Work Breakdown Structures in Microsoft Dynamics AX 2012 R3

Microsoft Dynamics AX 2012 R3

Work breakdown structures White paper

Rupa Mantravadi June 2014 This document describes how you can use work breakdown structure (WBS) enhancements in Microsoft Dynamics AX 2012 R3 to meet your requirements for estimating and tracking. www.microsoft.com/dynamics/ax Send feedback.

Contents Work breakdown structures

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Prerequisites for creating WBSs

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Prerequisites for creating a work schedule Prerequisites for estimating cost of work

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Creating a WBS

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Work decomposition Project root task Summary or container tasks Leaf node tasks Schedule estimation Task dependencies Task scheduling in Microsoft Dynamics AX Cost estimation Estimating labor costs Estimating expense and material costs

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Tracking progress on the WBS

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Planning view Effort tracking view Project manager’s re-projection of effort Modified effort on summary tasks Cost tracking view Project manager’s re-projection of cost Projection revision of cost on summary tasks Earned value management Planned value Earned value Actual cost How to use the concepts of planned value, earned value, and actual cost

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WBS templates in AX 2012 R3

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Saving a project’s WBS as a template Importing a WBS template into a project’s WBS Differences between a project’s WBS and a WBS template

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Work breakdown structures A work breakdown structure (WBS) is a description of the work that will be done for the project. It is a hierarchy of tasks that represents the project team’s understanding of the composition of work, and the size, cost, and duration of each component or task. A WBS has three major purposes: • Describe the breakdown or composition of work in tasks. • Schedule the project work. • Estimate the cost of each task. The degree of detail in a WBS depends on the need for accurate estimates and the level of tracking required against the estimates. Projects that have very low tolerance for slippages in schedule or cost usually require a more detailed WBS, and diligent tracking of work progress and cost against the WBS. This kind of project is common in the construction and engineering industries. By contrast, industries such as media and advertising, software, and IT infrastructure have projects that tend to be one of a kind, and productivity is relative to the experience and competency of the individual performing the task. Therefore, these industries use a WBS to get an approximation of the size of the project but not to track the progress of a project in detail. Building a WBS is an intensive process and is usually done over a period of time with collaboration and information from a wide variety of people. This white paper describes how you can use WBS enhancements in Microsoft Dynamics AX 2012 R3 to meet your requirements for estimating and tracking.

Prerequisites for creating a WBS Prerequisites for creating a work schedule To use the full scheduling capabilities of the WBS features in Microsoft Dynamics AX, complete the following setup steps: 1. Set up a default calendar and a project calendar: A. Click Project management and accounting > Setup > Scheduling. In the Default working calendar field, you can specify a default calendar. This will be the default working calendar for any new project that is created. The following illustration shows the setup of a default working calendar for projects.

B. You can change the default calendar for a specific project. Click the project’s details page, and then, on the Project team and scheduling FastTab, update the Scheduling calendar field by selecting another calendar. The following illustration shows the setup of a project’s scheduling calendar.

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2. Set up standard working hours and working days. The calendar that is set as the working calendar for your project will be used in the WBS to determine the following information: • Working days and holidays • The number of working hours in a day To set these for a calendar or to create a new calendar, go to Organization administration > Common > Calendars. The following illustration shows the setup of working hours for a day.

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The following illustration shows the setup of working days and holidays.

Prerequisites for estimating cost of work To use the full cost estimation capabilities of the WBS, you should set up the costs and sales prices for workers, categories of labor, expenses, and fees, and items. To set up the cost and sales price of labor, expense and fee categories, click Project management and accounting > Setup > Prices. To set up the cost and sales price of items, use the Trade agreements form for each item on the Released products list page in Product information management.

Creating a WBS Creating WBSs involves the following three activities: 1. Work decomposition – Create a breakdown of work into manageable chunks or tasks. 2. Work schedule – Estimate the time required to complete a task, set task interdependencies, and select the start and end dates for tasks. 3. Cost estimation – Estimate costs for each task. Let’s see how Microsoft Dynamics AX WBS capabilities can help with each of these activities.

Work decomposition Creating a breakdown or decomposition of work is usually the first step in creating a WBS. The WBS functionality in Microsoft Dynamics AX supports the following basic constructs of work breakdown or decomposition.

