MODULE 2

RESOURCE MANAGEMENT
 RESOURCE MANAGEMENT

The basic objective of resource management is to supply and support the

field operations so that established time objectives can be met and costs can
be kept within the construction budget.

Type of Resources:
1. Manpower
2. Material
3. Equipment
MANPOWER

 Next to agriculture , the construction industry provides maximum

employment.
 There is no job security & the workers are hired when required & fired when
the work is over.
 Legislation is generally necessary for the following reasons.
1.To fix the terms of employment.
2.To provide proper working conditions.
3.To provide social security.
MANPOWER

Importance of proper manpower:

 It helps in discovering talented and competent workers and developing
them to move up the corporate ladder.
 It ensures greater production by putting the right man in the right job.
 It helps to avoid a sudden disruption of an enterprise's production run by
indicating shortages of personnel, if any, in advance.
 It helps to prevent under utilization of personnel through over manning and
the resultant high labour cost and low profit margins.
 It provides information to management for the internal succession of
managerial personnel in the event of an unanticipated turnover.
General points regarding manpower:

 Safety manual regarding manpower has to be maintained

 Trade unions should be established
 Safety department should check weather all the workers are insured
 Workers should give proper training while dealing with heavy machines
 Facilities should be provided such as drinking water , shelter if they are
imported from other states , food facilities etc.
MANPOWER PLANNING

Manpower planning is the process by which a firm ensures that it has the
right kind of people and the right number of people at the right places at the
right time, doing work for which they are economically most useful.

From this definition it is clear that manpower planning is a vital tool in the
hands of management to control labour costs by avoiding both shortages
and surpluses of personnel in an organisation. In large organisations, this
function is performed by the personnel department.
CLASS OF LABOUR
Carpentry Work
RCC Steel Work
 Shuttering carpenter
 Rebar fabricator
 Furniture carpenter
 Rebar helper
 Wood Polisher
Painting Works
 Carpenter helper
 Painter
Masonry Work
 Painter helper
 Concrete helper
Electrical works
 Masonry Work
 Electrician
 Concrete mason
 Cable jointer
 Blockwork and plaster mason tiling mason
 Cable layer
 Marble mason
 Electrical helper
 Mason helper
WAGES AND STATUTORY REQUIREMENT

 Construction workers constitute one of largest categories of workers in the

unorganized sector. The workers are hired as and when required and are
retrenched on completion of the work. Construction labour leads a
migratory life working on different sites.

 Construction workers have no job security and are last trained. Although
industrial training institutes have been set up in our country, their
contribution towards training of construction workers is not enough.
There are two methods of making wage payment to labour:

 The time rate system: a suitable rate of payment is fixed per unit of time for
which labour is engaged on the work.

 The piece rate system: In the piece rate system, payment is based on
output or production of the work. In this system, payment is made at the
agreed rate· for the actual quantum of work carried out by each labourer.
Trade unions are connected with the
construction industry

 All India Trade Union Congress (AITUC)

 Indian National Trade Union Congress (INTUC)
 Bhartiya Mazdoor Sangh (BMS)
 United Trade Union Congress (UTUC)
 Hind Mazdoor Sabha (HMS)
 Centre of Indian Trade Unions (CITU)
LABOUR PRODUCTION RATE OR PRODUCTIVITY

