Cost management training day4

Training Agenda/Objectives– Understanding of why managing costs are important, Army’s overall objectives, the process of Cost Management, how it differs from Budget, and key cost terms

Training Agenda/Objectives

– Understanding of why managing costs are important, Army’s overall objectives, the process of Cost Management, how it

differs from Budget, and key cost terms

– Understanding of an ERP, how to build a Cost Model, and the various cost objects within a Cost Model (e.g organization,

products, job orders, etc.)

– Understanding of cost allocations/assignments, how to chose which to utilize when, how to valuate the results of the

assignments (Std vs Actual), and rate creation

– Understanding of the results of the Cost Model and how various types of analysis and decisions are supported

Day 4 Objective & Agenda

Day 4: Analysis and Reporting

and how various types of analysis and decisions are supported

Lesson 1: Exercise

Objective(s):

(who your team provide services to)

Lesson 2: Analysis

Objective(s):

how reporting can support analysis

Current Status • W

hat kin

ds

of an aly sis oc cur no w?

pend

rate

rade-offs

thers

?

Costs Analysis Types • For ec

ast ing :

usi

ng pri

or period informatio

n

to predict future dollars an

d quantities

ian

ce An aly sis :

comparis

on analysis

of standard

vs Actual

s, Pla

n

vs Actual

s,

or multipl

e period

s (e

g Jan

vs Feb)

nd An aly sis :

Analysis

of cost/qt

y ove

r multipl

e consecutiv

e tim

e frame

s (e

g Monthl

y to Month, Ye

ar

to Ye

ar, etc.)

on om

ic An aly sis :

Analysis

of economic benefi

ts

of multipl

e options ove

r differe

nt pa

ns

of time

More Costs Analysis Types • Co st/

Be nef

it An aly sis :

Analysis

of Decisi

on

to examin

e cos

ts versus return

e Cy cle Co

st Est im ate :

Estima

te

of progra

m

or project ove

r the full life cyc

le fro

m concep

t development

to disposal

st/ Ris

k An aly sis :

Analysis assessing cos

t in reference

to probability/ri

sk

of potenti

al outcome

Analysis Supported by ERP

Reporting

The vario

us type

s of anal ysis are supp orte

d by ERP repo rting

by provi ding:

eal-time, accurate

data

rill-down

capabilities

to

generating

documen

t (e.g transparency

and

audit/integrity)

tandard

definitions, business

rules, and

methods

(commonality

in

wha

t the

data

means)

ultiple

cos

t assignments

and

views

Budget Execution Before & After GFEBS

• The way GFEBS reports Budget Execution information is very different than current environment

• The current view of COED is called Cumulative in GFEBS reporting

• Both views of Budget Execution will be provided

Lesson 2: Wrap-Up

• There are many kinds of analysis each with a different purposes and supporting different decisions

real-time, accurate, transparent data buolt within a common framework of definitions, business rules, and processes

performed

• Some reports within GFEBS will provide the ability to see COED as cumulative

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ERPs support analysis by (check all that apply):

o Real-time, accurate data

(e.g transparency and audit/integrity)

methods (commonality in what the data means)

Lesson 3: Reporting

Objective(s):

cost reports supported by GFEBS

GFEBS Cost Reports

for Multiple Needs

BI – Business Intelligence

• Optimized for Data Extraction

• Analytical Processing

• Near real-time; trending analysis

• Slice-n-dice reporting (pivot)

Cost By Report

Unit Cost Report

Detailed Labor Report

FI – Financial Acct & Mgmt.

FM – Funds Acct & Mgmt.

CO – Cost Acct & Mgmt.

MM – Materials Mgmt

and Procurement

PPE – Property, Plant &

Equipment [PM, PS, RE, AA]

SD – Sales & Reimbursables

ECC – Enterprise Central Component

• Optimized for Data Input

• Support external reporting

• Utilized for auditing activities

• Usually researching a smaller

data set

• Typically set to time-out

within 15 minutes to maintain

system resources for

receiving postings

BI:

• Nightly, 4 hrs, near real-time

• Drill-down to some level of aggregation – detailed line items researched in ECC