Project root task The project root task is the top-level summary task for the project. All other project tasks are created beneath it. The name of the root task is always set to the project name. The effort, dates, and duration of the root node are summarized based on the values in the hierarchy below it. Properties of the root node are not editable, and the root node cannot be deleted.

Summary or container tasks A summary task is a task that has sub-tasks or constituent tasks beneath it. A summary task does not have any work effort or cost of its own. Its work effort and cost are a sum of the work effort and cost of its constituent tasks. The start date is calculated as the earliest start date of the constituent tasks, and the end date is calculated as the latest end date 5 Work breakdown structures White paper

of the constituent tasks. The name of a summary task can be edited, but the scheduling properties for effort, dates, and duration cannot. Deleting a summary task deletes the task and all its constituent tasks.

Leaf node tasks A leaf node task represents the most granular work package on the project. A leaf node has an estimated effort, a planned number of resources, a planned start date and end date, and duration. You can complete the following hierarchy operations to enable the creation of a work hierarchy or decomposition for a project. New task Whenever a new task is created, it is automatically added under the root node. A WBS number for the task is automatically assigned. The number represents the task’s level in the hierarchy. For tasks in the first level under the root task of the project, a numbering scheme of 1, 2, 3, and so on is used. For tasks that are under the first level, a numbering scheme of 1.1, 1.2, 1.3, and so on is used. For each level added under the previous level, a new dotted series of numbers is added. As of the AX 2012 R3 release, WBS numbering cannot be customized. Indent task When a task is indented, it becomes a child of the task directly above it. The WBS number of this task is recalculated by using a dotted series from the WBS number of its parent. The parent task is now a summary or container task, and therefore becomes a roll-up of its constituent tasks. Note: When a task is indented under a task that was a leaf node before the indent operation, the newly created summary task loses its own dates, effort, and number of resources, and inherits the sum of the tasks that were indented under it. Outdent task When a task is outdented, it is no longer a constituent of its parent. Its WBS number is modified automatically to reflect the task’s new level in the hierarchy. The effort, cost, and dates of the task’s previous parent task are recalculated to exclude the outdented task. Move up and Move down When you click Move up and Move down, you change the position of a task within its parent’s hierarchy. Moving a task up or down does not have any effect on its effort, cost, dates, or duration. However, the WBS number of the task is modified to reflect the new position of the moved task.

Schedule estimation Schedule estimation is usually the second step in creating a WBS. As a best practice, complete schedule estimation after you create the tasks. The Work breakdown structure form in AX 2012 R3 has two sections. The top section is designed for schedule estimation, and the bottom section includes an Estimated costs and revenues tab that you can use for cost estimation.

Task dependencies In a WBS, you can create a predecessor relationship between tasks. When you assign predecessor tasks to a task, the task can start only after all its predecessor tasks have been completed. The planned start date of the task is automatically set to the latest date of all of its predecessors.

Task scheduling in Microsoft Dynamics AX The following factors determine the scheduling of leaf node tasks: • Predecessors • Effort • The number of resources 6 Work breakdown structures White paper

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Start and end dates

The start date of a leaf node task that does not have predecessors is automatically set to the project’s scheduling start date. The duration of a leaf node task is always calculated as the number of working days between its start and end dates. Scheduling rules When automatic scheduling assistance is turned on, the following rules apply to task scheduling for leaf node tasks: • The start and end dates of a task must be working days according to the project’s scheduling calendar. • The start date of a task that has predecessors is automatically set to the latest end date of its predecessors. • The effort for a task is automatically calculated as Number of people * Duration * Hours in a standard working day of the project calendar. In some cases, you might want to deviate from these rules. You can turn off automatic scheduling to stop the system from automatically setting or correcting any of the properties on leaf node tasks. When you enter information for a task that causes a violation any of the scheduling rules, a scheduling error icon is shown for the task. The following illustration shows a task that has a scheduling error.

If you don’t want scheduling errors to be displayed, you can click Scheduling errors are shown to turn off the feature. The following illustration shows the location of the Scheduling errors are shown button.

Note: The values for a summary or container task continue to be calculated as the sum of the values of the constituent tasks, regardless of whether automatic scheduling assistance is turned on or off.