 Productivity may be defined as the rate of transformation-of inputs into

outputs in a productive operation.
 In a broad sense, productivity means goods and services produced in
relation to the resources utilized in producing the same.
 Labour productivity may be defined as the ratio of output and labour
input.
 For a given worker or group of workers doing a job, the enterprise fixes
certain target volume of output in a given day or period.
 The basic equation for determining the workers required for accomplishing
a specific activity or work item is given by:
Where,
 Workers productivity standard is defined as the effort in man-days or
needed for the accomplishing a unit quantity of work, while working
efficiently but allowing for normal delays and wastage.
 Work quantity of the activity involved is expressed in standard units. In
India, method of measurement of building and civil engineering works is
specified in BIS1992(28parts)
 Completion period is taken as working days or hours planned or
earmarked to accomplish the task.
 Workers production norms in the above equation, is expressed in man days
or man hours, category wise, required for accomplishing the unit work.
 Production efficiency factor is the multiplier used to convert production
norms into productivity standards expected under job conditions at the
site.
FACTORS AFFECTING LABOUR OUTPUT
OR PRODUCTIVITY
 Overtime: Scheduling of extended work days or weeks
exceeding a standard eighth our work day or 40- hour work
week lowers work output and efficiency through physical
fatigue and poor mental attitude.
 Morale and Attitude: Spirit of workers based on willingness,
confidence, discipline, and cheerfulness to perform work or
tasks can be lowered due to a variety of issues including
increased conflicts, disputes, excessive hazards, overtime, over
inspection, multiple contract changes, disruption of work
rhythm, poor site conditions, absenteeism, unkempt
workspace, and so on.
 Work complexity: A simple, familiar work, is easier to
execute than an unfamiliar, complex one. The extra
effort needed for the latter type of work, especially in
the initial stages, may range from 10-100% of the
normal expected productivity.
 Repetition of work: While the first-time execution of an
unfamiliar work needs extra effort and results in low
output, the skill acquired in the process, when utilized
over a period of time to execute similar works,
improves productivity rate.
 Quality control: Stringent quality control is sensitive projects,
like in the construction of a nuclear reactor calls for frequent
inspections, which involve elaborate documentation and is a
time consuming task. They increase the nonproductive time
of workers and, in turn, reduces productivity by 10-25%.
 Equipment-intensive tasks: The construction equipment
executes works speedily, but it needs operators. The
equipment-intensive tasks are less susceptible to productivity
changes than the labor-intensive ones.
 Supervision: An efficient and effective supervisor can get a
higher productivity from labourers.
 Dilution of Supervision: This occurs when supervision is
diverted from productive, planned, and scheduled work to
analyze and plan contract changes, expedite delayed
material, manage added crews, or other changes not in the
original work scope and schedule. Dilution is also caused by
an increase in manpower, work areas, or project size without
an increase in supervision.
 Labour availability: The labour productivity also depends
upon the employment opportunities available in the market.
If jobs are plenty and labour is scarce, the labour productivity
tends to become less. In scarce job situation, the overall
productivity improves since the employers can then sort out
labour with a light productivity.
 Mobilize/Demobilize: This relates to moving resources on and
moving off to projects as a result from changes or delays,
causing work disruptions. Productivity may drop during these
periods as time is lost when crews move from one area or
work assignment to another.
 Site Access: This is a result of interferences to the convenient or
planned access to work areas. This can be due to blocked stairways,
roads, walkways, insufficient man-lifts, or congested work sites.
 Climatic and weather conditions: Performing work in a change of
season, temperature zone, or climate change resulting in work
performed in either very hot or very cold weather, rain or snow, or
other changes in temperature or climate can impact workers
beyond normal conditions. Since construction projects are. Spread
over several months or even years, it is necessary to adjust the effect
of weather changes month-by-month on worker’s productivity as
well as work execution.
 Role of management: The project management has
a key role to play in planning and controlling
productivity. It is responsible for specifying the weekly
target of work to be accomplished by the workers as
well as how the works are to be executed and using
which resources.
 CONSTRUCTION EQUIPMENTS

 In the case of huge construction projects;

 Proper use of the appropriate equipment contributes
to economy, quality, safety, speed and timely
completion of a project.
 Equipment are use for highway projects, irrigation,
buildings, power projects etc.
 15-30% of total project cost has been accounted
towards equipment and machinery.
Classification of Construction
Equipment

1. Earth-moving equipment 6. Pile-driving equipment

2. Hauling equipment 7. Tunneling and rock drilling
3. Hoisting equipment equipment

4. Conveying equipment 8. Pumping and dewatering

equipment
5. Aggregate and concrete
production equipment
Operations Involved In Construction
of Any Project

 Excavation  Compacting
 Digging of large  Levelling
quantities of earth  Dozing
 Moving them to  Grading
distances which are
sometimes fairly long  Hauling

