Simplify the Asset Lifecycle with SAP Compatible Units · PDF fileSimplify the Asset Lifecycle with ... Utilities, is the ability to ... Simplify the Asset Lifecycle with SAP Compatible

Written by Fionn Gilmour Vesta Asia Pacific

Simplify the Asset Lifecycle with

SAP Compatible Units

SAP COMPATIBLE UNITS

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Simplify the Asset Lifecycle with SAP Compatible Units

Construction of physical assets in a high volume, high repetition environment creates challenges within the entire build pro-

cess from design, estimation, planning, capture of ”as-built” design, physical/financial asset creation, and right into the asso-

ciated activities of costing and reporting (including statutory reporting in regulated industries). Many organisations use a

combination of separate systems and manual steps to address these challenges, and thereby introducing complexity, ineffi-

ciency and inaccuracy into these processes and outcomes.

SAP Compatible Units is a single, highly-integrated tool within core SAP, that is designed specifically to meet the above chal-

lenges. Within this paper we will focus on the key concepts behind Compatible Units, describing how they can be used to

address these challenges.

A common challenge for asset intensive companies today is the ability to identify the true cost of a physical asset throughout

it's lifecycle from estimation and planning, to procurement and commissioning, and to maintenance and retirement. Without

the ability to understand the true cost of a technical asset, it is very difficult to accurately estimate and forecast future work. It

is also a challenge to report costs to both internal and external groups, such as regulatory bodies.

SAP Compatible Units are designed to simply the entire lifecycle of an asset and provide greater traceability of cost through-

out the life of an asset. Compatible Units enable companies to forecast and estimate work directly within SAP, whilst simplify-

ing and enhancing the work planning, execution, and close out phases. Tightly integrated within SAP to other modules such

as Logistics, Human Resources, and Finance, Compatible Units provide greater reporting abilities to monitor, understand

and control costs of an asset lifecycle.

EXECUTIVE SUMMARY

INTRODUCTION

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Many within Asset Intensive industries struggle to:

accurately estimate construction work

efficiently turn estimates into actual work

identify and understand cost variances

explicitly link construction costs to financial assets

generate accurate internal and external reports

Typically, construction estimation is performed outside the work management systems and estimates are converted into work

plans in the work management system via either an interface or manual input. This duplication of efforts slows down the pro-

cess of converting estimates into work plans, increases the risk of data entry errors, requires duplicating labor, material, and

vendor information across both systems to ensure accurate estimates.

The ability to easily and accurately identify and understand cost variations between estimates and completed work is also

vital for asset intensive organisations. Particularly ones with customers that operate in regulated environments. Organisa-

tions that operate with an estimation tool that is separate from the work management system often struggle to identify and

understand cost variances. As a result, it can be very difficult to identify whether variances are a result of inaccurate estima-

tion data, poor work practices either by the estimators, planners, field workers, or unforeseen challenges during construction.

Another challenge faced by Asset Intensive industries, particularly organisations that operate in regulated industries such as

Utilities, is the ability to link construction costs to financial objects. Some organisations operate with standalone financial sys-

tems, thereby making it very difficult to accurately assign construction costs to financial objects such as assets. Additionally,

these same organisations struggle with the ability to forecast material, equipment and labor demands due to their disparate

systems.

A common requirement for regulated organisations is the ability to accurately calculate the value of their asset base. If a

business is unable to easily and accurately assign physical asset costs to financial assets, end users of financial reports will

struggle to confidently accept the figures.

PROBLEM DEFINITION

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SAP Compatible Units is a comprehensive estimation solution that supports the entire asset lifecycle from planning and de-

sign, to procurement and construction as well as maintenance and retirement.

Compatible Units exist within the SAP Enterprise Asset Management module with strong links to the Logistics, Human Re-

sources, and Financial modules. This tight integration enables designers and engineers to very accurately generate con-

struction estimates within SAP, drawing on labor, material, and vendor data from across these modules.

Compatible Units combine standardised and repetitive units of work for a certain physical asset, such as Install, Repair, or

Replace a 22kV or 200kVA Transformer. The Compatible Unit contains labor (who, required qualification, duration),

materials, tools, costs, internal/external resources, and financial rules. All this information which is sourced and maintained

cross various modules within SAP are leveraged to estimate and generate accurate construction work.

Compatible Units are used in conjunction with two other objects – Construction Measures and CU Designs. The Construction

Measure, which is commonly referred to as the "paper clip" for the job, provides a link between the Project System (via a

WBS) and the Compatible Unit estimates which is referred to as the CU Design. The CU Design is a template based estima-

tion tool that allows estimators to pull in Compatible Units, from within the CU Library to build up construction estimates. Esti-

mators can generate different construction alternatives and execute cost simulation reports to determine the most cost effec-

tive estimate or to produce quotes for customers.

CU Designs can then be used to quickly generate SAP Work Orders, prepopulated with all the required information to effi-

ciently schedule and execute the construction work. Using the data from within the Compatible Units and the attributes set in

the CU Design, the work orders contain all the required labor, material, cost, internal/external resources, instructions, and

financial rules to execute the work.

