Training Agenda/Objectives Day 1: Cost Management Overview Understanding

Training Agenda/Objectives  Day 1: Cost Management Overview  Understanding

Training Agenda/Objectives Day 1: Cost Management Overview Understanding of why managing costs are important, Armys overall objectives, the process of Cost Management, how it differs from Budget, and key cost terms Day 2: Cost Object Definition 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.) Day 3: Assignment of Costs 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 Day 4: Analysis and Reporting 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 Understanding of the results of the Cost Model and how various types of analysis and decisions are supported Lesson 1: Exercise Lesson 2: Analysis Lesson 3: Reporting Lesson 4: Summary/Key Take-Aways

Lesson 1: Exercise Objective(s): Break out into teams Define Cost Centers/Activity Types List types of costs Identify senders (provide services) and customer (who your team provide services to) Sample Outputs Lesson 2: Analysis Objective(s): Understand different types of analysis and how reporting can support analysis Current Status W hat kin ds of an aly sis oc cur no w? S Costs Analysis Types For

ec ast ing : usi ng pri or per iod info rm atio n to pre dict fut More Costs Analysis Types Co st/ Be nef it An aly sis : An aly sis of

De cisi Analysis Supported by ERP Reporting The vario us type s of anal ysis are supp orte d by ERP repo Sample Analysis Cost Planning & Forecasting BCT w/ 58 Vehicles Planned Cost Planned Miles / Vehicle Planned $ / Mile Qtr 1 Qtr 2 Qtr 3 Qtr 4

Annual $4,872,000 $4,872,000 $4,872,000 $4,872,000 $19,488,000 200 $420 200 $420 200 $420 200 $420 200 $420 Projected Actuals Actual Cost Actual Miles / Vehicle Actual $ / Mile Cost Variance Activity Variance

Unit Cost Variance $4,060,000 $4,872,000 $6,820,800 $5,250,933 $21,003,733 200 $350 240 $350 280 $420 240 $377 240 $377 -$812,000 $0 $1,948,800 $378,933

$1,515,733 0 -$70 40 -$70 80 $0 40 -$43 40 -$43 Price Variance Quantity Variance Change in Total Cost No Change in Activity Drives Change in Unit $ Cost Variance Change in Activity No Change in Total Cost Drives Change in Unit Cost Change in Activity No Change in Unit Cost

Drives Change in Total Cost Budget Execution Before & After GFEBS Budget Management View ASN/Fund Center : Ft. Jackson Process Budget Commitment Obligation Expenditure Disbursement Available 25-Sep Budget Load $ 100,000 $ 100,000 15-Oct Pur. Req $ 10,000 $ 90,000 30-Oct Pur. Order $ (5,000) $ 5,000 $ 90,000 15-Nov Goods Rec. $ (2,500) $ 2,500 $ 90,000 30-Nov Payment $

(1,000) $ 1,000 $ 90,000 Total COED $ 100,000 Cost Management View CC/MAINT. 25-Sep Budget Load 15-Oct Pur. Req 30-Oct Pur. Order 15-Nov Goods Rec. 30-Nov Payment Total Plan/Actual/Var $ 5,000 $ 2,500 $ 1,500 Actual $

1,000 $ 90,000 Plan/Traget Variance $ 2,500 $25,000 $22,500 $ 2,500 $25,000 $22,500 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 ERP reporting supports/enahnces analysis through realtime, accurate, transparent data buolt within a common framework of definitions, business rules, and processes

Reports are generated around the type of analysis being performed Some reports within GFEBS will provide the ability to see COED as cumulative D3L2_p6 Question ERPs support analysis by (check all that apply): o Real-time, accurate data o Drill-down capabilities to generating document (e.g. transparency and audit/integrity) o Standard definitions, business rules, and methods (commonality in what the data means) o Multiple cost assignments and views o Does the analysis for you X D3L2_p6 Lesson 3: Reporting Objective(s): Understand an overview of the types of cost reports supported by GFEBS GFEBS Cost Reports for Multiple Needs Cost Report Plan Actual

Installation SSP Labor Total Cost Materials Unit Cost Supplies Contracts By Appropriation Direct Funds Reimbursements Full Cost Service Equipment Variance Cost Report Service SSP

