Organizations involved in capital projects have traditionally relied on Enterprise Resource Planning (ERP) and accounting systems to help them maintain the financial system of record, produce financial statements, and to assess overall performance of an asset portfolio. However, during execution of a project, these finance-oriented systems can create obstacles for the project teams responsible for managing a specific project.
ERP systems, by their very nature, rely on transactions that have happened in the past to provide useful information to project focused teams. Further, due to the mechanics of a typical invoice/payment cycle, there is inherently an erosion of time from when work is performed in the field to the availability of meaningful reports.
By contrast, project-oriented systems allow for greater control and flexibility, while providing strategic insights to the project team members. Here are some areas where project systems can help project team members be more efficient and effective during execution.
Timeliness of decision making
As touched upon earlier, the inherent mechanics of invoice/payment cycles, coupled with a month-end closeout process, lead to delays of passing key performance and progress information to project team members. On longer duration projects, areas needing course correction may go unnoticed as the delay in getting information to the field is exacerbated. On short duration projects, key resources may no longer be onsite to make course corrections when news makes its way to the field.
Project systems, however, allow for more immediacy of the data, as much of it is captured directly in the field where the work is occurring. Effective planning in the field enables onsite team members to model the day’s progress in advance of any work being done, leading to key indicators on planned performance against the budget. Rather than waiting several weeks to see how they performed last month, team members are now equipped with tools that can determine their success before anyone picks up a tool.
Granularity of Data
ERP systems operate at a summary level. For instance, there may be one budget code for structural concrete within a project in an accounting system. However, this singular code will be the aggregate of all the structural concrete on the project, where some of these concrete pours will be extremely difficult (i.e., costing more dollars and hours). Project systems can create unique Work Breakdown Structures, which consider more costly and time-consuming work, while still allowing the details to “roll-up” to a generalized cost code for accounting.
Modeling Productivity
Project systems have an inherent focus on productivity: How much progress is being made during a certain measure of time? ERP systems will typically focus on costs, which can make it difficult to determine how a field crew is performing relative to a productivity rate. Project systems instead can compare actual units per time (e.g., cubic yards per day) to the budgeted units to help project team members understand within a few hours of work how they’re performing relative to their target.
Scenario-Based Forecasting
Project systems allow for intelligent modelling of work that has yet to be completed. This allows them to compare, say, best-case, worst-case, and most-likely case scenarios to arrive at a justifiable and predictable cost to complete the remaining work. ERP systems, by contrast, are typically focused on past events, and allow little to no flexibility to perform forward-looking analysis.
The 80/20 Rule
ERP systems, due to their integral nature of providing a financial system of record, will capture all project costs in the same disciplined, rigid manner to assure accuracy and precision. Project team members, however, realize that 20% of the work carries 80% of the cost and risk, and will choose to weigh their focus on those tasks which have the greatest impact on the project. In other words, project team members can determine ahead of time where they want to focus their attention to maximize their project’s performance.
Office vs Field
ERP systems are typically within the domain of a group of back-office administrators. Data from the field is processed in the office, and when available, reports are distributed to project teams. Project systems, by contrast, thrive on what is happening in the field. Electronic timesheets can capture the day’s progress and crew hours, making actual productivity dashboards available on crew leaders’ mobile devices in the field. This information can then be electronically synchronized with the ERP system, allowing for payroll and other key business processes to leverage the data collected in the field.
ERP systems are essential to the day-to-day operation of a capital projects business. However, due to their heavy focus on finance, they only tell part of the story. When coupled with powerful project-focused systems, organizations can empower their project teams to make better, timelier, data-driven decisions by integrating these complimentary tools.
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