Work Breakdown Structure

Posted on January 13, 2008

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http://www.scmfocus.com/projectsystems/2010/09/14/work-breakdown-structure/
Why Understand Work Breakdown Structures?
Work Breakdown Structures were created by the US defense establishment for actual costing. However within
SAP they are the critical elements within the SAP PS system. Understanding the WBS is important to
understanding GPD (Grouping, Pegging and Distribution) which is a manufacturing solution for research and
development, make-to-order and engineering-to-order environments. (More on GPD in the Appendix)

What is a Work Breakdown Structure?

Simply put, Work Breakdown Structures are “buckets” to which cost centers are assigned , allowing Lockheed to
track the costs of its PBL contracts (Performance based logistics contracts). Below is a sample of a simple WBS
structure for the creation of a bicycle. “A WBS is not a project plan, project schedule or a chronological listing. It is
considered poor practice to construct a project schedule (e.g. using project management software) before
designing a proper WBS. This would be similar to scheduling the activities of home construction before
completing the house design. It is not possible to recover from an improperly defined WBS without starting
over[citation needed], so it is worthwhile to finish the WBS design before starting a project plan or project
schedule Parts is not.
Simple WBS Structure for Building a Bicycle

WBS Capabilities
“In a product-oriented WBS, functional categories of work may form “cost accounts” within a WBS element. Cost
account managers are responsible for a functional area’s contribution to a WBS element. Cost accounts from
several departments or functions may combine into one WBS element. Internal department planning for a cost
account will be made up of individual work packages. A work package will typically have its own budget and
schedule. Work packages should be small enough to be executed by individuals or small groups in a single
department, and they should be of relatively short schedule duration. A small project might define a maximum
work package size as two weeks of effort. Larger projects will assemble larger work packages that can be
appropriately managed and controlled.” – SAP Help
WBSs allow you to map the structure of a project in SAP. The WBS is made up of WBS elements, which can be
broken down further. Structuring the WBS is primarily answered by considering what you want to report on.
Dependent Configuration
Dependent configuration relates how a configuration one system affects another system. Here it involves other
areas in SAP that are affected by WBS creation and use. One of the most important features of WBS usage is
distinguishing between Plant Stock and Project Stock. Each material can be coded as several stock types.
Typically Plant Stock is the more common, however in a project environment it becomes necessary to code at
least some of the materials as Project Stock. Plant Stock vs. Project stock is broken down in the matrix below.
Plant Stock Project Stock
For: planning collective requirements in warehouse
material For: individual project planning
Usage: Materials at subordinate BOM levels which
are required in all projects can be planned and
procured in the warehouse, independently of WBS Usage: In individual project planning, only individual
elements. In requirements planning, all the requirements are planned – that is, materials which
requirements for a material are determined in one are required for a WBS element, are planned for
plant. Such procurement is made jointly, with no that purpose, and procured with reference to the
reference to a WBS element. WBS element.
New Demand to A Location System
Assignment: In individual project planning, only
individual requirements are planned – that is,
materials which are required for a WBS element,
are planned for that purpose, and procured with
reference to the WBS element.
This procedure is used to plan the finished product
and important components.
The material stock is assigned to a single WBS
element in the project and is, as far as planning is
concerned, available only for that WBS element.
Stock is managed separately for each WBS element
in a project definition.
Unlike general stock, you must specify the relevant
Assignment: The material is managed in general WBS element, as well as the plant and storage
stock. It is not assigned to any particular project or location, in all goods movements involving project
sales order. stock.
From:http://help.sap.com/saphelp_dimp50/helpdata/EN/49/7db835295f962de10000009b38f839/content.htm
Question: What costs will be allocated to a SAP PS Project?
Answer: We will want to allocate the costs of Purchase Orders, Stock Transport Orders and Service Orders to
specific projects.
New Demand to A Location Not New Demand to the Overall System
1. If there is sufficient inventory to cover the STO, a
new demand is created at a location, however, this
is not a new demand for the system. If one 2. If there is insufficient inventory to cover the STO,
considers this a new demand then it is true to stay a demand is created both at the location, and for
that an STO creates a new demand. theoverall system.
What is Necessary to Tie Back to the PS PBL Project
A Network in SAP PS is a parallel hierarchy of the operations of a project rather than the financial areas of the
project. The necessity is to tie the operational transactions (and their costs) back to the project. The transactions
necessary to map to the PBL projects are:
 Purchase Orders
 Stock Transport Orders
 Service Orders
“The grouping WBS element is the organizational unit which produces the goods and to which the material
belongs. Requirements planning creates the replenishment elements (planned orders, purchase requisitions)
which are assigned to the grouping WBS element. A separate planning section is managed for each grouping
WBS element in the evaluations in inventory/requirements planning.”