 Placement
 EXCAVATING AND EARTH MOVING
EQUIPMENT

 Power shovel
 Back hoe
 Drag line
 Clam shell
 Scrapers
 Bull dozer
POWER SHOVEL OR FACE SHOVEL:

 To excavate the earth and to load the trucks

 capable of excavating all types of earth except
hard rock
 size varies from 0.375m3 to 5m3 .
 Basics parts of power shovel including the track
system, cabin, cables, rack, stick, boom foot-pin,
saddle block, boom, boom point sheaves and
bucket.
APPLICATIONS:
 Suitable for close range of work
 Capable of digging very hard materials,
 can remove big sized boulders.
 It is used in various types of jobs such as digging in
gravel banks, clay pits, digging cuts in road works,
road-side berms, etc.
OLD NEW
BACK HOE

 Also known as hoe, back shovel and pull shovel

 It is used to excavate below the natural surface on
which it rests.
 Generally used to excavate trenches, pits for
basements and also for grading works, which requires
precise control of depths.
 The basic parts are boom, Jack boom, Boom foot
drum, Boom sheave, Stick sheave, Stick, Bucket and
Bucket sheave
APPLICATION:
 It is the most suitable machine for digging below the
machine level, such as, trenches, footings, basements
etc.
 It can be efficiently used to dress or trim the surface
avoiding the use of manual effort for dressing the
excavated the surface.
Drag Line:

 The drag line is so name because of its prominent operation

of dragging the bucket against the material to be dug.
 Unlike the shovel, it has a long light crane boom and the
bucket is loosely attached to the boom through cables.
 Because of this construction, a dragline can dig and dump
over larger distances than a shovel can do.
 Drag lines are useful for digging below its track level and
handling softer materials.
 The basic parts of a drag line including the boom, hoist cable,
drag cable, hoist chain, drag chain and bucket.
Application
 It is the most suitable machine for dragging softer
material and below its track level
 It is very useful for excavating trenches when the sides
are permitted to establish their angle of repose
without shoring.
 It has long reaches.
 It is mostly used in the excavation for canals and
depositing on the embankment without hauling units.
Clam Shell

 This is so named due to resemblance of its bucket to a clam

which is like a shell-fish with hinged double shell.
 The front end is essentially a crane boom with a specially
designed bucket loosely attached at the end through cables
as in a drag line.
 The capacity of a clam shell bucket is usually given in cubic
meters.
 The basic parts of clam shell bucket are the closing line, hoist
line, sheaves, brackets, tagline, shell and hinge.
Application:
 Used for handling loose material such as crushed
stone, sand, gravel, coal etc.
 Main feature is vertical lifting of material from one
location to another.
 Mainly used for removing material from coffer dam,
sewer main holes, well foundations etc.
Scrapers:

 Unique machine for digging and long-distance

hauling of plough able materials.
 self-operating machine
 It is not dependent on other equipment.
 Wheels of machine cause some compaction.
 The basic parts of scrapers are the bowl, apron and
tail gate or ejector.
Bull dozer

 The heavy blade attached to the tractor pushes the

material from one place to another.
 The tractor can be of the crawler or the wheeled
type.
Classification of bull dozer
1. Position of blades
a) Bulldozers in which the blade perpendicular to the
direction of movement
b) Angle dozers in which the blade is set at an angle
with the direction of movement.
2. Based on mountings
a)Wheel mounted
b)Crawler mounted
3. Based on the control
a)Cable controlled
b)Hydraulically controlled
Applications

Bull dozers are mainly used for the following operations

 For spreading the earth fill
 For opening up pilot roads through mountainous and rocky terrains.
 Clearing construction sites.
 Maintaining haul roads
 Clearing land from the trees and stumps
 back-filling trenches at construction sites by dragging the earth from one
place to another
Earth compaction equipment

 Smooth-wheel rollers.
 Sheep-foot rollers
a)Ordinary sheep-foot roller
b)Convertible roller
c)Turn foot roller
 Pneumatic-tyred rollers
Smooth-wheel rollers

