AAOM Handbook

resources will be visible through the supply system of the ERP and the historical costs of these resources will be visible through either work order or cost collector records in the ERP. Resources such as labour and equipment are continually reassigned to new work in a schedule and an ERP utilises the concept of a Work Centre to manage these. A Work Centre resource simply represents the capacity of a particular resource that can be assigned to a schedule (e.g. a mechanics for B hrs, C 100t trucks for D hrs). Where Work Centre costs are required to be quantified and/or charged to specific work activities an ERP cost collector will be created, for the Work Centre, in the ERP. The cost centre can be used identify the cost and pricing of the Work Centre resource, and where charge out rates are applied to a Work Centre resource the work order records can be used to identify historical Work Centre resource quantities and costs for the work. The significant set of Resource Types used within an EPS (those that make up >90% of the total costs) should be individually and accurately estimated for the appropriate Activities. The remaining resource costs cannot be ignored in the EPS, and should be estimated against the appropriate Activities, but can be grouped into a general cost classification rather than individually identified. The estimates for Work Centre Resource Type quantities can be used in the EPS model to forecast the distribution of Work Centre demand over time. The parameters of this distribution can be used to set the fixed capacity for a work Centre as well as guiding the selection of an appropriate strategy for dealing with the variable element of demand (e.g. overtime, over-resourcing, contracting, etc).

The ExPenditure Schedule will be based on the fully costed OMS for the process.

Purpose

To specify the expenditures required for the Operating Master Schedule.

Quantity

The deliverables from setting ExPenditure Schedules shall include; • specification of the Resources Types required to cost the OMS, • the cost estimate for each non Work Centre Resource Type for each OMS/EPS Activity, • the quantity and cost estimate for each Work Centre Resource Type for each OMS/EPS Activity, • an estimate for the Minimum, Most Likely and Maximum total cost estimates for occurrences of an Activity, • one estimate of the probability distribution for the expenditure outcomes for each Expenditure Schedule. • one confidence level for the 'most likely' Expenditure Schedule total. • one estimate of the ‘contingency’ value necessary to achieve the confidence levels specified for the process expenditure target, • the forecast of distribution of demand for each Work Centre Resource Type over time,

© McAlear Management Consultants 2006

Operational Planning: Set Expenditure Schedule

Updated: August 2018

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