What is a Project Based Manufacturing Industry?
Further to the broader classification of manufacturing industries into Process and Discrete Manufacturing, the latter one can be further classified into a Product based manufacturing setup and Project Based Manufacturing Setup.
Key features that distinguish Project Based Manufacturing setup would be as under where all or some of the criteria may be fulfilled:
- Almost all of the finished goods that are manufactured and assembled are made as per the specifications of the customer
- Each customer order has unique product specifications
- Meeting the customer requirements need the organization to perform activities of unique design, work specifications, test and installation.
Once the design and routings are created, each process builds upon the next, so the product is built cumulatively as each layer of the manufacturing process is applied in a sequential order and in a quality-controlled environment.
Few of the key business challenges faced by Project based manufacturing organizations are as under:
- Since every order is different, it is difficult to determine the sales quote to be sent to the customer enquiries
- It is difficult to maintain and report on the records for the costs consumed in fulfilling a particular order. Standard costs and overheads cannot be applied.
- It is also difficult to determine the profitability of each order and hence the viability of the business model being followed remains in doubt.
- Due to all of the above, and inaccuracies around them, it is difficult to build a reliable repository of historical trends of costing, revenue and profitability which can aid as ballpark for estimations of new orders.
Apart from the above business challenges, other operational challenges faced by the industry are as under:
- Data Integration across various business functions.
- Maintaining Quality
- Managing Schedule
- View of Project Cost across each function
- No clear methodology of cost allocations to project at various stages of the manufacturing
What does Oracle Projects Offer to this Industry?
Oracle Project Management and Oracle Project Manufacturing can help in a big way to solve the above problems. Oracle Project Manufacturing Application is specifically an offering which is targeted to support organizations in an 'Engineer-To-Order' and 'Project Contract' delivery model.
Oracle Project Manufacturing along with Oracle Project Costing and Oracle Project Billing provides organizations a layer of project view for planning and execution on top of their existing business functions in Oracle like Order to Cash, Procure to Pay and Manufacturing cycles. Key process activities and process steps while using Oracle Project Manufacturing are as under:
- Create Project for every Sales Order Booked
- Detail out the Project Activities in the Project Work Breakdown Structure. Create Cost and Revenue Budgets based on estimates from the design activities
- Incur costs on the project including procurement, material and resource consumption, overhead allocations and job works. Collect all these costs into the project (and tasks) so that costs of the project and each activity are updated at each stage.
- Review and Track project activities as per schedule and plan activities in advance, align resources as per plan.
- Generate Billing out of Projects to determine and account revenue as well as billing events and eventually determine the financial metrics for the project (e.g. Profitability, Budget vs. Actual, etc.)
Key Business Drivers for Oracle Projects in a Projects Organization
Key benefits in implementing and usage of Oracle Projects portfolio in a Project based Manufacturing setup would be as under
- Leveraging standardized WBS for project execution based on generic product templates and customizing them as per the engineering design specifications and resultant activities
- Order execution planning can factor in both internal constraints like lead time required to complete each activity, resource leveling, delivery schedules of procured items as well as external constraints like committed delivery timelines to the customer as well as financial budget constraints.
- Initiation of the Procurement and tracking of the deliveries based on project. This is critical, particularly in the light of the uniqueness of each project resulting in project specific items to be procured, and in time.
- Helps maintain inventory specifically to a project / order by creation of a logical organization of inventory
- Aids in systematic change management of project schedules and rescheduling of other dependent processes. Also, impact of any change on cost and timelines can be verified before base lining the same.
- Automation of Cost and Revenue recognition in correct accounting periods more accurately which helps in better reporting of financial position of the organization.
As every project is different in nature, separate rules for allocation of cost of resources and overheads to each project is possible. Hence no more compulsion to use organization specific generic allocation templates which do not factor project specific complexities
Lead Consultant, Oracle Practice
Infosys Limited, Pune