved calculation of the project costs is automatically added to the project structure created in the system by means of a dedicated interface. This calculation is stored in the system as a contract calculation that is at the same time the project budget. The planned deadlines for the activity are entered automatically by means of a NEMESIS interface.
In the subsequent phase of the purchase order execution, the design and technological documentation is being prepared, on which basis the list of materials and operations is updated in the project structure. The list of the materials completed with the material indices is the basis for the creation of the purchase requisition, and then of the purchase orders for the suppliers. The process of registration of own works: designing, production for particular departments, and in the final phase of the project execution the works dedicated for launching of the transformers at the customer’s site, is performed directly in the project system.
The challenge was to create a project system that is on one hand unified with regards to the reporting needs within the group, and on the other hand enables the processing adapted to the needs of a specific plant within ABB. The project manager is able to monitor in SAP system the process of ordering the materials, inflow of the costs, progress of designing works and works in the particular production departments.
All information, such as planning and realized costs/revenues, the current margin, cash-flow for the project, is available in the online system. They enable the project manager to identify the risks, and thus to take timely corrective actions to measure and minimize the risks.
The refinement of the information available in the system, including the needs specific for the particular positions in the plant – in the scope of the costs/expenses planned for the moment of signing the contract with the customer, current costs/expenses and cost/expense planned up to the moment of finishing the execution of the contract, enables the performance of the tasks resulting from the realization of the agreed margins and cash-flow for projects, as well as is the basis for reporting of the current and planned financial results of the particular projects. Project closing – through assignment of the proper status to the project in PS module – takes places after the expiry of the guarantee period.
Compliance with SOX
The new solutions have been launched in compliance with the regulations resulting from Sarbanes Oxley Act (SOX). It assures meeting of high requirements in the scope of internal control effectiveness. The control in the process of entering and approving the plans of the project budgets is of particular importance for ABB. Due to the requirements of SOX, the standard functionalities of SAP system in the scope of approving and authorizing the changes of plans and budgets have been extended.
The implementation of the project module was a part of a bigger project of merging all ABB companies into one legal entity, based on a coherent, integrated management system both in the scope of the architecture and business processes. The works on the creation of one uniform system lasted more than one year and required a huge engagement both of the internal and external resources.
The strategic partnership with BCC in the implementation of PS module enabled the ABB employees to take advantage of extensive knowledge and experience of the consultants. The success of the project is the result of the hard work, experience and determination of the implementation team consisting of ABB and BCC employees.
At the moment, the entire project management integrates different systems into one process, which allows the ABB company to significantly better, faster and safer meet the needs of the customers.
More information: www.abb.pl