• Reconciliation

• Support internal reporting

• Utilized for costs analysis activities

• Usually researching a large data set

• Typically set to time-out within 90 minutes to support end-users performing

analysis

ECC Report Types • Pla n

vs Act ual Var ian ce

s –

eac

h cos

t object has

a standard report for compari

ng Plan/Actual/Var whi

ch contain

s the dollars an

d the activity typ

e an

d SK

F quantities

nd An aly sis Re por

ts

– std report

s are availab

le

to compare Quart

er

to Quart

er, Period

by Period

tist ica

l Ke

y Fig ure /Q ua ntit

y Re por

ts

– period-bas

ed report

s

on the quantities

of SK

Fs

e Re por

ts

(Activit

y Typ

es an

d Business Processes) – provid

es the rat

es per eac

h Co

st center/Activit

y Typ

e an

d Business Processes

ECC Report Capabilities • Mul tipl

e Filt ers

– eve

ry std rep ort has mult iple filter s/p ara met ers, e.g Fro

m

To and Ran ges suc

h

as sing

le valu

e of

a Cos

t Cen ter

of a Ran

ge

of Cos

t Cen ters are

a Gro

up

of Cos

t Cen ters

r Def ine

d Lay out/ Vari ant

s –

eac

h rep ort has

a sta nda

rd layo

ut pro vide

d with the abili

ty for the end use

r to add /re mov e/c han

ge field

s and sav

e the layo

ut

as thei

r def ault for eas

e of rep ort

el Inte gra tion

– the rep orts can

be exe cut

ed

as Exc

el if desi red

ort Fun ctio

ns

– rep orts can

be exp orte

d into vari ous for mat

s suc

h

as xls, csv, etc.

BI Report Types • Sta nda

rd Rep ort

s –

mos

t of the std rep orts with

in EC

C are pro vide

d with

in

BI

as well

t

By

– pro vide

s the cost

by all cost obj ects , bud get pla

n, cost pla

n, vari anc

es, with mult iple attri but es

t Cos

t –

Ge ner ates

a $

$/# bas

ed

on the sele ctio

n par am eter

s cho sen

aile

d Lab

or Rep ort

– pro vide

s info rma tion

by em ploy

ee for pay roll and ATA APs

dit Lab

or Rep ort

– utili zed

to rec onci

le and mak

e adj ust me nts for pay roll rela ted issu es

BI Reporting Capabilities • Us er

Def ine

d Var ian

ts

– like

in EC

C, use

rs can defi

ne filte

r values an

d sav

e

as

a variant for repeat

ed use for dat

a set the

y are always

workin

g with

ho

-c rep ort

s –

the report structure

is pre-defi

ne, however the use

rs can drag-n-dro

p fiel

ds

in

as need

ed

to generate thei

r ow

n versio

ns

of the report

vor ite

s –

use

rs can sav

e thei

r ow

n versio

ns

of the report

as

a favorit

e an

d the

n execut

e tha

t report wh

en performin

g analysis

Cost By Report

Cost By Report Variables

GFEBS Sample Cost By

Exportable Cost By Report

for Analysis

Unit Cost Report

Central Issue facility

CIV

HR

Cost Center/Resource Pool

CNT HR

Civilian Employees Contractors

Military

Labor

Depreciation

Director of Logistics)

MIL

HR

Full Cost Organizations

SSPA: Manage OCIE Inventory

SSPB: Issue OCIE to Soldier

SSPC: Issue Clothing to Initial Training Soldier

SSPD: Accept OCI Turn-Ins

SSPE: Receive & Process Shipments

SSPF: Manage Chemical Defense Equipment

SSPs Provided

Full Cost Product/Services

Brigade XXX

TRADOC YYY

Brigade ZZZ

Etc

Cost Center

Full Cost Customers

CCD – Cost Model

Military

Reports provide the information

of the results of the Cost Model

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Lesson 3: Wrap-Up

from both ECC and BI

support Army specific needs, Cost By, Detailed Labor, Unit Cost Rate, etc

data within the reports and favorites

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_ Real-time

_ Nightly, 4 hrs, near real-time

_ Drill-down to originating document _ Reconciliation

_ Smaller data set

_ Time out normally around 15 mins _ Larger data set

_ Time out normally around 90 mins

Lesson 4: Summary/Key

Take-Aways

Objective(s):

addressed throughout the training

Base Support

$ / Service

$ / Brigade

$ / Installation (SRM, BOS, ENVR, FP)

• Cost Management provides ‘efficiency and effectiveness’ and control of the conversion activity

in order to provide the agreed upon outputs of the agency (primarily output focused)

• Financial Management provides ‘historical and comparative’ information of an externally defined view of the conversion activity

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Managing Business Operations Efficiently & Effectively Through the Accurate Measurement & Thorough Understanding of the "Full Cost"

of an Organization's Business Processes, Products & Services in Order to Provide the Best Value to Customers.