 Plain steel rollers

 Self-propelled type
 Weighing from 5 to 15 tonnes
 Used for ordinary rolling work where deep compaction is not required
 These rollers may have one front and two rear wheels
 The rear wheels being usually larger in diameter and the front one being
winder.
 Weight of rollers may be increased by filling water or sand ballast in hollow
cylinder.
 These rollers are effective in compacting granular soils, such as sand,
gravel and crushed stone.
 Sheep-foot rollers

 For compacting earth work in embankments and canals (where

compaction deep into the layer of the earth is required)
 These gives best result in compaction when the soil is clay or
predominantly cohesive and impervious.
 The sheep foot rollers may weigh upto 15 tonnes or more
 Travel at a speed of 25 kmph
 As roller moves over the surface, the feet penetrate the soil to produce a
kneading action and a pressure to mix and compact the soil from bottom
to top layer.
 With repeated passages of the roller, the penetration of feet decreases.
Pneumatic-tyred rollers

 It consists a base or a platform mounted between two axles.

 The rear of which has one more wheel than the front.
 Most suitable for compacting fine-grained soil and well graded sands.
 Ballasting is done using either water, sand or pig iron in order to increase
the self weight.
Major advantages are the ability to control the ground contact pressure by:
a) Altering the weights of machines,
b) Increasing the number of wheels,
c) Increasing the tyre width
d) Changing the contact area of the tyre by altering the contact pressure.
 Cost of Owning
and Operating Construction
Equipment
Cost of Owning and Operating Construction Equipment

 For contractors in the heavy civil construction industry, the cost of owning
and operating equipment is a key part of doing business in a profitable
manner. Failing to properly estimate equipment cost has led many
contractors into hardship.
 Without knowing the actual equipment ownership costs, contractors might
report higher- than-justified paper profits due to inaccurate accounting
practices that do not factor the cost of idle equipment into the
company’s overall profit picture.
 Then at the end of the year, they find that they had not accounted for the
incurred costs of idle equipment impacting the actual profit margin.
Total equipment costs comprise two separate components:
1. ownership costs and
2. Operating costs.
Except for the one-time initial capital cost of purchasing the machine, ownership costs
are fixed costs that are incurred each year, regardless of whether the equipment is
operated or idle.
Operating costs are the costs incurred only when the equipment is used. Each cost has
different characteristics of its own and is calculated using different methods.
None of these methods will give exact costs of owning and operating equipment for
any given set of circumstances. This is because of the large number of variables
involved, which is because of the uncertain nature of the construction business.
One should consider these estimates as close approximations while calculating
ownership and operating costs.
OWNERSHIP COST

Ownership costs are fixed costs. Almost all of these costs are annual in nature
and include:
 Initial capital cost
 Depreciation
 Investment (or interest) cost
 Insurance cost
 Taxes
 Storage cost
INITIAL COST
On an average, initial cost makes up about 25% of the total cost invested
during the equipment’s useful life. This cost is incurred for incurred for getting
equipment into the contractor’s yard, or construction site, and having the
equipment ready for operation. Many kinds of ownership and operating costs
are calculated using initial cost as a basis, and normally this cost can be
calculated accurately. Initial cost consists of the following items:
 Price at factory + extra equipment + sales tax
 Cost of shipping
 Cost of assembly and erection
DEPRECIATION
Depreciation represents the decline in market value of a piece of equipment
due to age, wear, deterioration, and obsolescence. Depreciation can result
from:
 Physical deterioration occurring from wear and tear of the machine
 Economic decline or obsolescence occurring over the passage of time
In the appraisal of depreciation, some factors are explicit while other factors
have to be estimated. Generally, the asset costs are known which include:
 Initial cost: The amount needed to acquire the equipment
 Useful life: The number of years it is expected to be of utility value
 Salvage value: The expected amount the asset will be sold at the end of
its useful life
INVESTMENT (OR INTEREST)COST
 Investment (or interest) cost represents the annual cost (converted into an
hourly cost) of capital invested in a machine. If borrowed funds are utilized
for purchasing a piece of equipment, the equipment cost is simply the
interest charged on these funds. However, if the equipment is purchased
with company assets, an interest rate that is equal to the rate of return on
company investment should be charged. Therefore, investment cost is
computed as the product of interest rate multiplied by the value of the
equipment, which is then converted into cost per hour of operation.
 TOTAL OWNERSHIP COST

