Saturday, December 26, 2009
Nui – 12th blog
What I’m learning and Compare to my organization
This past week, I get into Earned Value Management part in Humphrey book, Chapter 33 Collecting Actual Cost. So I would like to analyze my organization practice with consideration factor of actual cost collection.
Level of Cost Collection
In my organization, we collect the actual cost at the work package level which is the level that work actually performed and have single assignment to individual. This is provide the visibility advantages to project manager but quite disadvantage in maintenance task for project control or project support team. But I think this is the proper level of detail that we should do because we not only get visibility when monitoring but we also can keep historical record in database for cost estimation development.
Commitment
I’m familiar with this word “Commitment” because it is the term that SAP use in project system. It has the same meaning with this book, “Commitments are orders which have been placed but delivery has not yet occurred, meaning no cost has been booked. Even though money has not been paid, accounting will recognized liability for that amount.” (Cited from Project Management Using Earned Value, Humphrey & Associates, p. 662). And as it is mentioned in the book, this reflects the time lag between order placement and use of material and the figure 33-3 page 662 and 33-4 page 663 provide me the clear picture.
Material Cost
“The most popular points to take earned value credit for material is at the point of receipt, because it is normally the point at which the liability is recognized within the accounting system. This minimizes the impact on accounting, but this convenience should be weighed against the greater utility of crediting earned value at the time of usage. This is the point at which the material has real value to the project.” (Cited from Project Management Using Earned Value, Humphrey & Associates, p. 663).
Compare to my organization, material cost can apply to installation material and software. And the point that we normally use in practical is material receipt as it is the point which we accept material from supplier and will be used at site. I had never thought how this is so important of each point with the earned value methodology. But its explanation is quite clear for me that it should be the point that material will be performed its work. And not just receiving it because it probably returns with damaged, scrapped, or found unacceptable reason. This incorrect point will result in variance analysis.
Accuracy of Report Actual Costs
We just standardize the work package of our service product in this year. This is very good program since we will have the same defined work package and everyone are understandable, as from the book "the precaution should be taken to minimize in correct charges 3. Keep charge codes as simple as possible and 7. Clearly defined what belongs in each account", page 668.
Moreover, it provides project manager and project control easier when monitoring, analysis and keep historical record for, as from the book “the precaution should be taken to minimize in correct 5. Do spot checking and 6. Maintain historical records", page 668.
Merry Chirstmas and Happy New Year!
Wishing You and Your family happy and healthy.
This past week, I get into Earned Value Management part in Humphrey book, Chapter 33 Collecting Actual Cost. So I would like to analyze my organization practice with consideration factor of actual cost collection.
Level of Cost Collection
In my organization, we collect the actual cost at the work package level which is the level that work actually performed and have single assignment to individual. This is provide the visibility advantages to project manager but quite disadvantage in maintenance task for project control or project support team. But I think this is the proper level of detail that we should do because we not only get visibility when monitoring but we also can keep historical record in database for cost estimation development.
Commitment
I’m familiar with this word “Commitment” because it is the term that SAP use in project system. It has the same meaning with this book, “Commitments are orders which have been placed but delivery has not yet occurred, meaning no cost has been booked. Even though money has not been paid, accounting will recognized liability for that amount.” (Cited from Project Management Using Earned Value, Humphrey & Associates, p. 662). And as it is mentioned in the book, this reflects the time lag between order placement and use of material and the figure 33-3 page 662 and 33-4 page 663 provide me the clear picture.
Material Cost
“The most popular points to take earned value credit for material is at the point of receipt, because it is normally the point at which the liability is recognized within the accounting system. This minimizes the impact on accounting, but this convenience should be weighed against the greater utility of crediting earned value at the time of usage. This is the point at which the material has real value to the project.” (Cited from Project Management Using Earned Value, Humphrey & Associates, p. 663).
Compare to my organization, material cost can apply to installation material and software. And the point that we normally use in practical is material receipt as it is the point which we accept material from supplier and will be used at site. I had never thought how this is so important of each point with the earned value methodology. But its explanation is quite clear for me that it should be the point that material will be performed its work. And not just receiving it because it probably returns with damaged, scrapped, or found unacceptable reason. This incorrect point will result in variance analysis.
Accuracy of Report Actual Costs
We just standardize the work package of our service product in this year. This is very good program since we will have the same defined work package and everyone are understandable, as from the book "the precaution should be taken to minimize in correct charges 3. Keep charge codes as simple as possible and 7. Clearly defined what belongs in each account", page 668.
Moreover, it provides project manager and project control easier when monitoring, analysis and keep historical record for, as from the book “the precaution should be taken to minimize in correct 5. Do spot checking and 6. Maintain historical records", page 668.
Merry Chirstmas and Happy New Year!
Wishing You and Your family happy and healthy.
# posted by Maneesuda (Nui) @ 12/26/2009 09:27:00 PM 
Comments:
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Hi Nui,
What about the time lag between when the work is done and when project controls gets the information from SAP? Asked another way, how long does it take from the time work is actually done on the project before the project controls group is able to give management an accurate EVM report? Same day? One day? 3 days? One week? One month?
As a project controller, you should be able to consistently be no more than one day behind, and "best in class" can report same day........
Wishing you and yours a very safe, happy, healthy and PROSPEROUS 2010 as well...
BR,
Dr. PDG, Jakarta
What about the time lag between when the work is done and when project controls gets the information from SAP? Asked another way, how long does it take from the time work is actually done on the project before the project controls group is able to give management an accurate EVM report? Same day? One day? 3 days? One week? One month?
As a project controller, you should be able to consistently be no more than one day behind, and "best in class" can report same day........
Wishing you and yours a very safe, happy, healthy and PROSPEROUS 2010 as well...
BR,
Dr. PDG, Jakarta
Previously we have project controller which sit in Fianance department, they product financial report for a week. But now after we have new role project support who take care project system in SAP. So we can get the real time report from SAP and do some adjustment in excel file. This is very advantage to project management. But my organization has not implement EVM in real practise yet.
OK Nui..... Curious about what will happen when you do implement EVM for real...... I have yet to see SAP be able to provide "real time" information, and have always had to fix that time gap using Excel.....
Happy New Year!!! Stay sober!!! Not too much partying!!!
BR,
Dr. PDG, Jakarta
Happy New Year!!! Stay sober!!! Not too much partying!!!
BR,
Dr. PDG, Jakarta
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