SAP Enterprise Asset Management (EAM) Benefits

The latest water cooler talk at HPC was about Enterprise Asset Management. By combining elements of Plant Maintenance, Project Systems, Materials Management, and Warehouse Management, SAP EAM enables utilities to realize much higher productivity from PM orders compared to Internal Orders. After setting up a Functional Area hierarchy and identifying the location of all assets, utilities can create orders more efficiently via notifications (what we'd call a "pre-order"). So if the inspection of a pump, for example, identifies necessary corrective maintenance work, the order for that work can be created automatically. Tight integration with the MM module, plus records of prior labor and parts history, also mean that repair kits with all relevant parts can also be identified easily.

For utilities that are considering transitioning from their legacy CMMS to SAP EAM, we would make two particular recommendations. First, ensure that your project team includes subject matter experts from Engineering, Construction, Generation, Transmission and Distribution Maintenance—that is, the people who know what it takes to fix things that break. Their knowledge and requirements will ensure the success of the initiative beyond the needs of IT and Finance. Second, conduct a thorough review of all equipment so that nothing is inadvertently left out of Plant Maintenance. For selected assets, seriously consider bringing in a year or two of work history from the external CMMS.

Document Splitting and the Balance Sheet in SAP New GL

In all of our previous posts about the SAP New General Ledger, we've only looked at P&L accounts.  But what about the balance sheet? Using the New GL will eliminate either the accounts approach or the company code approach to IFRS compliance using SAP. A somewhat complicated feature is the use of document splitting, which we'll touch on next.

Let's suppose a vendor is paid with invoice line items charged to both generation and transmission on the same invoice, but with only one offset to the vendor account on the balance sheet. Using document splitting, the offset account charged to accounts payable is allocated or "split" between the generation and transmission lines. So, if $300 is charged to generation and $500 charged to transmission on the same invoice, the offset for the total of $800 is split to "follow" the P&L accounts that were charged originally.  By doing this split, separate balance sheets can be generated for each segment (i.e., generation and transmission) below the company code level. This will save time during document entry, as the preparer doesn't have to be affected by a process change. An employee in Accounts Payable doesn't change his SAP business process. Rather, in the background, SAP will split the transactions entered to create the separation by segment.

Document splitting can be a complicated undertaking and shouldn't be conducted without ample testing. In fact, a utility's New GL conversion scenario should consider the impact of document splitting when determining a migration data and activation date. Since most large utilities can have thousands of open items during a New GL migration, it is suggested—and we highly recommend—to set an activation date as close to the migration date as possible to limit the amount of documents (and line items) that will need to be split.

New SAP for utilities email newsletter

We've just launched an email newsletter for SAP for utilities professionals to get our latest news and insights. We'll send periodic product updates, customer case studies, white papers, and other tips and tricks on regulatory reporting and enhancing SAP for utilities. We won't share your personal information with anyone outside HPC, and you can unsubscribe at any time.  Subscribe to our email newsletter online.  If you have any requests for content that we cover, please let us know.

SAP New GL and Cost Models

We've commented before about the increasing interest we're seeing from utilities in migrating to the SAP New General Ledger. In the context of SAP's recent announcement that ECC 6.0 will be supported until 2020, we expect to see even more interest—and action—since utilities are under no immediate pressure to upgrade. Instead, they can focus on a New GL migration independent of future upgrade plans.

That said, we also notice that some utilities are focusing almost exclusively on the migration itself, and not enough on their underlying cost model. Some aren't thinking about it at all, while others separate, uncoordinated initiatives in the works. This is a serious mistake. Not to discount the care with which a New GL migration must be undertaken, but it's essentially a technical procedure that can be handled smoothly with proper preparation and coordination with SAP. In contrast, there is far greater benefit potential from reassessing the cost model and transitioning from a cost center-centric to order-centric model—in other words, abandoning the approach adopted during 1990's deregulation, and going back to what most utilities did in the 70s and 80s (when they had no choice and regulation was the only business model). Here are a few quick reasons why this makes so much sense:

1. Cost-centric models are ideal for what we think of as the trifecta of utility financials: budgeting, regulatory reporting, and possibly in the near future, IFRS.


2. Using the order as the central point means evaluating activity type pricing and unbundling rates, such that the cost of labor going into each order is very close to the actual rate of pay.


3. By documenting secondary costs in each order, they'll be fully supported and enable easier cost recovery. They will, as we like to say, provide one version of the truth.

We'll revisit this topic in November to discuss some realistic approaches to a managing a cost model project in conjunction with a New GL migration.