 Total equipment ownership cost is calculated as the sum of depreciation,

investment cost, insurance cost, tax, and storage cost.
 The elements of ownership cost are often known on an annual cost basis.
 The individual elements of ownership cost are calculated on an annual
cost basis or on an hourly basis, total ownership cost should be expressed
as an hourly cost.
COST OF OPERATING CONSTRUCTION EQUIPMENT

 Operating costs of the construction equipment, which represent a

significant cost category and should not be overlooked, are the costs
associated with the operation of a piece of equipment.
 They are incurred only when the equipment is actually used.
 The operating costs of the equipment are also called ‘‘variable’’ costs
because they depend on several factors, such as the number of operating
hours, the types of equipment used, and the location and working
condition of the operation.
 The best basis for estimating the cost of operating construction equipment
is the use of historical data from the experience of similar equipment under
similar conditions.
Operating costs include the following costs:
 Maintenance and repair cost
 Tire cost
 Consumable costs
 Fuel cost
 Lubricating oil cost
 Mobilization and demobilization cost
 Equipment operator cost
 Special items cost
 MAINTENANCE AND REPAIR COST

 The cost of maintenance and repairs usually constitutes the largest

amount of operating expense for the construction equipment.
 Construction operations can subject equipment to considerable wear and
tear, but the amount of wear varies enormously between the different
items of the equipment used and between different job conditions.
 Generally, the maintenance and repair costs get higher as the equipment
gets older.
 Good maintenance, including periodic wear measurement, timely
attention to recommended service and daily cleaning when conditions
warrant it, can extend the life of the equipment and actually reduce the
operating costs by minimizing the effects of adverse conditions.
 TIRE COST

 The tire cost represents the cost of tire repair and replacement. Because
the life expectancy of rubber tires is generally far less than the life of the
equipment on which they are used on.
 The depreciation rate of tires will be quite different from the depreciation
rate of the rest of the vehicle.
 The repair and maintenance cost of tires as a percentage of their
depreciation will also be different from the percentage associated with
the repair and maintenance of the vehicle.
 CONSUMABLE COSTS

 Consumables are the items required for the operation of a piece of

equipment that literally gets consumed in the course of its operation. These
include, but are not limited to, fuel, lubricants, and other petroleum
products. They also include filters, hoses, strainers, and other small parts
and items that are used during the operation of the equipment.
 Fuel cost
 Lubricating oil cost
 MOBILIZATION AND DEMOBILIZATION COST

 This is the cost of moving the equipment from one job site to another.
 It is often overlooked because of the assumption that the previous job
would have already paid for it.
 The costs of equipment mobilization and demobilization can be large and
are always important items in any job where substantial amounts of
equipment are used.
 These costs include freight charges (other than the initial purchase),
unloading cost, assembly or erection cost (if required), highway permits,
duties, and special freight costs (remote or emergency).
 EQUIPMENT OPERATOR COST

 Operator’s wages are usually added as a separate item and added to

other calculated operating costs. They should include overtime or
premium charges, workmen’s compensation insurance, social security
taxes, bonus, and fringe benefits in the hourly wage figure. Care must be
taken by the companies that operate in more than one state or that work
for federal agencies, state agencies and private owners.
 SPECIAL ITEMS COST