Once the construction work has been completed, all the costs are posted back to the work order via time and material confir-

mations and service entry sheets. Leveraging the Compatible Unit’s ability to generate Functional Locations/Equipment rec-

ords, these actual costs captured from the field can then be linked to these Technical Objects and settled to Financial Ob-

HIGH LEVEL DEFINITION

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The SAP Compatible Unit application is a powerful tool that can be adapted to meet specific customer requirements. Five

common requirements that Vesta has frequently encountered throughout our various SAP Compatible Unit implementations

globally are as follows:

HIGH LEVEL DEFINITION

jects, such as assets. Capturing costs within the work order, in conjunction with the use of Compatible Units enables organi-

sations to easily map costs between physical and financial assets, along with providing the ability to identify and understand

SOLUTION DETAILS

Compatible Unit Bundling Long Term Planning and Forecasting

Cost Variance Reporting Regulatory Reporting

Complex Financial Settlements

cost variance between the estimate and actual work.

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A common challenge that many customers face with SAP Compatible Units is the number of Work Order Operations that can

exist within a Work Order. Standard SAP results in one Work Order Operation for each Compatible Unit, which depending on

the complexity of the Compatible Unit library, can result in a large number of Work Order Operations, each requiring planning

and scheduling, along with confirmations. This can result in a significant amount of effort required to manage each of these

Operations. Vesta offers a Compatible Unit Bundling solution that reduces the effort required to manage Work Orders with

large volumes of Compatible Units and Operations.

Complex and unique Financial Settlements in Work Orders are quite common within the Utilities industry. Many Utilities have

complex rules on how costs must be treated, reported, and capitalized. Vesta has encountered such requirements in almost

every Compatible Unit implementation. SAP does provide support for automated settlement rules, but this can be too limiting

for many Utility customers. Vesta has significant experience with structuring Compatible Units to support automated settle-

ment rule generation for complex scenarios along with automating the creation of financial assets for cost settlement.

Asset Intensive companies typically struggle with cost variances in construction work while finding it challenging to under-

stand if they occur as a result of a poor estimator, field worker behaviors, or just bad data. Vesta has experience in designing

and building reporting to help customers easily understand the causes of cost variances in construction work, leveraging

various objects throughout SAP. Such reports can help identify bad data and/or poor work practices to help drive down cost

variances to increase accuracy of construction estimates.

Compatible Units can also be leveraged to generate long term work forecasts. Using the Compatible Unit library, customers

can build up long term capital forecasts such as replacement programs and yearly targets – identifying projected costs, labor

requirements, and long term scheduling needs. As the quality of Compatible Unit data improves as a result of Plan vs Actual

reporting, these forecasts become even more accurate. Vesta has the expertise and experience that can help customers

confidently forecast the future.

A typical pain point within a regulated organisation, is the regulatory reporting cycle. Many Utilities around the world on a

regular basis must produce large volumes of complex data explaining in detail the cost of running their businesses and or-

SOLUTION DETAILS

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ganisations. Typically the work required to complete this type of reporting is significant – large numbers of employees work-

ing in various software systems and tools extract large volumes of data to aggregate and produce to a regulator or state body

to justify spend and grants. Vesta has significant experience in this space, and has successfully implemented Compatible

Units to help customers simplify the regulatory reporting process.

SAP Compatible Units solution has a proven track record of simplifying the asset lifecycle by speeding up the estimation to

work execution phases, supporting complex financial requirements in the close out phase, enabling robust cost and regulato-

ry reporting and facilitating accurate long term forecasts.

In North America, many Utility companies are reaping the benefits of having implemented SAP Compatible Units. They have

gained efficiencies using the template based estimation approach, minimising the time required by estimators to generate

quotes and work for customers and internal projects. Numerous companies have implemented Compatible Unit cost reports

to identify and understand cost variances across their work. This ability allows managers to identify if the cost variances are a

result of poor data quality, inefficient work practices, or unforeseen challenges during construction. Such reporting can then

be used to help improve future estimates by correcting poor data and/or improving work practices.

One Australian Utility AusNet Services is not only using SAP Compatible Units to support the asset lifecycle, but also to help

support their regulatory reporting activities. Using SAP Compatible Units, in conjunction with SAP Operational Account As-

signment, AusNet Services is now able to in detail report exactly where capital cost was incurred and against which technical

asset in the field. Prior to their SAP implementation, the same activity required a significant amount of effort to produce this

reporting based on data from multiple Asset Management and Financial systems.

Partnering with Vesta to help implement Compatible Units is the first step to reducing risk and effort required to implement

Compatible Units. Vesta consultants have significant implementation experience across North America and Australia, and

SOLUTION DETAILS

BUSINESS BENEFITS

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bring a wealth of experience and accelerators to help clients realise the benefits on SAP Compatible Units.

As outlined in this paper, SAP Compatible Units can help companies simplify the asset management lifecycle, reduce effort

associated with estimating, planning, and closing out work, identify cost variances in construction work, and strengthen both

internal and external reporting.

Engaging Vesta to help your company through an SAP Compatible Unit implementation will reduce the effort and risk associ-

ated with an implementation as we will bring the experience, accelerators, and intimate knowledge of SAP Compatible Units

and the EAM module to help you reap the benefits of SAP Compatible Units

SUMARY

Find out if SAP Compatible Units is the right

solution for your company.

CONTACT OUR TEAM TODAY.

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ASIA PACIFIC SOUTHEAST ASIA

AUSTRALIA NEW ZEALAND

EUROPE MIDDLE EAST EUROPE

MIDDLE EAST

NORTH AMERICA USA

CANADA

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Simplify the Asset Lifecycle with SAP Compatible Units · PDF fileSimplify the Asset Lifecycle with ... Utilities, is the ability to ... Simplify the Asset Lifecycle with SAP Compatible