Mapping SAP New GL for FERC

Expanding on our post last month about the New GL and FERC data, today we're going to look at mapping the New GL for FERC, a serious consideration for utilities that are evaluating an SAP New GL migration. One immediate challenge is that all CO transaction codes for secondary movements have a single general ledger account assignment in the New GL. That would seem to be a limitation at first. Rather than focus on the GL account, however, a utility could use a pass-through GL account assigned to all secondary CO transactions, and then use SAP's functional areas to map to specific, four-digit FERC chart of account values.

Here's a practical example.  Let's say an internal order has primary costs of $100 and secondary costs of $30.  Both the primary and secondary costs are assigned the functional area of "583.0 Distribution Operations-Overhead Lines Expense." This could be shown (in an abbreviated way) as functional area "583.0 DM-Lines." We would then use a BAdI to add a long description through the New GL's extensibility features. The result of this functional area assignment is the posting to the correct FERC account via the CO object mapping. What's more, should the utility want to override the assigned functional area, it could simply change it during document entry. This flexibility would give corporate accounting the option to assign any natural account to any FERC account—with appropriate authorization and controls, of course.

Utilities looking to separate the core functions of supply, generation, transmission, and distribution into segments should also consider activating profit center accounting and segmentation.  Since most utilities running FERC have already assigned regulatory indicators to CO objects such as PM and internal orders, these existing assignments could be used to load the initial functional areas using our FERC conversion BAdI described above. In some cases, there might be thousands of CO objects to be mapped to functional areas.  Leveraging the existing regulatory indicators would make the conversion effort far less daunting a task than mapping each one individually.

Since segments are derived from profit centers, and profit centers are derived from CO objects, the building blocks would already exist to determine the correct segments.  For a utility wanting to convert to IFRS, we could consider segments to be equivalent to traditional lines of business. The CO design in place may already use assessments or settlements to determine the line of business. Given that, it would be important not to start from scratch, but rather to build on the current design and leverage the links already developed in the cost flow model in CO.

Mobility and SAP for Utilities

As signposted in the first day's keynotes, mobility was a recurring topic during the 2011 SAP for Utilities conference in San Antonio. Deloitte's Lee Ditmar and Mark White presented a well rehearsed message (and super slick Keynote deck) about going beyond the "veneer" of mobility to offer new operating models and services—plus including other information workers in addition to field teams alone. Again, this sounds terrific but highly aspirational; we'll be giving further thought to practical, real world examples that utilities would actually consider implementing. In fact, we'll be doing this next week at Sonoma County Water Agency, as part of our Fleet Management project.

Other notable take-aways: Mark's advocacy of single task-oriented mobile apps that deliver obvious results is another valuable best practice. And we also liked their characterization of descriptive, predictive, and prescriptive analytics—a good framework in which to think about data and actionable behavior in the workplace.

Conveniently enough, Adolf Alesch from IBM closed the loop on some of this theory later on in the conference with his presentation on Mobility Moments℠. He gave a great example of a mobile app that would enable a field team to photograph a transformer, for example, and connect the image and related GIS data to the SAP Asset Master in order to get real-time maintenance records. This "augmented reality" scenario combines a utility's system of record with its system of engagement to generate greater efficiency and better customer service.

GIS and SAP for utilities - MTEMC and Aquarion Water

Building on last year's great presentation by the City of San Diego, the 2011 SAP for utilities conference included several new examples of GIS' positive impact on utilities' operations and customer service. Middle Tennessee Electric Membership Cooperative (MTEMC) spoke about their integration of GIS and SAP EAM, in which they use GIS for design and SAP for orders, accounting, Compatible Units, and materials. This configuration allows engineers to work more efficiently by staying in GIS instead of switching frequently between the two applications.

MTEMC focused on automating work orders and pick-lists for construction projects; automating fixed asset and expense accounting for GIS-generated projects; and standardizing order create, time and cost collection, and project accounting. By starting with these core elements—for example, two work order templates to cover simple jobs and complex projects‐MTEMC was able to eliminate data chasing and deliver automated, real-time views of inventory. Amidst all of the technical explanations and ambitious goals, Chip Pinion gave a little reality check by noting that, "Linemen want to be linemen, they don't want to work on computers."

Another good example of GIS and SAP was presented by Mark Fois from Aquarion Water, which uses GIS to note critical customers that can be seriously impacted by scheduled maintenance and unplanned events, such as main breaks. Aquarion uses GIS to map designated customers, such as schools, hospitals, and toxic chemical-producing businesses such as hair salons, and keeps this data fresh by contacting customers annually and updating records when move-ins and move-outs occur.