Fundamentals of Project System (PS) in SAP

The project system is an important component in the SAP System. Based on my practical experience this component is not fully utilized by Indian organizations using SAP. The use of PS has been restricted to cover asset capitalization (can be managed using Internal Order) or to manage small projects only although the feature of PS is quite extensive. Mainly business takes a call to use the PS system considering the intricacy & functionality. Coming to the generic meaning of a Project. What is a Project in a practical scenario????  

Business invest in capital expenditure say for example:– Construction of Plant Building. Here from the start of construction to hand over of the building to the user can be considered as a Project. There are many EPC projects & are extensively used by construction industries. The Project is always associated with a Start & End date. In SAP Projects are generally uses to collect cost & capture revenues, it’s like another cost collector/revenue collector. A simple Project diagram in SAP has been depicted below.

If we will see the integration of PS with other modules in SAP, it has widely integrated with CO, MM, SD, FI, PM, IM, HR, etc. in several ways.

The main components of a Project System Include;

a. Project Definition. (like Dummy Object. The header of the entire structure)

b. Work Breakdown Structure.

c. Network Header.

d. Network Activity.

e. Activity Element

f. Milestone (manage key events like Billing etc)

To cover the above aspects of PS I will give a few examples of the corresponding components.

Suppose in an organization we are working in the facility management dept. & assigned a project of constructing a New Building. So, in this case, Building itself can be treated as Project Definition. For Example, In case one construction company is building a Civil work Project for a 3rd party, it can be managed in 2 ways. Either Sales Order creates Projects automatically (i.e. assembly processing) or Project can automatically create Sales Order (i.e. Simulated sales pricing).

Coming to our main topics i.e. To achieve the completion of the project, we have to segregate the task under various elements like Planning, Civil, Electrical. etc, which will be captured by way of creating WBS under Project Definition. We also can create Sub-WBS like 'Labour, Material, etc' to capture different components under the main WBS 'Civil'.

Networks are connected to WBS which are nothing but the collection of activities. In the above Sub-WBS, I mentioned one example as Material. The place where the material will be ordered in our Project is called Material Components. Here we need to add the components which are necessary for the Project, accordingly in case of a Stock item reservation will be generated & on the other hand in case of a Non-Stock item a Purchase Requisition will be generated. In the same fashion, Labour costs can be captured by way of activity type. For deriving the Rate we will refer the basis Cost Center rate derivation process (like KP06, KP26 & KSPI, etc).

Scheduling in a Project depends on the method you want to adopt. For example, the Activity Dates determined the WBS Dates (Refer below Diagram).

Milestones are objects which are attached to the WBS's & activities. In simple term milestones are stages, dates or events the Project team wants to remember. For example, in our above scenario, we want to release the Project Invoice with the Finance dept. after completion of Sub-WBS activities which is 05th Feb. Hence 05th Feb is our milestone. You might have heard of the term 'Running Bill' in various government contracts. It is issued by the contractor with the govt. finance dept. to release the payment. Milestone can also be done by specifying some % of the cost of the Project. In Sales terms, it is also known as 'Billing Block'. A standard Project System can be viewed in SAP as follows (Just for Information). T Code CJ20N.

In case you want to treat this WBS as Billing Element, the billing element indicator has to be activated in the master data. (Shown in the below screenshot)

I hope you will get some clarity about the functionality of the Project System (PS) in SAP.

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