Cost Planning

Cost Controlling

Cost Analysis

Cost Accounting

Cost Management

Process

Cost Management

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• Integrated Business Design

To’s

Enablers of Change

Army Cost Culture Change

“Making a Square a Circle”

• Use what is necessary to obtain the objective

“A Culture of Entitlement” “A Culture of Influence”

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Enhanced Ability to Capture

• Support to Olympics

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Central Issue facility

CIV

HR

Cost Center/Resource Pool

CNT HR

Civilian Employees Contractors

Military

Labor

Depreciation

Director of Logistics)

MIL

HR

Full Cost Organizations

SSPA: Manage OCIE Inventory

SSPB: Issue OCIE to Soldier

SSPC: Issue Clothing to Initial Training Soldier

SSPD: Accept OCI Turn-Ins

SSPE: Receive & Process Shipments

SSPF: Manage Chemical Defense Equipment

SSPs Provided

Full Cost Product/Services

Brigade XXX

TRADOC YYY

Brigade ZZZ

Etc

Cost Center

Full Cost Customers

CCD – Cost Model

Military

Results of the Analysis Workshops are aggregated and utilized to generate the Cost Model

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Costing Conceptual Design

Budget Accounting

Publi

c Sect or

stored, used, and presented

Cost Planning

Cost Controlling

Cost Analysis

Cost Accounting

Cost Management Process

How the information is entered, stored, used, and presented

What/Why information is entered, stored, used, and presented

SSPA: Manage OCIE Inventory

SSPB: Issue OCIE to Soldier

SSPC: Issue Clothing to Initial Training Soldier

SSPD: Accept OCI Turn-Ins

SSPE: Receive & Process Shipments

SSPF: Manage Chemical Defense Equipment

Central Issue facility

CIVHR CNTHR

Civilian Employees Contractors

Brigade XXX

TRADOC

YYY

Brigade ZZZ

Etc

Military Labor

Depreciation

Director of Logistics)

MILHR

Full Cost Organizations Product/Services Full Cost Customers Full Cost

Military Labor

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Many Types Costs

• Direct costs— A cost such as labor, materials/supplies that can be

directly traced to producing a specific output of an organization,

product/service.

• Indirect costs – A cost that cannot be directly traced to a specific

organization, product/service output

• Funded Costs The value of goods or services received because

of an obligation of funds (obligation authority), by the organization

performing the work

• Unfunded costs – A cost that are financed by another

organization's or activity's appropriations

• Variable Costs A cost that changes with change in output

• Fixed Cost A cost that remains the same regardless of the

change in output.

• Sunk Cost A cost incurred in the past that will not be affected by

any present or future decision

• Incremental Cost: The increase or decrease in costs that would

result from a decision to increase or decrease output levels

• Avoidable Costs – A cost incurred on an object that will no longer

be incurred due to a decision to change the output

• Unavoidable Cost: A cost incurred on an object that will be

incurred regardless of the decision to change.

• Common

Understanding of Types of Cost is Necessary for Informed

Decision Making

• Each Decision Should be

Focused on Only Relevant Cost that Impact the Decision

Cost Objects

• Cost Center - A cost center is a responsibility center that incurs costs and has a manager

who is accountable for those costs.

• Activity Type - An Activity Type is a cost object that represents a group of resources within

a Cost Center These resource groups have capacity and a unit of measure such as: labor hours, machine hours, square footage, etc Activity Types are consumed and utilized to the produce the products and services of the organization.

• Cost Element - A Cost Element is the lowest level component for classifying costs and

revenues (as negative costs) of a resource and indicates the category/type associated with a posting (e.g allocation type, revenue, expense)

• WBS Element - WBS elements are activities in the Project used for planning and updating

cost data Some examples of WBS Elements are: Tasks, Partial tasks that are further

subdivided, and work packages.

• Order - Orders are cost objects used to plan, collect, monitor, and settle the costs of

specific jobs and tasks Orders are used to monitor the costs of short term projects and event/job costing.

• Business Process - A business process is a cost object used to capture costs of

cross-functional (cost center) activities

Other:

• Statistical Key Figure - A Statistical Key Figure is a piece of information about the cost

object it is assigned to, e.g # FTE for a cost center, # telephones, etc.

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Cost Allocations/Assignment

type (resource driver) or a process (activity driver) quantity This method is a direct charging of the quantity to the receiver.

account to move both primary (G/L accounts) and secondary cost elements (internal allocation accounts) between senders and receivers.

account structure and is only available for primary costs movements.

the cycle-supported allocation basis such as fixed portion, fixed percentage, and so

on Has ability to inversely determine a sender quantity based on receiver

information.

posts quantities with their corresponding values The relationship is defined through planning rather than a cycle.

between cost objects using Boolean (“IF-THEN”) logic Used to establish a based relationship between these types of cost objects for allocations to be made based on operational metrics in a timely manner.

associating costs to a receiver based on static business rules

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Cost Management Enables

Unit Training

• Ground OPTEMPO Installation

• SSP 1 (Labor Tracking) School Training

Direct Reporting Unit

GFEBS enables Army

to “slice and dice” data for decision-making

Direct