Turnaround and Project Procurement: Pt. 3

This is the third in a series of four blogs on turnaround and project procurement using SAP. To start with the first post, click here.

In the first post we looked at the challenges facing the turnaround and capital project supply chain. In the second post we looked at how to transform a typical turnaround and project supply chain away from free text material requisitions and onto cataloged material masters.
SAP cannot store text purchases as inventory and assumes that the material is installed immediately upon goods receipt. This is not the case with turnarounds and projects, unless we are looking at repair work occurring during the execution phase.

The challenge is to switch to material masters for every single item purchased during the planning phase (it is perfectly OK to use text PR's during the execution phase).
To support this fundamental transformation, tools and processes need to be implemented to support a 24-hour turnaround of all material requests.

Now that we have adopted material masters for all project materials, the next question is how to manage these materials inside SAP?
We have two options:

1) Plant Stock
2) Project Stock

Plant Stock uses Reservations and MRP to fulfil the demand generated from the work orders. This is no different to Routine Maintenance. The process is simply extended to support turnarounds and project materials.
Planners get to see the procurement lifecycle in real time, from Material Component to Reservation through MRP to Goods Receipt and ultimately Goods Issue.
Because the work order and material reservation are now linked, we can now track the progress of the work order through material issue; all the way to closing the order. This is important because it allows us to 'close-the-loop' and avoid generating a stock surplus at the end of the event.
The benefits of Plant Stock are numerous, for example it is the same process as used for Routine Maintenance, so no additional training or system support is required. Materials are visible as inventory and can be 'bagged+tagged' to an equipment or work package.
The accountants are happy too, as they can track the material costs as inventory until they are installed at the work site.

However there is one major downside to Plant Stock, and that is that the material is unrestricted, meaning anyone can issue it. This can happen by accident, because the materials show up as available stock. Indeed, it's just too convenient for maintenance or project planners to use the available stock and rely on MRP to replenish in time.
This brings us to the second option - Project Stock.

Project Stock was born from the need to restrict project materials so they were not available to everyone. Project Stock materials are assigned to a WBS element, even if ordered through a work order.
Consequently, the material could only be issued to work orders with that WBS element in the account assignment (Additional Data Tab). Furthermore, these materials did not show up as unrestricted stock in the system, so planners were unaware of their existence.

Project Stock sounds too good to be true. It is easily configured and is very robust. But there are down-sides. The biggest issue encountered by Project Stock is actually a symptom of recent changes in turnaround planning.
For years the scope of a turnaround would rarely change. But with COVID, cash flow and accountants became the ultimate scope controllers. If a unit could be moved to a later date, cash flow was reduced and cash preserved. A very important metric over the last few years.
If you happen to have a single PS Project covering your turnaround event, and a unit is pushed out to a later data, you now have to extract that scope from the WBS structure and move it to a new project.
This is either very difficult or impossible, depending on how your SAP system is configured. The worst case scenario is that you will need to move all project materials associated with that unit back into the main warehouse (unrestricted stock), then create new work orders and re-assign the materials back to the new work order / WBS element combo.
The less customization you have inside your SAP system, the easier it is to move project materials from one event to another.

Whilst SAP PS Module configurations vary from company to company, we always advocate Project Stock as the preferred approach because of the built-in restriction safeguards.
In our long experience we have always managed to figure out a way to make it work, although keeping your SAP environment as standard as possible makes this job a lot easier.

In the final post in this series we will summarize all the learnings from the previous posts and categorize companies into one of three project procurement maturities.