Fulcrum keeps Kumba`s costs in check in real-time

Industrial giant, Kumba Resources, formerly known as Iscor Mining, has gained a keener insight into its enterprise project management budgets with the assistance of EPM specialist Fulcrum Business Solutions. The result of the nine-month project is that Kumba can now better manage the costs of its mammoth industrial projects due to the integration of Microsoft Project with its SAP business application environment.

"Kumba is a large enterprise with a portfolio of assets spanning three continents - Africa, Asia and Australia - and is involved in large industrial projects that can take years to complete," says Adeline Cruywagen, project manager at Fulcrum Business Solutions. "In the past, due to the complexities involved in assigning and keeping track of subcontractors and their progress in these enormous projects, it could take as long as 18 months after a project was competed for Kumba to finally consolidate all the financials relating to it. This is naturally not the optimal solution for a project on which millions of rand is spent."

Kumba uses its SAP ERP system to keep track of its projects` budget structure and amounts agreed as well as the associated financials. "The problem we experienced was that SAP only keeps project records down to the third level (ie area, sub-area and module), which is a high-level overview," says Kumba`s project leader, Tony van Damme. "This is fine if all one wants is an overview of the progress, but it is insufficient information if the company wants to maintain tighter control over the real costs involved in a project."

The company therefore needed more granular detail about each project, sub-projects and the detailed costs of each. The designated EPCM contractor utilised its own cost management system to track budget, actuals and progress on the work it contracted to other companies. The cost management system handles lower levels of the project, including more granular measures such as the actual costs of the project`s various components and their day-to-day progress. The information Kumba required was therefore available, but it was not in the format the company could use.

Neither company was prepared to change applications, however, as they had significant history and costs tied up in implementing and customising their relevant software solutions.

Van Damme adds that Kumba already used Microsoft Project (MSP) to plan its engineering projects and the board instructed the company to determine if this application could be used to bridge the gap between SAP and the EPCM contractors` cost management system. The Kumba team could not find a reason to stop using the product and they therefore decided to turn to MSP specialist Fulcrum Business Solutions to find a way out of its information quagmire.

From post-project to real-time financial management

Fulcrum was tasked with using its business process expertise together with its MSP and Microsoft development skills to create a project management environment that could track each project`s costs and progress in real-time - without disrupting existing project management processes, SAP or the EPCM contractors` cost management system. Put simply, Fulcrum had to take the day-to-day project financial and budget information from the cost management system, combine it with data from the EPCM contractors` subcontractors and then summarise it to enable management to compare it to the information contained in SAP.

"To be able to keep track of a project`s progress and the costs in real-time, Fulcrum created a dashboard interface in MSP that would provide an accurate comparison between the two budgets and actual amounts spent," explains Cruywagen. "Engineers would keep using MSP as normal, while budget information, invoices raised, paid and incident of payment schedules would be available for staff that required it."

To accomplish this, Fulcrum first developed an application to import budgets from SAP into MSP to allow Kumba users to view the original budget. It then developed a second application that would import the lower level cost management system information into MSP and subsequently roll up said information to the same level as the SAP data within MSP to allow for the dashboard comparison. This allowed Kumba to track the actual costs versus the original budget and immediately identify areas that were misaligned.

"Kumba could now ensure projects stayed on track and on budget, or, if they were going wrong, Kumba would be able to take action before costs escalated out of control," adds Cruywagen. "Additionally, Kumba was able to plan its incidence of payments more accurately. Tasks assigned to the EPCM contractors` subcontractor, for example, are now linked to proposed payments in SAP to ensure that money is not paid for work not completed and that the correct amounts are paid for every milestone in the project.

The functionality of importing and updating payment forecasts from MSP into SAP over the duration of the project was also developed, showing the project`s real cash flow needs. This could provide an up-front cash flow forecast and ensures there is less chance of any unpleasant financial surprises during the project."

This information is used to plot payment milestones, again in SAP, including data such as the date of payment, invoice number and payment terms. Similar payment milestones from the EPCM subcontractors` cost management system are also included to allow an accurate comparison to be made - permitting Kumba to see the actual amounts paid compared to the amounts budgeted for.

Fulcrum also created a template for the EPCM contractors` subcontractors that would assist them to provide the relevant information required for the new budgeting process. This was a manual process consisting of an offline MSP template that the subcontractors would fill in and pass on the EPCM contractor as well as a user guide. Both the EPCM contractor and Kumba decided that third-party access to the EPM environment should be restricted, thus necessitating the manual entry of this information.

Real-time management a reality

A non-negotiable aspect of this project was that SAP had to be the master budgeting system containing all the relevant financial information and the status of Kumba`s projects. This was accomplished successfully, with Van Damme noting that Fulcrum proved itself very competent and had a number of highly skilled people on board.

"Everything is now running as per the specifications, with only some fine tuning of the original requirements needed as the project progressed," he says. "We needed to know that the importing of data to and from SAP would be done correctly every time to avoid the potential catastrophe of having corrupted data in the system. Fulcrum managed this process well and Kumba can use the interface to track every rand spent on each project with certainty."