A sample of WBS Elements in a project

From Project Management Academy:
Notice how the Project is the top of the hierarchy. A Work Package contains a WBS code along with costs. A
Work Package is “..is a quantitative and qualitative description of an activity to be carried out in the project – for
example, the work to be done and the result to be achieved for a clearly defined task within the project.”
Other Important Features of the WBS:
WBS Connections to Other SAP Transactions WBS Links to Activities
1. If there is insufficient inventory to cover the STO,
a demand is created both at the location, and for
1. The STO is tied in with MRP theoverall system.
2. The procedure of converting purchase
requisitions to Work Breakdown Structures can be 2. A goods receipt can be planned in the receiving
monitored using PO history. plant.
New Demand to A Location System
3. The system can run an availability check for the 3. The goods receipt (GR) can be posted directly to
stock transfer. consumption.
Summary
The STO is both a type of Stock Transfer and a Purchase Order which has characteristics that closely map to the
Transshipment in MCA, most notably its calculation of inventory movement based upon lead times. The STO is used to
move materials between two Plants in SAP.
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PBL as a Trend in A and D

Posted on January 13, 2008
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http://www.scmfocus.com/projectsystems/2008/01/13/pbl-as-a-trend-in-a-and-d/
PBL and Alternatives
“Performance Based Logistics is a strategy for system support. Instead of goods and services a
supplier is paid for a guaranteed level of performance and system capability. The supplier often
has to guaranty the performance at lesser costs but has more control over all logistics elements.
The performance is declared in Performance Based Agreements.”- Wikipedia
Performance Based Logistics can be in the commercial area of A&D or in the
government/military. A quote from the 2006 Quadrennial Defense Review Report indicates the
orientation of the Department of Defense regarding PBL.

“There is a growing and deep concern in the Department of Defense’s senior leadership and in the
Congress about the acquisition processes. This lack of confidence results from an inability to
determine accurately the true state of major acquisition programs when measured by cost,
schedule and performance. The unpredictable nature of Defense programs can be traced to
instabilities in the broader acquisition system. Fundamentally reshaping that system should
make the state of the Department’s major acquisition programs more predictable and result in
better stewardship of the U.S. tax dollar. ”

PBL has become a strong trend among the management class of companies in the A&D
environment. This paper discusses PBL and makes some educated guesses as to where PBL might
be in 5 years from now.

Basis for PBL

PBL is introduced as a way to improve service levels and increase the responsibilities of supplier
service parts management and in some cases service part service operations. In this way it may be
viewed as a form of outsourcing where the part planning and management is moved from the
client to the suppliers. In cases where the military is the customer, it can be seen as a light form of
military privatization.
Supporting Case Studies
The outstanding case study for PBL in the A&D environment is Rolls Royce. While not
called “PBL,” Rolls’ TotalCare engine service program is in fact a long term service contract
where Rolls controls the engine service parts inventory and in a way goes beyond PBL by offering
direct guidance and instruction when certain parts are due for maintenance. Rolls actively
monitors over 3000 engines aggregating a strong level of service intelligence about engine
maintenance. Rolls has by most accounts leveraged this capability to grow its market share, take
business from larger competitors and reinforce the premium reputation of its industry leading
engines.