MDEP PE Directorate etc Ft Jackson Direct Funds Mil Pay Foreign Labor Indirect Funds Overhead Ft Hood Total Cost Unit Cost Ft Sill GFEBS System Components ECC Enterprise Central Component BI Business Intelligence FI Financial Acct. & Mgmt. Cost By Report

FM Funds Acct. & Mgmt. CO Cost Acct. & Mgmt. Unit Cost Report MM Materials Mgmt. and Procurement PPE Property, Plant & Detailed Labor Report Equipment [PM, PS, RE, AA] SD Sales & Reimbursables D2L1_p11 Optimized for Data Input Transaction Processing Real-time; recon analysis Structured reporting

Optimized for Data Extraction Analytical Processing Near real-time; trending analysis Slice-n-dice reporting (pivot) Why ECC vs BI ECC: BI: Real-time Drill-down to originating document Reconciliation Period-End and year-end closing activities 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 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 obj ect has a sta nd ECC Report Capabilities Mul tipl

e Filt ers eve ry std. rep ort has mul tiple filte rs/p ara met ers, e.g. BI Report Types Sta nda rd Rep ort s mo st of the std. rep orts

with in EC C are pro vide d with in BI Reporting Capabilities Us er Def ine d Var ian ts like in EC C, use rs can defi Cost By Report Cost By Report Variables

GFEBS Sample Cost By Exportable Cost By Report for Analysis Unit Cost Report CCD Cost Model Full Cost Organizations Full Cost Product/Services SSPs Provided Director of Logistics) Full Cost Customers Cost Center SSPA: Manage OCIE Inventory Brigade XXX SSPB: Issue Cost Center/Resource Pool Military Labor

Civilian Employees Contractors Military D4L_p SSPC: Issue Clothing to Initial Training Soldier Central Issue facility Depreciation OCIE to Soldier CIV HR CNT HR MIL HR TRADOC YYY SSPD: Accept OCI Turn-Ins

SSPE: Receive & Process Shipments SSPF: Manage Chemical Defense Equipment Brigade ZZZ . . Etc. Reports provide the information of the results of the Cost Model Lesson 3: Wrap-Up There are hundreds of standard reports provides from both ECC and BI Several special reports have been generated to support Army specific needs, Cost By, Detailed Labor, Unit Cost Rate, etc. ECC and BI provide different reporting abilities Users can create their own filters, views of the data within the reports and favorites D3L2_p6 Question: _____ ECC

BI _____ ECC _____ _____ Both _____ ECC _____ ECC _____ BI BI _____ 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): Highlight the most important concepts addressed throughout the training Need to Understand What the Resources Buy The Army Product Sets Framework for

Developing Army-wide Cost Structure X X X Heavy X X UA Light SUST Stryker X SUST FCS Force Generation $ to Reset $ to Train $ to Deploy

Training (Ind) $ / Student Trng Day $ / Course Day Base Support Training (Unit) $ / Mile $ / Flying Hour $ / Weapon System Personnel $ / Service Military -$ / Soldier $ / Brigade Civilian - $ / FTE $ / Installation (SRM, BOS, Contractor - $ / FTE ENVR, FP) D4L_p Equipment $ / Brigade- New $ / Brigade-Conversion Ratio: Sppt $ / Brigade $ Management Domains Budget Management Financial Management Inputs

Conversion Work Outputs Cost Management All business operations, regardless of industry or function, require the conversion of inputs into the outputs of the organization Budget Management provides authority and control of the conversion activity in order to provide the agreed upon outputs of the agency (primarily input focused) 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 D4L_p Cost Management 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 Accounting Cost Planning Cost Management Process Cost

Controlling D4L_p Cost Analysis Army Cost Culture Change Making a Square a Circle A Culture of Influence A Culture of Entitlement Budget-focused Spend rate driven inputs Performance objective 99.9% obligated Free goods has infinite demands Develop/Recruit Analysts Enhance Training Performance Focus (NSPS) Policy How Tos Process Improvement (Lean 6-Sigma) Integrated Business Design Results driven - output & outcome

Performance objective resource consumption optimization (efficiency & effectiveness) Use what is necessary to obtain the objective ERP Applications e.g. (GFEBS, LMP, GCSS) Business Warehouses Executive Scorecards D4L_p Cost and performance focused Enablers of Change Enhanced Ability to Capture Cost Organizational Entities Cost Objects GFEBS (SAP) Cost Centers Cost Collectors Installation Brigade School Directorate Lab Army Examples

