for the subject offered in GTU in the final year (8th semester), construction management final year Module:- 8 material management

1. By:-
Mr. Karm P. Balar
Asst. Professor
CED,SSASIT
Construction Management
Mod: 8:-Material Management

2. Introduction
Materials management functions
Inventory management
Inventory control
Job layout
Contents

3. INTRODUCTION
• Important function for improving productivity in construction projects.
• The management of materials considered at all the phases of the
construction
• poor MM can affect construction time, quality and budget.
• planning and controlling of materials MUST BE NEED for right quality and
quantity of materials.
• The goal is materials are available at their point when needed.
• The materials management system insure that the right quality and
quantity of materials selected, purchased, delivered, and handled
onsite in a Timely manner and at a reasonable Cost.

4. DEFINITION OF MATERIAL MANAGEMENT
 Material management is defined as planning, identification,
procuring, storage, receiving and distribution of materials. The
purpose of material management is to assure that the right
materials are in the right place, in the right quantise when
needed.
 The responsibility of material management department for the
flow of materials from the time the materials are ordered,
received, and stored until they are used in the basis of material
management.

5. AIM
To get @ The
Right quality To get Right
quantity of
supplies To get @ the
Right time
To get @ the
Right place
To get @ the
Right cost
OBJECTIVE
Primary objectives Secondary objectives

6. objectives
Primary Objectives
Low Prices
Lower
Inventories
Reduction in
Real Cost
Procurement
of Quality
Materials
Efficient
handling of
Materials
Make or Buy
Decisions
Regular
Supply
Locating &
developing
future
Executives
Secondary Objectives
Reciprocity Standardisation
New
Developments
Assistance to
Production
department
Co-operation
with other
departments
Conception of
future outlook

7. 1) Material Planning & Budgeting
2) Storage Of Materials
3) Inventory Control
4) Material Handling & Transportation
5) Disposal Of Scrap
6) Purchase Analysis & Research
7) Material Planning And Programming
8) Purchasing And Outsourcing
9) Standardization And Evaluation Of All
Products
10) Transportation And Material Handling
11) Inspection And Quality Control
12) Cost Reduction Through Value Analysis
13) Disposal Of Surplus / Obsolete Material
14) Distribution
15) Inventory Control
16) Storekeeping And Warehousing
Function of material management are…

8. 1. Materials Planning
2. Procurement
3. Custody (Receiving, Warehousing and Issuing)
4. Materials Accounting
5. Transportation
6. Inventory Monitoring and Control
7. Materials Codification
8. Computerization
9. Source Development (Vendor Development)
10. Disposal
Materials management functions

9. Classification of Construction Material
Material Type Details Example
Bulk materials
Materials that are delivered in mass and are
deposited in a container.
Sand, Gravel, Topsoil,
Cement, Concrete
Bagged materials
Materials delivered in bags for ease of
handling and controlled use.
Cement
Palleted materials
Bagged materials that are placed in pallets
for delivery
Cement, Doors
Packaged materials
Materials that are packaged together to
prevent damage during transportation and
deterioration when they are stored.
Pipes, Tiles, Electrical
Fitting

10. Material Bulk Bagged Pelleted Packaged Loose
Sand X
Gravel X
Topsoil X
Paving Slabs X
Timber X
Cement X X X
Concrete X
Pipes X X
Tiles X
Doors X
Ele. Fittings X

11. INVENTORY MANAGEMENT

12. The term INVENTORY is defined as “the systematic
control and regulation of purchase, storage and usage
of materials in such a way so as to maintain an even
flow of production and at the same time avoiding
excessive investment in inventories.”
12

13. Costs Associated With Inventory
• Purchase (or Production) cost
• Capital cost
• Ordering cost
• Inventory carrying costs (holding costs)
• Shortage cost
13

14. Objectives of Inventory Control
 To ensure that the supply of raw material & finished goods will
remain continuous so that production process is not halted and
demands of customers are duly met.
 To minimise carrying cost of inventory.
 To keep investment in inventory at optimum level.
 To reduce the losses of theft, obsolescence & wastage etc.
 To minimise inventory ordering cost.

