Project Planning & Controlling
Challenges of the project-based business
Project-based businesses typically deal with make-to-order, long-term, complex projects on a fixed-price basis. Their products have a low level of standardisation and are engineered throughout the execution of the project. As a result, managing project costs can be challenging:
- No transparency of true project costs
- Creeping margin erosion
- High variations between order entry costing and actual costs at project end
- No transparency of the root causes of the variations
Additionally, if there is no working "lessons learned" process, these problems can persist for some time.
A major contributing factor towards those challenges are Non-Conformance Costs (NCCs). These are additional costs that are not part of the original project plan, and result in the creeping margin erosion that can be found throughout many project-based businesses. NCCs may include scrap, re-work, warranty, over-consumption and price variations - some of which can be controlled.
Planning and Forecasting
Whilst cost variances cannot be completely avoided in the project business, there are steps that can be taken to minimise (or at least forecast and account for) NCCs:
- Transparency of project costs and variances throughout the complete project lifecycle
- Defining and maintaining acceptable limits for NCCs
- Close communication between all project members within the offer phase, clear handover to project management and full commitment to the order costing
- Rolling monthly, quarterly or yearly forecasting as appropriate
- Consistent risk and claim management
- Organisations learning from successes and failures, and feeding that back into the planning process
By closely integrating business processes, systems and the people involved, organisations can be better placed to handle NCCs.
PIKON's Non-Conformance Cost Solution
Drawing on over 20 years of experience of working with project-based businesses, combined with our unique 3-point approach, PIKON can:
- Analyse your business processes, IT systems and organisation and benchmark them against best practices
- Identify areas with the potential for optimisation
- Recommend steps to improve your project planning and forecasting
- Develop a roadmap
- Assist with any system, process or organisation implementation that may be necessary.
Get to grips with Non-Conformance Costs with PIKON.
For more information about how PIKON can add value to your SAP projects, please contact us.