 The cost of replacing high-wear items, such as dozer, grader, and scraper
blade cutting and end bits, as well as ripper tips, shanks, and shank
protectors, should be calculated as a separate item of the operating cost.
As usual, unit cost is divided by the expected life to yield cost per hour.
SELECTION OF CONSTRUCTION EQUIPMENT
 Site condition: Primary site condition (actions are: types of material to be
handled, physical constraints onsite, and hauling distances.
 The Nature of the Work: Some factors relating to the nature of the work
include payload, the total quantity of work, and the construction
schedule. Payload has a direct relation to the capacity of the equipment
selected.
 Size of the Equipment: Size of equipment should be such that it must be
able to be used with other matching units. If the equipment selected is of
larger size, that will remain idle for most of the time or sha1l work on part
loads, which means production cost will be more. On other side, if the
equipment is of smaller size than desired, the equipment will not be able to
work with the matching equipment’s and hence other equipment’s will
have to remain idle or to be allowed to work on part loads, which shall
again be uneconomical.
 Standardisation: It is better to have same type and size of equipment’s in
the project. It means lesser spare parts reserve, more interchangeability of
parts if required, easy for the operators to understand it, mechanics will be
able to maintain and repair better as they become expert by handling
similar type of equipment.

 Availability of Equipment: The equipment which is easily available in the

market should be purchased. It should also be ensured that the
equipment is of repute and is likely to be continued to be manufactured in
future also. This is necessary for future standardisation and ensuring spare
parts supply. It is easy to dispose of such equipment after completion of
projects.
 Availability of Spare Parts: While selecting a particular type or make of
equipment, it should be ensured that the spare parts will be available at
reasonable price throughout the working life of the equipment. It should
also be ensured that the downtime of the equipment for want of spare
parts may not be more. This is all the more necessary in case of imported
equipment’s.

 Multipurpose Equipment’s (Versatility): There are certain types of

equipment’s which are not utilised fully. Therefore, if possible, they must be
capable of performing more than one function for example, excavator
with wheel loader bucket arrangement or with rock breaker attachment.
 Client-and Project-specific: The owner/client in a certain project may
have certain preferences that are not in line with the construction
company's preferred policies as far as equipment procurement is
concerned. The schedule, quality and safety requirements demanded of
a particular project may in some cases force the company to yield to the
demands of the client.

 Labour Consideration: Shortage of manpower in some situations may lead

to a decision in favour of procuring equipment that is highly automated.

 Use in Future Projects: When equipment completes only a part of their

useful life in a project, it should be kept in view that the equipment can be
used in future projects and may not become obsolete.
 Economic Considerations: The economic considerations such as owning
costs, operating labour costs and operating fuel costs of equipment are
most important in selection of equipment. Besides, the resale value, the
replacement costs of existing equipment, and the salvage value
associated with the equipment are also important.

 Operating Requirements: The equipment selected should be easy to

operate and maintain, acceptable to the operator and should have lesser
fuel consumption.

 Past Performance: If the equipment being purchased is of new make and

model, it is desirable to enquire about its performance from other users,
who are using this make and model.
BASIC CONCEPT ON EQUIPMENT MAINTENANCE

 Maintenance includes all labour (both direct and indirect), material, plant,
and overhead required to sustain equipment in good serviceable
condition; It includes periodic inspection, lubrication, servicing, repairs,
and overhauls.
Objectives of Maintenance

 To maximise availability of plant, equipment and machinery for productive

purposes.
 To extend the lifespan of plant, equipment and other facilities by
minimizing their wear and tear.
 To ensure operational readiness of equipment at all times.
 To reduce the cost of lost production due to breakdown.
 To provide information to the management on the cost and effectiveness
of maintenance.
 To ensure safety through regular inspection and maintenance of plant,
equipment and other facilities such as compressors, elevators, material-
handling equipment etc.
Construction material management
 Introduction

 Materials management is a vital function for improving productivity in

construction projects.

 The management of materials should be considered at all the phases of the

construction process and throughout the construction and production
periods.

 This is because poor materials management can often affect the overall
construction time, quality and budget.

