using ‘earned value management’ and ‘milestone based ... · earned value management as key...

1

HOW TO PLAN A BATTLE SHIP

Using ‘Earned Value Management’ and ‘Milestone

based planning’ to manage the production of

complex products

About Damen Shipyards

• Damen is an international shipyard group;

• Turnover 2012: € 1.7 billion

• More than 8,000 employees

• 38 shipyards worldwide, 150 vessels a year

Petje op / Petje af

Joint Support Ship (JSS)

Patrol Vessel (PS)

Sigma frigates

Project (planning) driven organization

JSS general

• 11 000 ton steel

• > 100 Engineers, 445 000 Engineering hours

• Engineering and production at different locations

• Use of subcontractors

Planning / logistics

• Thousands of activities in planning

• Thousands of relations in planning

• Thousands of components on board

• Hundreds of people involved

FROM…

… TO

The Ostrich Project Management Method

The need for proactive project control

Project Life Cycle

Possibility

to take action

Cost

of taking action

Timely escalation

Link planning and cost control

Prevent surprises

20% delay / inefficiency

during Engineering

40% delay / inefficiency

during Production

115 000 hours budget

23 000 hours inefficiency

315 000 hours budget

126 000 hours inefficiency

70 Euro / hr

1 610 000 Euro

50 Euro / hr

6 300 000 Euro

7 910 000 Euro

+ 33%

The need for proactive project control

Earned Value Management

“ A project management technique for measuring project

performance in an objective manner.

EVM has the ability to combine measurements of scope,

schedule, and costs in a single integrated system ”.

SPI = Schedule

Performance Index.

CPI = Cost

Performance Index

Earned Value Management – the basics

• Planned value = Planned % progress multiplied by the budget

• Earned value = Actual % progress multiplied by the budget

• Actual = Actual costs

• CPI = Cost Performance Index = Earned value / Actual costs

CPI indicates how efficient hours are spend on a project

CPI < 1 : Project is over budget,

CPI = 1 : Project is on budget

CPI > 1 : Project is under budget

• SPI = Schedule Performance Index = Earned value / Planned value

SPI indicates to what extend the project is following the planning

SPI < 1 : Project is running late,

SPI = 1 : Project is on schedule,

SPI > 1 : Project is ahead of schedule

Earned Value Management – the basics

EVM – Example 1:

What would you do?

• Project is inefficient

• Improve efficiency

• Project is on schedule

• Check / change operational planning

now

inefficiency

Planned Value (PV): 42000

Earned Value (EV): 41700

Actual hours (AH): 50500

Cost Performance Index (CPI):

41700 / 50500 = 0,83

Cost Performance:

41700 – 50500 = -8800

Schedule Performance Index (SPI):

41700 / 42000 = 0,99

Schedule Performance:

41700 – 42000 = -300

EVM - Example 2:

What would you do?

Planned hours

Earned hours

Actual hours

Time

planned finish

ho

urs

• Project is efficient

• Project is behind schedule

• Check / change operational planning

• Increase capacity

now

Delay

Planned Value (PV): 42000

Earned Value (EV): 35000

Actual hours (AH): 34800

Cost Performance Index (CPI):

35000 / 34800 = 1,00

Cost Performance:

35000 – 34800 = -200

Schedule Performance Index (SPI):

35000 / 42000 = 0,83

Schedule Performance:

35000 – 42000 = -7000

EVM - Example 3:

What would you do?

Planned hours

Earned hours

Actual hours

Time

planned finish

ho

urs

• Project is inefficient

• Project is behind schedule

• Check / change planning

Delay inefficiency

now

• Or.......

Planned Value (PV): 42000

Earned Value (EV): 35000

Actual hours (AH): 41800

Cost Performance Index (CPI):

35000 / 41800 = 0,84

Cost Performance:

35000 – 41800 = -6800

Schedule Performance Index (SPI):

35000 / 42000 = 0,83

Schedule Performance:

35000 – 42000 = -7000

Schedule Variance

in time

Budget overrun

Delay in delivery

Cost forecasting using EVM

EAC

Estimate at completion (EAC)

Diagrams

0

3000

6000

9000

12000

15000

18000

feb-12 mrt-12 apr-12 mei-12 jun-12 jul-12 aug-12 sep-12 okt-12 nov-12 dec-12 jan-13