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Fixing scheduling errors When automatic scheduling assistance is turned on, scheduling errors are not likely to occur. However, if you turn off automatic scheduling assistance and then turn it back on at a later time, scheduling error icons might be displayed in the WBS. Fixing by task When you double-click the schedule error icon for a specific task, a dialog box displays all the scheduling errors that exist for that task. You can choose to fix one or more of the scheduling errors for the task. The following illustration shows the dialog box that appears for a task that has scheduling errors.

Fixing all scheduling errors If you want the system to fix all scheduling errors in the WBS, on the Action Pane, click Fix all scheduling discrepancies. Note: Using this feature can cause significant modifications to the WBS. Errors are corrected in the following order: 1. The estimated effort on all tasks is modified so that it is equal to the capacity defined in the project calendar. 2. The start dates on all tasks are modified so that they start after all of their predecessor tasks are completed. 3. The start dates on all tasks are modified to remove gaps in the start date for predecessor tasks. The following illustration shows the location of the Fix all scheduling discrepancies button.

Cost estimation As mentioned earlier in this document, the cost estimation for each leaf node task is entered by using the Estimated costs and revenues tab in the lower (Line Details) section of the Work breakdown structure form. 8 Work breakdown structures White paper

Note: You can’t modify the cost estimation for a summary or container task. The cost estimation for a summary task is equal to the sum of the cost estimation for its leaf node tasks. The estimated total cost for each task is calculated as the sum of the estimated cost amounts for the following transaction types: • Labor • Item or material • Expenses A Fee transaction type is used to estimate fee-based revenue. This transaction type does not have a cost component and is therefore not considered for estimating costs. An On-account transaction type is used to recording the contracted sales value in a fixed-value type of project. This transaction type is also not considered for estimating costs. When estimating costs for labor, material, and expenses for each task, you must assign a project category to the estimated cost.

Estimating labor costs For each leaf node task, you assign a work effort in hours and a default category. Therefore, when you set up a schedule for a task, the labor cost estimate for that task is automatically added in the default category for labor. This cost estimate is displayed on the Estimated costs and revenue tab in the Line details grid for that task. On this tab, you can also add more labor cost estimates, if required. Increasing or decreasing hours on the labor cost estimate causes automatic recalculation in the schedule of the task.

Estimating expense and material costs The Estimated costs and revenue tab also lets you estimate expense and material costs for a task, if required. The cost and sales price for each labor or expense estimate line are based on the setup defined for each category in the pricing tables at Project management and accounting > Setup > Pricing. For items, cost and sales price are added by default from the item or trade agreements on the Released products list page in Product information management. The following illustration shows the Estimated costs and revenue tab for a task.

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Tracking progress on the WBS The need to track progress against a WBS varies across industries. Some industries track the progress of a project at a very granular level of the WBS, whereas others track at a higher level of the WBS. This section describes how you can use WBS tracking for your project requirements. Microsoft Dynamics AX has three different views for the WBS of a project.

Planning view The Planning view displays the planned or baseline estimate of the schedule and cost information. Although there are no features to track the version and baseline for a project WBS, the values in this view are meant to represent the baseline version. The Schedule estimation and Cost estimation sections of this white paper describe this view and how it is used to create a WBS.

Effort tracking view The Effort tracking view displays the tracking of progress for tasks in the WBS. It compares the accumulated actual effort hours on a task to the planned effort hours for the task. The following formulas show the tracking metrics: • Progress percentage = Actual effort to date / Planned effort for the task • Remaining effort (also named Estimate-to-complete [ETC]) = Planned effort – Actual effort to date • Estimate at complete (EAC) = Remaining effort + Actual effort to date • Projected effort variance = Planned effort – EAC Based on whether EAC is more or less than planned effort, a projection of the effort variance on the task is displayed. If EAC is more than planned effort, the task is projected to take more time than originally planned and is behind schedule. If EAC is less than planned effort, the task is projected to take less time than originally planned and is ahead of schedule.

Project manager’s re-projection of effort It is common for the project manager or any persona that is tracking the progress of a project to occasionally revise the original estimates on a task. The task might be moving faster or slower than originally anticipated for reasons such as reduction in scope or the use of workers with less experience than originally planned. Projections are a project manager’s perception of estimates, based on the current status on a project. Changing the baseline numbers is not recommended or preferred, because a project baseline represents a well-published document for the project’s schedule and cost estimate that all stakeholders on the project have agreed to. Microsoft Dynamics AX gives project managers two ways to modify the effort on tasks: • Modify the remaining effort that is automatically set to update the actual remaining effort on the task. • Modify the progress percentage that is automatically set to update the true progress on the task. Both of these approaches cause a recalculation of the task’s ETC, EAC, and progress percentage, and the projected effort variance on a task. The EAC, ETC, and progress percentage on summary tasks are also recalculated, and their projection of effort variance is updated.