X X Real Property / Equipment Program / Project Task / Activity Special Event or Initiative Assets / Real Estate Objects Project / WBS Business Process Internal Order Building Training Range Weapon System Acquisition RDTE Project MILCON Project System Test Service Support

Program (SSP) Instructional Course Repair Process Test Run BRAC Training Event Mandatory Training Support to Olympics Cost assigned Directly or Indirectly X Heavy X X UA Light SUST Stryker X SUST FCS

Force Generation $ to Reset $ to Train $ to Deploy Training (Ind) $ / Student Trng Day $ / Course Day Training (Unit) $ / Mile $ / Flying Hour $ / Weapon System Base Support Personnel $ / Service $ / Brigade $ / Installation (SRM, BOS, ENVR, FP) Military - $ / Soldier Civilian - $ / FTE Contractor - $ / FTE D4L_p Equipment $ / Brigade - New $ / Brigade - Conversion Ratio: Sppt $ / Brigade $

Customer / Product Brigade Weapon System PEO / PM Tenant Command Course CCD Cost Model Full Cost Organizations Full Cost Product/Services SSPs Provided Director of Logistics) Full Cost Customers Cost Center SSPA: Manage OCIE Inventory Brigade XXX SSPB: Issue Cost Center/Resource Pool Military Labor Civilian Employees

Contractors Military D4L_p SSPC: Issue Clothing to Initial Training Soldier Central Issue facility Depreciation OCIE to Soldier CIV HR CNT HR MIL HR TRADOC YYY SSPD: Accept OCI Turn-Ins SSPE: Receive

& Process Shipments SSPF: Manage Chemical Defense Equipment Brigade ZZZ . . Etc. Results of the Analysis Workshops are aggregated and utilized to generate the Cost Model Costing Conceptual Design Full Cost Organizations Full Cost Product/Services Full Cost Customers SSPA: Director of Logistics)

Manage Brigade XXX OCIE Inventory SSPB: Issue OCIE to Soldier Military Labor Central SSPC: Issue TRADOC Clothing to Initial Training Soldier YYY Issue facility Civilian Depreciation CIVHR SSPD: CNTHR SSPE:

Military Labor Accept OCI Turn-Ins Employees Contractors What/Why information is entered, stored, used, and presented Receive Brigade ZZZ & Process Shipments MILHR SSPF: Manage Chemical Defense .. Equipment Etc.

Cost Accounting Cost Cost Planning Management Cost Analysis How the information is entered, stored, used, and presented Process Cost Controlling End User Presentation Layer D4L_p Publi c Sect or Budget Accounting Where the information is entered, stored, used, and presented 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 crossfunctional (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. D4L_p

Cost Allocations/Assignment Direct Activity Allocation - The direct recording and posting of either an activity type (resource driver) or a process (activity driver) quantity. This method is a direct charging of the quantity to the receiver. Assessment Cycle - A value-based allocation method that uses an aggregate account to move both primary (G/L accounts) and secondary cost elements (internal allocation accounts) between senders and receivers. Distribution Cycle - An allocation method that allocates cost in the original detailed account structure and is only available for primary costs movements. Indirect Activity Allocation - The allocation of quantities (rather than dollars) using 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. Target = Actual The imputed output quantity of one driver based on another and posts quantities with their corresponding values. The relationship is defined through planning rather than a cycle. Template Allocation - A tool that facilitates simple to complex assignments of costs between cost objects using Boolean (IF-THEN) logic. Used to establish a quantitybased relationship between these types of cost objects for allocations to be made based on operational metrics in a timely manner. Overhead Costing Sheet - A costing sheet is an allocation mechanism for associating costs to a receiver based on static business rules D4L_p Cost Management Enables

Optimization Providers/Inputs relating Outputs/Consumers Cost of Brigade HQDA Military Pay Contracts (CLS) Direct assign Weapon Sys $ (VAMOSC) $ $ $ $ $ Army Service Component Commands Direct Reporting Unit Army Commands Unit Training Ground OPTEMPO

Installation SSP1 (Labor Tracking) School Training Initial Entry Equip the Force Acquisition Direct assign $ assign $ $ Direct GFEBS enables Army to slice and dice data for decision-making $

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