15. Inventory Management flow cycle
Raw Material  InspectionMoving Processing  Setup Final
Product
15

16. TWO BIN SYSTEM – A INVENTORY POLICIES

17. Commonly adopted inventory-control
policies

18. V-E-D Classification
• V-Vital :Items without which the activities will come to a
halt.
• E-Essential :Items which are likely to cause disruption of
the normal activity.
• D-Desirable :In the absence of which the hospital work
does not get hampered.
18

19. 19

20. H-M-L Classification
• Similar to A-B-C analysis. But it doesn't depend on annual
consumption. The items listed out in decreasing order of
unit value.
H-High
M-Medium
L -Low
20

21. F-S-N Classification
• Takes into account the distribution and handling
patterns of items from stores.
• Important when obsolescence is to be controlled.
F – Fast moving
S – Slow moving
N – Non moving
21

22. 22

23. • ‘F’ items are those items that are fast-moving—i.e., in a
given period of time, say, a month or a year, they have been
issued a number of times.
• ‘S’ items are those items that are slow-moving—in the
sense, in a given period of time they have been issued in a
very limited number.
• ‘N’ or non-moving items are those that are not at all issued
for a considerable period of time.
FSN Analysis

24. S-D-E Classification
• Based on the lead-time analysis and availability.
S – Scarce: longer lead time(imported)
D – Difficult : long lead time(indigenous)
E – Easy : reasonable lead time
The items coming under S class are imported items, hence
it has to be purchased once in a year or it may be an item
which is not easily available in market.
24

25. S-O-S Classification
• S-O-S :Seasonal- Off- Seasonal
• Some items are seasonal in nature and hence require
special purchasing and stocking strategies.
• EOQ formula cannot be applied in these cases.
• Inventories at the time of procurement will be extremely
high.
25

26. G-O-L-F Classification
• G-O-L-F stands for:
G – Government
O – Ordinary
L – Local
F – Foreign
26
X-Y-Z Classification
• Based on the value of inventory stored.
• If the values are high, special efforts should be made to
reduce them.
• This exercise can be done once a year.

27. analysis
27

28. ABC Analysis
 The ABC (Always Better Control) inventory control technique is
based on the principle that a small portion of the items may typically
represent the bulk of money value of the total inventory in
construction process, while a relatively large number of items may
from a small part of the money value of stores.
 The money value is ascertained by multiplying the quantity of
material of each item by its unit price.

29. ABC Classification System
Classifying inventory according to annual value of consumption of
the items.
A- very important
B- mod. important
C - least important
Annual
value
of items
A
B
C
High
Low
Few Many
Number of Items
29
 The Pareto principle states that 80% of the total material cost
(overall consumption value) is based on only 20% of items.

31. Procedure for ABC Analysis
• Make the list of all items of inventory.
• Determine the annual volume of usage & money value of each item.
• Multiply each item’s annual volume by its rupee value.
• Compute each item’s percentage of the total inventory in terms of
annual usage in rupees
• The relative position of these items show that items of category A
should be under the maximum control, items of category B may not
be given that much attention and item C may be under a loose
control.

32. What is ABC analysis?
ABC analysis is an inventory categorization method which consists in
dividing items into three categories (A, B, C):
A being the most valuable items,
C being the least valuable ones.
This method aims to draw managers’ attention on the critical few (A-
items) not on the trivial many (C-items).
(ABC = Always Better Control)
This is based on cost criteria.
About 10 % of materials consume 70 % of resources
About 20 % of materials consume 20 % of resources
About 70 % of materials consume 10 % of resources
32

33. Small in number, but consume large amount of resources
Must have:
Tight control
Rigid estimate of requirements
Strict & closer watch
Low safety stocks
Managed by top management 33

34. ‡
Moderate control
Purchase based on rigid requirements
Reasonably strict watch & control
Moderate safety stocks
Managed by middle level management
34

35. Larger in number, but consume lesser amount of resources
‡
Must have:
Ordinary control measures
Purchase based on usage estimates
High safety stocks
‡
ABC analysis does not stress on items those are less costly but may be
vital
35

36. The ABC calculation
The annual consumption value is calculated with the formula:
(Annual demand) x (item cost per unit)
Through this categorization, the supply manager can identify inventory
hot spots, and separate them from the rest of the items, especially
those that are numerous but not that profitable.
36

37. Example 1
Percentage of
items
Percentage value of
annual usage
Class A items About 20% About 80%
Close day to day
control
Class B items About 30% About 15% Regular review
Class C items About 50% About 5%
Infrequent
review
37

38. Step 1
Calculate the total spending per year
Item number Unit cost Annual demand Total cost per year
101 5 48,000 240,000
102 11 2,000 22,000
103 15 300 4,500
104 8 800 6,400
105 7 4,800 33,600
106 16 1,200 19,200
107 20 18,000 360,000
108 4 300 1,200
109 9 5,000 45,000
110 12 500 6,000
Total usage 737,900
Total cost per year: Unit cost * total cost per year
38

39. Step 2
Calculate the usage of item in total usage
Item number Unit cost Annual demand Total cost per year
Usage as a % of
total usage
101 5 48,000 240,000 32,5%
102 11 2,000 22,000 3%
103 15 300 4,500 0,6%
104 8 800 6,400 0,9%
105 7 4,800 33,600 4,6%
106 16 1,200 19,200 2,6%
107 20 18,000 360,000 48,8%
108 4 300 1,200 0,2%
109 9 5,000 45,000 6,1%
110 12 500 6,000 0,8%
Total usage 737,900 100%
Usage as a % of total usage = usage of item/total usage 39