Deviations Between the Strong Case Study and Other Projects PBL Clients and
Environments
It would be a mistake to assume that the success at Rolls can be duplicated to every A&D
supplier or can be generalized to other areas outside of engines. By comparison there were certain
organization differences between Toyota and US manufacturing firms as well as geographic
differences between the location of supplier base in Japan vs. the US that prevented other
companies from ever duplicating Toyota’s success with JIT, regardless of decades of attempts
across probably thousands of factories. What this means is that the case for PBL with Rolls must
be observed in terms of how Rolls as a company, and Rolls business is different than other
companies that want to implement PBL type programs. Some of differences are listed below:

 Rolls is only managing a small proportion of the overall service parts of an airplane. They
are providing 100% of the parts for the engines under the TotalCare program. This means
that a 95% availability actually does mean a 95% availability for the engine as there are no
other suppliers. However, this is not true with companies that provide the entire airplane.
Therefore it must be considered that Rolls is solving a much more simple problem than a
supplier that supplies the entire airplane would be.
 Rolls appears to be on the outward edge of competence within the industry. Secondly, this
is not a new philosophy for Rolls. Their “Power by the Hour” program, which is essentially
similar to the TotalCare program dates at least back to the 1930’s. This means that Rolls
has been organizationally oriented towards service for generations. This is not necessarily
the case for other A&D suppliers.
The Expertise Required
Developing a PBL contract requires more than the capability to run an advanced service parts
planning system like MCA or Servigistics. It also requires a way to cost the PBL contract. This is
so the firm can determine the profitability of each contract and can use this information to adjust
future contracts. SAP PS is an excellent way to cost the transactions associated with a contract.
The difficulty comes in tying the specific transaction to the specific contract in question.

Posted in PBL | 3 Replies

T – Codes – Project Reports: Plan /Actual Reports

Posted on January 7, 2008
Transaction Description
CJI3 Display Project Line Items

CJI8 Display Project Planned Line Items

CN43N Display Project Structure

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T – Codes – Project Month End – Result Analysis

Posted on January 6, 2008
In the future this post will be maintained here.

http://www.scmfocus.com/projectsystems/2008/01/06/t-codes-project-month-end-result-analysis/
Transaction Description
CJR2 Plan Project Costs (EAC) and Revenue by Cost Elements

CJR8 Plan Project Revenue by Cost Element

CJ40 Plan Project Costs (EAC) at a Summarized Level

CJ42 Plan Project Revenues at a Summarized Level

KKA2 Execute Project Result Analysis for Individual WBS Element

KKAJ Collective Execution of Project Results Analysis

KKAL Display Project Results Error Log

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T- Codes – Project Reports: Summarization Reports

Posted on January 6, 2008
In the future this post will be maintained here.

http://www.scmfocus.com/projectsystems/2008/01/07/t-codes-project-reports-plan-actual-reports/
Transaction Description
CJH1 Run Inheritance for Summarization Reporting

CJH2 Review Inheritance Run

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T – Codes Project Month End: Settlement

Posted on January 6, 2008
Transaction Description
CJ20N Project Builder: Create Settlement Rule for WBS Element
CJ02 Change Project – Create Settlement Rule
CJ8V Create Variant for Project Settlement
CJ88 Individual Project Settlement
CJ8G Collective Project Settlement
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T- Codes – Creating and Editing Project Structures

Posted on January 6, 2008
In the future this post will be maintained here.

http://www.scmfocus.com/projectsystems/2008/01/06/t-codes-creating-and-editing-project-
structures/
Transaction Description

CJ20N Project Builder: Create, Change, and Display Projects

CJ01 Create Project
CJ02 Change Project
CJ03 Display Project
CJ91 Create a Project Template
CJ92 Change a Project Template
CJ93 Display a Project Template
CNMASS Mass Change of Project Structure

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Results Analysis (RA)

Posted on January 6, 2008
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http://www.scmfocus.com/projectsystems/2008/01/06/results-analysis-ra/
Overview:
The objective for calculating Work in Process (WIP) is to determine the value of manufacturing
activity in process at the end of a fiscal period, during a fiscal period and to properly reflect this
value on the financial statements. WIP calculation is a facet of Results Analysis (RA). RA is a
specialized tool within the controlling module that computes and analyzes the value of WIP. The
terms WIP calculation and RA are generally interchangeable.