 It is important for planning and controlling of materials to ensure that the right
quality and quantity of materials and installed equipment are appropriately
specified in a timely manner, obtained at a reasonable cost, and are
available when needed.
 Definition

 “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 quantity when needed.
 Functions of Materials Management

The Primary functions Of Material Management are:

 Efficient materials planning
 Buying or Purchasing
 Procuring and receiving
 Storing and inventory control
 Supply and distribution of materials
 Quality assurance
Secondary Functions of Materials Management :

 Efficient production scheduling

 Prepare specifications and standardization of materials
 To assist in product design and development
 Forecasting demand and quantity of materials requirements
 Quality control of materials purchased
 Material handling
 Use of value analysis and value engineering
 Developing skills of workers in materials management
 Smooth flow of materials in and out of the organization
Activities involved in materials management

 Materials Requirements Planning

 Purchasing.
 Incoming materials quality & quantity check
 Inventory Control
 Storage
 Materials Handling
 Transportation
 Scrap & surplus disposal
 Inventory

 “It is defined as comprehensive list of items which are required for

manufacturing the products and to maintain the plant facilities in working
conditions”.

 The term inventory includes Materials : raw, in process, finished packaging,

spares and others stocks
Inventory Management

 Inventory Management is primarily about specifying the size and

placement of the stocked goods.

 It is the system and processes which identifies the inventory requirements,

set targets, provides replenishments techniques and it reports the actual
and projected inventory status.

 Inventory management is required at different locations within a facility or

within multiple locations of supply network to protect the regular and
planned course of production against random disturbance of running out
of materials or goods.
 Inventory Control

 “Inventory control is a planned approach of determining what to order,

when to order and how much to order and how much to stock so that
costs associated with buying and storing are optimal without interrupting
production and sales”.

 The inventory control system strikes the balance between the loss due to
non availability of the item and cost of carrying the stock of an item.
 How to Achieve Inventory Control?

 Purchasing items of the right-quantity, at the right-place and at right-time.

 Providing a suitable, secure, and sufficient place for storage.
 Developing a proper inventory identification system.
 Maintaining an up-to-date record keeping.
 Making proper requisition procedures.
 To avoid accumulation of work in progress
 To contribute directly to the overall profitability of the enterprise
 Functions

 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 make arrangement for sale of slow moving items.
 To minimise inventory ordering cost.
 Problems of Material Management
1. Organization Structure
The coordination and communication between estimating department,
research and development department, purchasing department, and
plant and machineries department should be maintained at highest level
Main issues in organisation structure:
 Undefined scope
 Lack of communication between parties involved
 Incomplete drawings Plans are not completed and details are missing
 Lack of conformance to requirements
 Nonstandard specifications that are not commonly used
 Incomplete / ineffective meetings
 Difference between plans and specifications
 Don’t communicate exactly
2. Procurement problem

 Availability of material
 Availability of quantity
 Price reduction to match competitor’s price
 Late deliveries Materials are not delivered as per schedule
 Late or incorrect submittals
 Poor communication between parties
 Lack of conformance to requirements
 Unrealistic delivery dates
 Re handling of materials
 Storage areas are limited or are far from working area
 Theft or damaging during handling or other conditions
3. Storage Space

 Large number of materials is required depending on the magnitude of the

project.
 And the term storage space implies both enclosed and open space that can be
used to keep materials of work safe until the need for it arise.
 All materials need protection against many threats such as pilferage, theft,
damage or loss. Material such as aggregates, bricks/blocks may not require
enclosed storage protection than proper outdoor positioning and stacking.
However, other materials such as reinforcement bars, steel columns, timber, and
galvanized steel for trusses must be protected against contact with water in order
to avoid rust/corrosion.
 The size of proposed building may occupy 60% of the total project site, enabling
the remaining 40% to be used for temporary access and site facilities. In such
case, the planners must arrange for periodic delivery of certain materials to avoid
cluttering the space, and maintain constant operation to keep the
4. Security Problem

 Security of materials onsite is of paramount importance. Gradual pilferage

and theft are issues of concern to the project managers. Loss of materials
through pilferage and theft represent financial lost to the project as a
whole, and in the end it increases the cost of the project. Materials are
prone to be stolen despite being in store. And some materials as earlier
mentioned may not require indoor storage. Therefore, a well designated
vigilante must be maintained 24 hours onsite.
5. Availability of Materials on Market

 Steady flow of materials throughout project duration is among the primary

function of material management. However, this can be affected by market
availability of the material of work.