40. Step 3
Sort the items by usage
Item
number
Cumulative
% of items
Unit
cost
Annual
demand
Total cost per
year
Usage as a %
of total usage
Cumulative % of
total
107 10% 20 18,000 360,000 48,8% 48,8%
101 20% 5 48,000 240,000 32,5% 81,3%
109 30% 9 5,000 45,000 6,1% 87,4%
105 40% 7 4,800 33,600 4,6% 92%
102 50% 11 2,000 22,000 3,0% 94,9%
106 60% 16 1,200 19,200 2,6% 97,5%
104 70% 8 800 6,400 0,9% 98,4%
110 80% 12 500 6,000 0,8% 99,2%
103 90% 15 300 4,500 0,6% 99,8%
108 100% 4 300 1,200 0,2% 100%
Total usage 737,900 100%
40

41. Step 4
Results of calculation
Cathegory Items
Percentage of
items
Percentage
usage (%)
Action
Class A 107, 101 20% 81,6% Close control
Class B
109, 105, 102,
106
40% 16,2%
Regular
review
Class C
104, 110, 103,
108
40% 2,5%
Infrequent
review
41

42. Conclusion
• The boundary between class A and class B might not be as sharply
defined;
• The purpose of this classification is to ensure that purchasing staff use
resources to maximum efficiency by concentrating on those items that
have the greatest potential savings → selective control will be more
effective than an approach that treats all items identically.
42

43. The ABC analysis can be also be useful in several steps of the Sourcing
Value Chain:! Demand Identification, to gather the annual spend of a
site! Demand Aggregation, to gather the annual spend of several sites!
Opportunity Assessment, to identify leveraging opportunities.
‡
The ABC tool is used to identify the vital few from the trivial many,
according to a defined set of criteria.
‡
Different decisions may be taken from the result of the ABC analysis.
43

44. It gets harder to do correctly the longer you do them.
Needs to be completed in the moment for the most accuracy.
Still might reflect the biases of the data collector.
44

45. EOQ model
45

46. INTRODUCTION
Economic Order Quantity Is The Number Of Units That A
Company Should Add To Inventory With Each Order To
Minimize The Total Costs Of Inventory.
Example For Inventory Costs Are
 Holding Costs
Order Costs
Shortage Costs
46

47. DEFENITION AND EXPLANATION
 Size Of The Order Which Gives Maximum Economy In
Purchasing Any Material And Ultimately Contributes
Towards Maintaining The Materials At The Optimum Level
And At The Minimum Cost.
 The Amount Of Inventory To Be Ordered At One Time For
Purposes Of Minimizing Annual Inventory Cost.
47

48. EOQ=
•A = DEMAND FOR THE YEAR
•CP = COST TO PLACE A SINGLE ORDER
•CH = COST TO HOLD ONE UNIT INVENTORY FOR A YEAR
FORMULA OF EOQ
48

49. HOW TO CALCULATE EOQ
1. Understand And Review The Formula
[2 * (Annual Usage In Units * Order Cost) / Annual
Carrying Cost Per Unit]^(1/2).
2. Define The Variables.
3. Calculate The Numerator
4. Divide The Numerator By Annual Carrying Cost Per Unit
5. Take The Square Root
49

50. ECONOMIC ORDER QUANTITY
16
Annual Cost ($)
Order Quantity
Minimum
Total Annual
Stocking Costs
Annual
Carrying Costs
Annual
Ordering Costs
Total Annual
Stocking Costs
Smaller Larger
LowerHigher
EOQ
50

51. The Diagram Below Illustrates How These Two Components (Annual
Holding Cost And Annual Order Cost) Change As Q, The Quantity Ordered,
Changes. As Q Increases Holding Cost Increases But Order Cost Decreases.
Hence The Total Annual Cost Curve Is As Shown Below - Somewhere On
That Curve Lies A Value Of Q That Corresponds To The Minimum Total
Cost.
51

52. THE TOTAL COST FUNCTION
 Total Cost = Purchase Cost + Ordering Cost + Holding
Cost
 Purchase Cost : Variable Cost Of Goods= Purchase Unit
Price × Annual Demand Quantity. This Is P×d
 Ordering Cost: Cost Of Placing Orders: Each Order Has A
Fixed Cost S, And We Need To Order D/Q Times Per Year.
=S × D/Q
 Holding Cost: The Average Quantity In Stock (Between
Fully Replenished And Empty) Is Q/2; =H × Q/2.
52

53. UNDER LYING ASSUMPTIONS
• The Ordering Cost Is Constant.
• The Rate Of Demand Is Constant
• The Purchase Price Of The Item Is Constant I.E. No Discount
Is Available
• The Replenishment Is Made Instantaneously, The Whole
Batch Is Delivered At Once.
53

54. USE OF EOQ
 As A Part Of A Continuous Review Of Inventory System
 Model For Calculating The Appropriate Reorder Point And
The Optimal Reorder Quantity
 Tool For Determining Quantity Of Inventory
54

55. EOQ(Economic order of quantity) analysis
The EOQ refers to the order size that will result in the lowest total of ordering and
carrying costs for an item of inventory. If a firm place unnecessary orders it will
incur unneeded order costs. If a firm places too few order, it must maintain large
stocks of goods and will have excessive carrying cost.