Results analysis is used to:

a. Calculate the inventory value of finished and unfinished products in a non-valuated project
stock or non-valuated sales stock environment or
b. You are using a valuated sales order stock or valuated project stock and want to capitalize
goods that have been delivered but not yet invoiced.

The difference between SAP and other systems is in the treatment of material consumption for
manufacturing. Component issues to production orders, run schedules, WBSs, etc is immediately
treated as an expense to the P&L statement. The issue is not treated as a reclassification from raw
or semi-finished inventory to WIP inventory. SAP considers WIP to be a snapshot of values that
can be computed on demand and passed to the general ledger as required to re-class the values to
the balance sheet. This process demands a specific, methodical approach to be used for period-end
and mid-period processing. Rules used to calculate the value of WIP and settle WIP to the G/L are
defined in multiple RA tables depending upon the requirements of the company. RA is designed
to support a variety of calculation techniques and there may and are alternate settings depending
on the demands of the company. To support the configuration, scenarios and unit testing need to
be thorough. RA needs to be configured towards the middle of the of the implementation with
subsequent testing. This will allow for configuration of the data needed to support WIP and RA
(chart of accounts, production orders, projects, cost centers, cost elements, etc.)

Configuration Transactions:
OKG1 — Create Results Analysis Key
OKG2 — Results Analysis Version
OKG9 — Results Analysis Version
OKGC – OKGD — Valuation Methods
IMG SPRO — Define Line IDs
OKGB — Define Assignment Mapping by incoming charges by cost element to line IDs
OKG5 — Define Assignment Mapping by incoming charges by cost element to line IDs
OKG4 — Define Update
OKG6 — Define Number Ranges

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GPD – Grouping, Pegging and Distribution

Posted on January 2, 2008
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http://www.scmfocus.com/projectsystems/2008/01/02/gpd-grouping-pegging-and-distribution/
Grouping Pegging Distribution
GPD is highly connected to SAP Project Systems. it includes the following capabilities:
 Grouping, which allows manufacturers to group requirements originating from different
WBS elements or projects.
 Pegging, which makes it possible to keep track of the origin of the demand
 Distribution, which distributes the actual costs and commitments back to the original
project.
This means that GPD enables you to utilize the advantages of larger lot sizes while still being able to apply
resource-related billing and project-specific cost controlling.
· Transfer/Borrow-Loan-Payback (TBLP)
During the realization of projects in a complex manufacturing environment, requirements frequently undergo a
number of unplanned changes. TBLP provides an easy way to transfer or loan material items to another project.
With respect to loans, borrowed material items can be repaid either fully or partially.
· Resource-Related Billing
Prices for services performed for individual customers are not always stored as fixed prices in a contract or are
determined using a standard pricing procedure. For example, the work performed may be completely new. This
function enables orders for such work to be billed on a resource-related basis. The billing document provides
detailed information, for example on individual materials, internal activities, costs, and so on.
· Project Earned Value
Because of unplanned changes to costs and schedules the actual project becomes increasingly different than the
project plan. This application allows you to monitor and control your projects effectively, as well as easily access
information about project status and progress at any time.
· Project-Related Incoming Orders
This function enables the system to determine key figures from sales orders assigned to projects for incoming and
open order values. This provides you with a report on the expected results for customer projects at an early stage.
Setting Up GPD:
Config:
For the Plant and MRP Group that you plan to perform GPD for, the Grouping Requirement Flag must be checked
Material Management:
Any material that will be used for GPD must be in an MRP Group that is GPD relevant
Under the MRP4 Tab in MM01, the requirements must be set to “Individual Requirements” (1) as
opposed to “Collective Requirements”
Project Setup:
Grouping WBS elements must be defined as Grouping WBS elements for all materials (1) or for selected
MRP groups (2) when they are created in the system