<--- Period--->

Ho

urs

Earned Value Planned Value Actual

Budget (BAC): 20400

Planned Value (PV): 12300

Earned Value (EV): 12700

Actual Hours (AH): 15400

Cost Performance Index (CPI):

12700 / 15400 = 0,82

Cost Performance

12700 – 15400 = -2700

EAC:

20400 / 0,82 = 24738

Variance At Completion (VAC)

20400-24738 = -4338

Cost forecasting: example

EAC = Budget / CPI

EAC = Budget / CPI / SPI

EAC = AH + Budget - Earned

Link to cost control

1. Budget (hours) in Primavera = Budget (hours) cost control

2. Estimate at completion (EAC) in Primavera only

3. Forecast (hours) = Forecast (hours) cost control

BudgetBudget

Forecast

time

hours

Forecasting vs. budget

Prerequisites for effective

Earned Value Management

• Budgets are basis for planning

• Budgets are fixed from start of project

• Planning includes entire project scope

- Contingencies

- Subcontractors

• Usable Work Breakdown Structure

• Detailed progress information

Master

Planning

Operational planning

(primavera)

1. Planning creation

Update planning

2. Maintenance

Actual progress from process

Cost Control

Operational reports

(planning layouts)

Project status reports

3. Reporting

Planning framework

20

MONTHWEEK 01 02 03 04 05 05 06 07 08 09 9 10 11 12 13 14SUNDAY 6 13 20 27 3 10 17 24 3 10 17 24 31MONDAY 7 14 21 28 4 11 18 25 4 11 18 25TUESDAY 1 8 15 22 29 5 12 19 26 5 12 19 26WEDNESDAY 2 9 16 23 30 6 13 20 27 6 13 20 27THURSDAY 3 10 17 24 31 7 14 21 28 7 14 21 28FRIDAY 4 11 18 25 1 8 15 22 1 8 15 22 29SATURDAY 5 12 19 26 2 9 16 23 2 9 16 23 30

01 02 03

MONTHWEEK 14 15 16 17 18 18 19 20 21 22 22 23 24 25 26 27SUNDAY 7 14 21 28 5 12 19 26 2 9 16 23 30MONDAY 1 8 15 22 29 6 13 20 27 3 10 17 24TUESDAY 2 9 16 23 30 7 14 21 28 4 11 18 25WEDNESDAY 3 10 17 24 1 8 15 22 29 5 12 19 26THURSDAY 4 11 18 25 2 9 16 23 30 6 13 20 27FRIDAY 5 12 19 26 3 10 17 24 31 7 14 21 28SATURDAY 6 13 20 27 4 11 18 25 1 8 15 22 29

04 05 06

MONTHWEEK 27 28 29 30 31 31 32 33 34 35 37 38 39 40SUNDAY 7 14 21 28 4 11 18 25 1 8 15 22 29MONDAY 1 8 15 22 29 5 12 19 26 2 9 16 23 30TUESDAY 2 9 16 23 30 6 13 20 27 3 10 17 24WEDNESDAY 3 10 17 24 31 7 14 21 28 4 11 18 25THURSDAY 4 11 18 25 1 8 15 22 29 5 12 19 26FRIDAY 5 12 19 26 2 9 16 23 30 6 13 20 27SATURDAY 6 13 20 27 3 10 17 24 31 7 14 21 28

07 08 09

MONTHWEEK 40 41 42 43 44 44 45 46 47 48 49 50 51 52 53SUNDAY 6 13 20 27 3 10 17 24 1 8 15 22 30MONDAY 7 14 21 28 4 11 18 25 2 9 16 23 31TUESDAY 1 8 15 22 29 5 12 19 26 3 10 17 24WEDNESDAY 2 9 16 23 30 6 13 20 27 4 11 18 25THURSDAY 3 10 17 24 31 7 14 21 28 5 12 19 26FRIDAY 4 11 18 25 1 8 15 22 29 6 13 20 28SATURDAY 5 12 19 26 2 9 16 23 30 7 14 21 29

10 11 12

OCTOBER NOVEMBER DECEMBER

JULY AUGUST SEPTEMBER36

JANUARI FEBRUARI MARCH

JUNE APRIL MAY

Progress update cycle

Unexpected costs for your project

Planned value curve for DSNSEarned value curve for DSNS, project seems to be somewhat on scheduleActual cost curve for DSNS, project seems to be somewhat inefficientActual cost curve after project is earned 100%. There are still a lot of actual costs. Apparently, the project was not yet ready.