Modified effort on summary tasks You can modify the effort on summary tasks or container tasks. Regardless of whether you modify these values by using the remaining effort or progress percentage on the summary tasks, the calculations occur automatically in the following sequence: 1. Microsoft Dynamics AX calculates the EAC, ETC, and progress percentage on the task. 2. The new EAC is distributed down to the child tasks in the same proportion as the original EAC amount. 3. The new EAC on each of the leaf node tasks is calculated. 4. The remaining effort and progress percentage are recalculated for all of the affected child tasks, based on the new EAC value. The effort variance of the tasks is also recalculated. 5. Microsoft Dynamics AX also recalculates the EAC of the summary tasks from the leaf nodes. Click the Expand to level button in the Effort tracking view to set the level at which to track and maintain your WBS. The WBS is automatically expanded to that level in the Effort tracking view whenever you open it.

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The following illustration shows the Effort tracking view.

Cost tracking view The Cost tracking view displays the tracking of cost consumption for a task. In this view, the actual cost spent against a task to date is compared to the planned cost on a task. Microsoft Dynamics AX uses the following formulas for values in the Cost tracking view: • Percentage of cost consumed = Actual cost to date / Planned cost for the task • Cost to complete (CTC) = Planned cost – Actual cost to date • Estimate at complete (EAC) = CTC + Actual cost to date • Projected cost variance = Planned cost – EAC Based on whether EAC is more or less than planned cost, a projection of the cost variance on the task is displayed. If EAC is more than planned cost, the task is projected to use more money than originally planned for and is over budget. If EAC is less than planned cost, the task is projected to use less money than originally planned for and is under budget.

Project manager’s re-projection of cost Project managers must use CTC to revise the original cost estimate on a task. The CTC value can be modified by the project manager to the amount of cost required to complete the task. Modifying the CTC value causes a recalculation of the task’s CTC, EAC, and percentage of cost consumed, and the projected cost variance on a task. The EAC, ETC, and percentage of cost consumed on the summary tasks are also recalculated, and their projection of cost variance is updated. Note: When effort is revised for a WBS task in the Effort tracking view, the task’s CTC, EAC, percentage of cost consumed, and projected cost variance are all recalculated in the Cost tracking view. However, cost revisions don’t affect the values in the Effort tracking view, because the cost by transaction type (labor, material, or expense) or project category is not revised.

Projection revision of cost on summary tasks The revision of costs on summary tasks is allowed, and the following calculations are automatically completed: 1. The EAC, CTC, and percentage of cost consumed on the task are recalculated. 2. The new EAC is distributed down to the child tasks in the same proportion as the original EAC on the tasks. 3. The new EAC for each of the tasks is calculated. 4. The CTS and percentage of cost consumed are recalculated for all of the affected child tasks, based on the EAC value. The cost variance of the tasks is also recalculated. 5. The EAC for all of the summary tasks is recalculated by this change. Click the Expand to level button in the Cost tracking view to set the level at which to track and maintain your WBS. The WBS is expanded to that level in the Cost tracking view whenever you open it. The following illustration shows the Cost tracking view.

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Earned value management In AX 2012 R3, you can use the earned value method (EVM) to track the progress of a project. Earned value metrics can be viewed on the project manager’s Role Center. The earned value chart component shows the time-phased values of planned value and actual cost. Earned value as of the current date is shown as a point. Time-phased data for earned value is not available in AX 2012 R3. The time phase that is displayed on the earned value chart is by week or by month. This section describes the three main pillars of EVM in AX 2012 R3.

Planned value EVM theory states that the planned value plot represents the rate at which the project’s team planned to earn value on the project. AX 2012 R3 uses the 0:100 earning rule when plotting planned value. Under this rule, the value of the task is posted to the task as of its end date. No value is posted until the task is 100 percent complete. In Project management and accounting, you enter the end date of the leaf nodes and the planned cost for it. When the graph of planned value is displayed by week, planned value is summarized by week for all leaf node tasks for the duration of the project.

