Project cost control ... But at what Cost?
For Project based organizations (be it a typical E PC firm, for a professional services based firm or contract manufacturing firm), cost control is a very high priority requirement. As the margins for projects completely depend on the proper cost control, there is always a big drive from top management to control the cost for projects and have a better control over any changes to cost budget.
So, when you have a tool like Oracle Projects, and when a new implementation starts, there is always a likely hood of solution going over the board when it comes to control the costs.
Oracle Projects supports unlimited number of levels when it comes to definition of definition of task structure. So more granular you go in defining the tasks, the better cost control for you.
For ex. Lets look at one task where project manager has a budget to procure and dispatch a pump set. Budget can be defined at a Pump set level, which gives project manager a flexibility to use this budget to buy or make all the items for a pump set at a given budget.
So if he/she is not able to get a better deal (from buyer assigned to a project) , say for electric motor , she/she can still manage the project cost by getting better deal for a pump and couplings.
And this is where the organization looses the opportunity to save the costs, as project managers use the budget across various activities. So if cost budget is defined at a lower level than a complete pump assembly say at pump level, electric motor , nut bolts, base plates level there will be lot more pressure on project managers and buyers to get better deal for each of these components and for sure this will result into better cost control at a assemble level.
Such a explanation of features of product and its potential benefits is certainly a attractive proposition.
But I think before a solution is finalized, one must look at the organizations capability to handle the change that will come up due to the solution. More granular you go in defining control for a project, other divisions or departments of a organization must undergo some process changes.
For ex. The way in which buyer issues the purchase orders, changes to a great extent. Earlier (means when project solution wasn’t in place), for a Purchase order buyer can group in all the items for a project and issue a single Purchase order. (With necessary distribution lines for each item etc). But as we have cost control at more granular levels, even one item, which a buyer is buying can map to multiple tasks of a project. So based on this knowledge buyer should create separate distribution lines for same item mapping to different tasks of a given project. This will necessitate that buyer is very well aware of the project structure, and cost control as it’s planned by project manager. (Or project manager communicates this to buyers via valid requisition). Same will be applicable when supplier invoices are registered in system for a particular project.
Hence for such a solution to successful, its very important that organization is realistic about what they are getting by controlling cost at very granular levels vs cost they have to spend in managing the change due to such a solution.