So, the earned value curve should look more like this.Besides, the planned value curve should represent a realistic planning.

Monitoring unexpected costs

Detailed activities that represent the normal work to be done for Basic Engineering (already present in planning)

Detailed activities that represent the normal work to be done for Detailed Engineering (already present in planning)

One or a few activites that represent all other activities (e.g. changes, open remarks, etc.)

One or a few activites that represent all other activities (e.g. changes, open remarks, etc.)

The same for all main processes23

Example 1

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

16,0%

18,0%

Example:

Budget = 3000 hours

Actual = 1000 hours

Now

Earned = 70,8 % * 3000 = 2124 hoursCPI = 2124 / 1000 = 2,12ETC = (3000 – 2124) / 2,12 = 413 hours

24

Example 2

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

16,0%

18,0%

Example:

Budget = 3000 hours

Actual = 1500 hours

Now

Earned = 90,8 % * 3000 = 2724 hoursCPI = 2724 / 1500 = 1,82ETC = (3000 – 2724) / 1,82 = 152 hours

25

3-03-2011 2626

Basic Eng

Detailed Eng

Project Control

Production Support

Planning / Logistics /

Purchasing

Vlissingen

Module 5

Work Preparation

Steel Cutting

Piping Fabrication

Block Fabrication

Hull Construction

Outfitting

Testing

Galati

Module 3

Work Preparation

Steel Cutting

Piping Fabrication

Block Fabrication

Hull Construction

Outfitting

Testing

Surabaya

Module 1

Work Preparation

Module 2

Module 3

Module 4

Module 6

ProductionENG

Project

Steel Cutting

Piping Fabrication

Block Fabrication

Hull Construction

Outfitting

Testing

Module 1

Module 2

Module 4

Module 6

ENG Platform

MEGA

E-supplier

HVAC supplier

Location activitiesLocation activitiesLocation activities

Site Team Site Team

Setting to Work

Site team

Basic Eng

Detailed Eng

Project Control

Production Support

ENG CS

DSNS

Extern

Engineering Purchasing Production

Project C

Project B

Project A

Led by project

leaders

Cost Control

Provide capacity

and functional

expertise

COO, CFO & CEO

Position and role of planning

27

Planning

Role of planner

Milestones are critical for successful project control

(Main) Milestones

Control Points

Activity D phase 2.1

Activity E phase 2.1

Activity F phase 2.1

Activity G phase 2.1

Activity H phase 2.1

Activity I phase 2.1

Activity J phase 2.1

Activity K phase 2.1

Activity L phase 2.1

Activity … ect. phase 2.1

End of phase 2.1

Activity C phase 2.1

Activity B phase 2.1

Activity A phase 2.1phase 1

Engineering

Procurement

Production

Integrated Logistics Support

Combat Systems

phase 2 phase 3 phase 4 phase 5 phase 6

1.1 1.2 1.3 2.1 2.2 2.3 3.1 3.2 3.3 4.1 4.2 4.3 5.1 5.2 5.3 6.1 6.2 6.3

Sub-phases

Engineering of structural drawing

Timely Escalation on critical processes!

Earned Value Management

as key enabler for project control

• Ideal project management method to control large complex projects

• EVM links planning and Cost Control

• Monitor project status concerning both schedule and costs

• Cost forecasting for your project.

• Escalate quickly

• Prevent surprises

EyeOn bv

Croylaan 14

5735 PC Aarle -Rixtel

Tel.: +31 492 38 88 50

mail@eyeon.nl

www.eyeon.nl

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1015 BT Amsterdam

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mail@eyeon.nl

www.eyeon.nl

EyeOn BVBA Belgium

Drie Eikenstraat 661

B-2650 Edegem

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mail@eyeon.eu

www.eyeon.eu

EyeOn Dinalog

Princenhagelaan 13

4813 DA Breda

Tel.: +31 492 38 88 50

mail@eyeon.nl

www.eyeon.nl

Paul Husslage

paul.Husslage@eyeon.nl

+31 6 83 69 33 80