 Occasionally manufacturers can run out of raw material or be affected by

government policy to the extent that production may have to be slow or
suspended. Unavailability of materials of work on market can affect material
management by either increasing competition in material purchase or delay the
general work progress.
 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.
 ABC Analysis is a method of tiered inventory or supplier valuation that
divides inventory/suppliers into categories based on cost per unit and
quantity held in stock or turned over a period of time.
 Purpose of ABC Analysis

 ABC Analysis allows inventory/purchasing managers to segregate and manage the

overall inventory/suppliers into three major groups. This allows different inventory/supplier
management techniques to be applied to different segments of the inventory/suppliers in
order to increase revenue and decrease costs. In terms of a Pareto Analysis, it separated
the critical few from the trivial many.
 "A" Category items generally represent approximately 15%-20% of an overall inventory by
item, but represent 80% of value of an inventory. By paying attention close attention in
real-time to the optimization of these items in inventory, a great positive impact is possible
with minimal increase in inventory management costs.
 "B" Category items represent 30%-35% of inventory items by item type, and about 15% of
the value. These items can generally be managed through period inventory and should
be managed with a formal inventory system.
 "C" Category items represent 50% of actual items but only 5% of the inventory value. Most
organizations can afford a relatively relaxed inventory process surrounding these items.
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
 “A” Category – 5% to 10% of the items represent 70% to 75% of the money value.
 “B” Category – 15% to 20% of the items represent 15% to 20% of the money.
 “C” Category – The remaining number of the items represent 5% to 10% of the
money value.
 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.
 VED Analysis

 VED analysis is an inventory management technique that classifies

inventory based on its functional importance. It categorizes stock under
three heads based on its importance and necessity for an organization for
production or any of its other activities. VED analysis stands for Vital,
Essential, and Desirable.
V-VITAL CATEGORY
 As the name suggests, the category “Vital” includes inventory, which is
necessary for production or any other process in an organization. The
shortage of items under this category can severely hamper or disrupt the
proper functioning of operations. Hence, continuous checking, evaluation,
and replenishment happen for such stocks. If any of such inventories are
unavailable, the entire production chain may stop. Also, a missing essential
component may be of need at the time of a breakdown. Therefore, order
for such inventory should be before-hand. Proper checks should be put in
place by the management to ensure the continuous availability of items
under the “vital” category.
E- ESSENTIAL CATEGORY:
 The essential category includes inventory, which is next to being vital.
These, too, are very important for any organization because they may
lead to a stoppage of production or hamper some other process. But the
loss due to their unavailability may be temporary, or it might be possible to
repair the stock item or part.
 The management should ensure optimum availability and maintenance of
inventory under the “Essential” category too. The unavailability of
inventory under this category should not cause any stoppage or delays.
DESIRABLE CATEGORY:
 The desirable category of inventory is the least important among the three,
and their unavailability may result in minor stoppages in production or
other processes. Moreover, the easy replenishment of such shortages is
possible in a short duration of time.
 FSN Analysis

 FSN Analysis is an inventory management technique which is based on the

rate of consumption of spares and goods in an organization. This analysis
divides the inventory into three categories based on their speed or rate of
utilization, their consumption rate, and average stay. FSN stands for Fast-
moving, Slow-moving, and Non-moving.
FAST-MOVING INVENTORY
 Fast-moving inventory comprises of inventory, which moves in and out of stock fastest
and most often. Therefore these goods have the highest replenishment rate. Items in
this category generally comprise less than 20% of the total inventory.
SLOW-MOVING INVENTORY
 Items in this category move slower, and hence, their replenishment is also slower. This
category comprises of around 35% of the total inventory in an organization.
NON- MOVING INVENTORY
 The last category of this analysis is the least moving portion of the inventory and also
includes the dead stock. Replenishment of such inventory may or may not take place
at all after utilization. This category can go as high as 55%-60% of the total inventory in
organizations.