Earned value EVM theory states that the earned value plot represents the rate at which the project’s team is actually earning value on the project. AX 2012 R3 uses the 0:100 earning rule when plotting earned value. Under this rule, the value of the task is posted to the task as of its end date. No value is posted until the task is 100 percent complete. When earned value is calculated, the progress percentage of each task is considered. In the 0:100 earning rule, only tasks that are complete in a given period are considered for the calculation of earned value as of the end of that period. Earned value on the project is calculated for all tasks that are complete when the graph is created. Note: As of the AX 2012 R3 release, the system for WBS tracking does not have data structures to store historic progress percentage on each task. Therefore, earned value can be reported only as of the time that the cube is processed. Process the cube regularly to update values in the earned value data shown on the Role Center.

Actual cost EVM theory states that the actual cost plot represents the rate at which money is being spent on the project. Transactions posted to a project are used to plot the actual cost line. The costs are summarized by date. This data is then used to graph the actual costs by week or by month on the earned value chart.

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How to use the concepts of planned value, earned value, and actual cost Schedule variance During planning, you create a forecast for work on a timeline. Therefore, planned value is the rate at which project planners thought work would be completed on the project. After a project is in process, work is completed and the project earns value. By comparing planned value to earned value, you can view how work on a project is progressing. This is called schedule variance. If the planned value for a period is more than the earned value, the amount of work done on a project is less than what was planned. Therefore, the project is behind schedule. Because planned value and earned value are expressed in monetary terms, the lag time on the project is also given a monetary value. If the planned value for a period is less than the earned value, the amount of work done on a project is more than what was planned. Therefore, the project is ahead of schedule. This lead time is also given a monetary value. Cost variance Because earned value uses the cost price as the multiplier, earned value indicates the cost of the work done on the project. As a project progresses, the transaction log provides a record of money that is actually spent on the project. When you compare earned value to actual cost, you can view the amount of money being spent compared to the value earned. This is called cost variance. If the actual cost spent for a period is more than the earned value, the amount of money spent is more than what was earned. Therefore, the project is over budget. If the actual cost spent for a period is less than the earned value, the value earned was more than what was spent. Therefore, the project is under budget. The following illustration shows the earned value chart on the project manager’s Role Center.

WBS templates in AX 2012 R3 You can use the WBS templates feature in Microsoft Dynamics AX to create standard templates for projects. If your company offers projects that have significant portions of repeatable work, you should consider creating a WBS template. 13 Work breakdown structures White paper

You can create a WBS template from the WBS of an existing project, so that knowledge and best practices gathered during the planning of that project can be reused on similar projects in the future. However, sometimes, it might not make sense to save the whole WBS as a template. Therefore, you can also create templates from portions of the WBS for a project.

Saving a project’s WBS as a template The following illustration shows how to create a WBS template from the WBS of a project.

After a template has been created, it can be imported into a new project’s WBS under the root node or under any task in the project’s WBS.

Importing a WBS template into a project’s WBS When you import tasks, the tasks in the template are organized by using the start date on the task under which they are imported. During import, predecessor relationships on the template tasks are used to compute the start dates on the imported tasks. The destination project’s standard work calendar is applied to compute the end dates of the imported tasks, so that working days and standard working hours that are defined in the current project’s work calendar are retained. Cost amounts and sales prices on the estimate lines are applied to ensure that prices that are specific to the project or project contract have valid dates.

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The following illustration shows how to import a WBS template into the WBS for a project.

Differences between a project’s WBS and a WBS template • • •

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The tasks in WBS templates do not have start dates and end dates. The working and non-working days are not set for WBS templates. WBS templates always use the scheduling calendar that is set up as the default calendar for all projects. The default scheduling calendar is used only to find out hours in a standard working day. Predecessor relationships are not copied to a WBS template. Because WBS templates do not have dates, the start date logic that is based on a predecessor’s end date is not necessary. A labor cost estimate line is automatically created when a task is created in a WBS template. The sales price and cost amount are copied from the selected worker. Expense and item costs can be created manually, just as they can on a project’s WBS. Scheduling errors are displayed when there are deviations from the following formula: Effort = Number of resources * Duration * Hours in a standard working day You can correct all scheduling errors at the same time by clicking the Fix all scheduling errors button. Alternatively, you can correct scheduling errors individually using clicking the warning icon for each task.

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Work breakdown structures White paper