56. Figure 11.6 Inventory behaviour under EOQ model
11.4.6 Economic Order Quantity Model

57. Figure 11.7
11.4.6.1 Total cost curve – EOQ model

58.  The total cost is given by the sum of inventory-carrying cost
and ordering cost.
Total cost TC = Ordering cost + Carrying cost (11.1)
 The following notations are used to develop EOQ model:
D = Demand rate; unit/year
A = Ordering cost; Rs/order
C = Unit cost; Rs/unit of item
I = Inventory-carrying charges per year
H = Annual cost of carrying inventory/unit item
Q = Order quantity; number of units per lot
 It is assumed that demand is at a uniform rate. Thus, the
average inventory required would be (0 + Q)/2 =Q/2
throughout the year.
 The total number of orders placed would be D/Q per year.
11.4.6.1 Total cost curve—EOQ model
(Contd…)

59. 11.4.6.1 Total cost curve—EOQ model
(Contd…)

60. Some of the observations that are clear from the
above expressions are:
More the demand per year, larger will be the order
quantity.
Higher the order cost, larger will be the order
quantity.
More expensive the item are, smaller will be the
order quantity.
Higher the carrying cost is, smaller will be the
order quantity.
11.4.6.1 Total cost curve—EOQ model
(Contd…)

61. The derivation of EOQ is based on a number of
assumptions such as:
 Demand is deterministic and continuous at a constant rate.
 The process continues infinitely.
 No constraints are imposed on quantities ordered, storage capacity,
budget, etc.
 Replenishment is instantaneous (the entire order quantity is
received all at one time as soon as the order is released).
 All costs are time-invariant.
 There are no shortages of items.
 The quantity discounts are not available.
 There is negligible or deterministic lead time.
11.4.6.1 Total cost curve—EOQ model
(Contd…)

62. 11.4.6.2 Important Relationships

63.  Generally, demand is never uniform throughout the year. In
case, the demand has a mean Dm and standard deviation σd ,
the reorder point is expressed as given below:
11.4.6.3 Effect of Uncertainty in
demand
Table 11.2

64. What is Job Layout?
• A job layout is prepared to promise that work proceeds smoothly
without any obstruction. The various construction resources such as
material, men, machinery etc. should be arranged in such way to achieve
optimal utilization of space. The larger and more complex
the project, greater will be the need for planned
detailing at site. And job layout can be defined as a
job layout and
site drawing of
the proposed construction showing the location of entry, exit,
temporary services, material stores and stocks, plant or equipment
and site offices.

65. as mixer
o A job layout is a scaled drawing of the propose construction
all relevant features
site showing
• Entry point
• Exit point
• Storage are of materials-bricks-cement-sand-aggregate
• Temporary services-washing and toilet
• Contractor site office
• Area of keeping equipment such
• Bar bending area
• Labor housing

66. • To save time in delivering construction material at the side of construction
• To safeguard construction material from damage and deterioration
• To adopt the best mode of working
• To complete the work with the minimum use of equipment and machinery
• To take maximum output from labor and machinery
6
Purpose of job layout

67. Factor affection job layout
• Nature of the project
• Construction method
• Availability of resources
• Material facility
• Constructer’s, site engineer’s offices
• Provision for temporary roads
• Other facility’s
9

68. Principal preparation of job layout
• Administrative block
• Warehouse
• Entry and exits
• Location of workshop
• Services
• Temporary roads
• Staff accommodation
10

69. Identification of facility
• The Following are the temporary facilities are identified to be
constructed on site
1) Site Office 2) Booking office 3) Subcontractor’s office 4) First•
Aid and Medical Room 5) Guard Room 6) Toilet on Site 7)
Engineer and Staff quarters 8) Labor quarters 9) Equipment
Maintenance room 10) Parking for machines 11) Bar bending shop
12) Fabricated rebar storage yard 13) Carpentry shop 14) Cement
warehouse 15) Batching plant and aggregates storage 16) Testing
Lab 17) Material storage lab 18) Water tank 19) Scaffolding storage
20) Canteen
11

70. 20

71. Typical job layout

74. 74