Ariba Implementation at MED-X: Managing Earned Value Case Study

By Team 4:

Yu Wang

Sijia Zhang

Lingling Ye
Executive Summary

Implementation Technologies was chosen by MED-X Inc. to implement the Ariba e-

procurement solution. The project started on May 1st, 2001, successfully went through CPR which

was scheduled on June 25th. However, it was clear by September 1st that the project could not be

delivered on October 1st. Martin, the consultant could not figure out what went wrong by studying

the project schedule so that he decided to check the earned value. There were two major

components that went through the critical path which are technical infrastructure and software

customization. The earned value chart showed that things went well for software customization

but went wrong from June for technical infrastructure as both over budget and behind schedule. It

was estimated for another 10 days to be delivered. Possible delays could be from part-time staff

off duties early in the project, equipment showed up late at the end of June, part of the system

testing was scheduled late in July, and some bias from designed in the testing. Martin should have

reported these troublesome events early in the project when he was aware of them. He could have

managed earned value from the beginning of the project so that he could address these issues

earlier. And there are some lessons he could learn from this project to prevent similar issues from

developing when managing future projects.

Statement of the Problem

The project Ariba Implementation at MED-X was undertaking while the CIO, Terry Baker,

found that the system may not be able to deploy on time when there was only one month before

the end of the project. Martin, the project manager, though checked the Gantt chart, did not figure

out what exactly should be responsible for the delay. He figured that possible issues that could be

responsible for the delay were: The part-time MED-X staffer pulled off the project at the very
beginning, Sun server equipment showed up late, legacy data interfaces setup was scheduled late,

and several things were not working as designed. He decided to check the earned value finally.

Through our study, we need to figure out what was going wrong by studying the earned

value of two major components on the critical path. Our major goal is to figure out at what time

and of which component things went wrong and how much longer it would take to deliver the

project. And also, what Martin should have done earlier to prevent delays as well as what he should

do when managing future projects to prevent similar problems from developing.

Background

MED-X, a rapidly growing company, could earn benefits from implementing the Ariba

Buyer solution which would encourage nationwide compliance, maximize purchasing power and

reduce costs and times. And, MED-X chose Implementation Technologies because it had

successfully implemented Ariba for the other five pharmaceutical companies. The company

Implementation Technologies designed the plan for this project including the project timeline,

project objectives, project scope, and other requirements. Both Implementation Technologies and

MED-X provided individuals to staff the project. Some of them assisted on an as-needed basis and

some were staffed part-time. Martin, the project manager, was responsible for the whole project

management and leadership with the help of technical, functional and supplier leads. Problem

raised as the project could not be delivered on time. Internal factors including the part-time MED-

X staffer pulled off the project at the very beginning and legacy data interfaces setup was scheduled

late, as well as external factors such that several things were not working as designed in the testing

and Sun server equipment showed up late were responsible for the delay.
 To figure out what went wrong, as Terry Baker, the CIO of MED-X, mentioned, checking

the earned value would be helpful. We need to analyze and calculate the gap among planned value

to the project, the actual cost to date and the earned value to date. By studying the earned value,

we can figure out what time and which component should be responsible for the delay and how

much longer we still need to complete the project.

Methodology

Earned value analysis (EVA) is a systematic approach to the integration and measurement

of cost, schedule, and technical (scope) accomplishments on a project. Using the EVA we will

estimate when and where the above problems occurred. From the information given by the case

we can calculate the:

(a) SV (Scheduled Variance): It represents whether the events are ahead or below the

schedule. If SV is positive, then the event is above the schedule and is below if it's negative.

(b) SPI (Schedule Performance Index): It represents how much actual work is done in

comparison to the planned schedule.

(c) CV (Cost Variance): It represents the relation between the amounts of work

accomplished to the resources allocated. A positive CV indicates that work accomplished costs

less resource expenditure than planned and a negative one indicates the opposite.

(d) CPI (Cost Performance Index): It represents the amount of work being completed on a

project for every unit of cost spent.

 (e) CR (Control Ratio): It is the product of SPI and CPI, which gives an idea of how much

work is done compared to both time and cost.

Results

Through the calculation of EVA, we can know that the Technical Infrastructure is

underperforming, and Software Customization is within budget. And the project will take more

than 10 days.

First, Exhibit 1 shows that, for the Software Customization component, the SV for six years

is all positive, and the average is $53,538, which means all events within this component are ahead

of schedule. Exhibit 2 demonstrates that SPI is greater than 1 and the average amount is 109.21%

that is to say, more work is done than scheduled. As for the Technical Infrastructure component,

the SV is negative and SPI is less than 1 except for May, that is to say, this project is behind

schedule and they have done less work than scheduled, the average for six months is -$44,333 and

93.57% respectively.

Next, what we can know from the Exhibit 3 and Exhibit 4 is that for the Software

Customization component, the CV and CPI are also good, which explains this work is

accomplished for less resource expenditure than planned. For the Technical Infrastructure

component, the average CV is -$58,417 and the average CPI is 90.95%, which means this project

spent more cost than planned.

Then, for combined projects, the average of SV and CV are both positive, and the SPI and

CPI are more than 1, which is because the excellent performance of the Software Customization

component compensates for the underperformance of Technical Infrastructure component. But

from the SV and SPI of Technical Infrastructure in September, we can deduce that this overall

project was behind the schedule.

Last, due to the delays in the development of the Technical Infrastructure, the project will

run 10 days (round by 9.12 days) over if no adjustments are made. This can be calculated by

dividing the number of planned days until now, 153 days (=31+30+31+31+30), by the scheduled

performance index, which is .9437 at the end of September. All the numbers we used are from

rolling ratios in September for Technical Infrastructure components, because we think that these

two components are independent of each other, the delay is caused by the Technical Infrastructure

only.

Conclusions and Recommendations

Problems addressed from the Ariba implementation at MED-X project are common in the

IT field. Similar issues happen all the time but often are not recognized at an early stage. Managing

earned value is a proficient method of tracking both costs and schedule. It should be conducted in

all projects for them to be delivered successfully. In this project, Martin should have followed both

the Gantt chart and the earned value analysis to have everything on track and identify potential

problems. And to avoid issues learned from this project in the future, Martin could get all

individuals availability and plan accordingly in case of part-time staff’s unavailability or other

similar events; He could schedule all events carefully and better have some buffer; He could avoid

any delays of materials by confirming with the suppliers in advance; And he could react more

quickly to changes like the bias between designed and actual. To conclude, potential issues of

projects can be prevented by managing earned value and utilizing other tools of project

management.
Appendix

Exhibit 1.

Exhibit 2.
Exhibit 3.

Exhibit 4.
 References

Jeffery, Mark & Norton, Joseph. Ariba Implementation at MED-X: Managing Earned Value.