NICMAR - SODE

ASSIGNMENT
GRADUATE PROGRAMME IN CONSTRUCTION PROJECT MANAGEMENT (GPPM)
MODULE - 18

MATERIALS AND EQUIPMENT MANAGEMENT

NCP 24 / 25

Prepared By Soumen Dhara ss Reg. No. 212-05-14-10584-2133

Assignment
1 2 3 4 Course No Course Title Assignment No Date of Dispatch NCP 24 / 25 Materials and Equipment Management Three August 16,2012

Last Date of Receipt of Assignment at 5 CODE Office August 25, 2012

ASSIGNMENT: Your company has been awarded a contract of developing and constructing a new
International Airport 30 K.M away from a city. You have been appointed as Planning Engineer (Materials and Equipment). Project is to be implemented in phases. In Phase-I, one strip of landing of 100 m width is to be constructed in 100 days. The scope of work for this assignment is only as follows a. Cutting and dozing of 100000 cum earth. Avg. height 0.75m b. Transportation of 20000cum surplus earth from site to dumping place (3 K.m lead incl. spreading), Filling of 80000 km in landing strip. c. Bringing in 3000 cum sand from 20 km. (incl. Spreading & levelling) d. Procurement of Bitumen 1,50,000 Ltr. Duration of work 30 days from 60th day. Bitumen to be obtained from refinery at Bongaigaon, Assam. Lead time 45 days, Storage facility 50000 ltrs. Estimate total cost of work and your plan of i. ii. Equipment Planning Procurement & Deployment Ordering and replenishing of Bitumen.

INTRODUCTION: Materials are the inputs to the construction activity on which certain operations are performed using the other resources to create a facility. Materials form the single largest component of the total cost of the facility. Materials management is very important for timely completion of the projects. A delay in providing the materials for construction will naturally put the project behind schedule from which it may never recover or the cost of bringing it back on schedule may be very high. Such shortages disrupt the workflow and apart from the lowering morale, need additional organizational efforts to generate the flow again. Men and machines remain idle while they await the arrival of the materials. These delay are not simply a matter of few weeks of days; they have a cascading effect on the entire project performance. Scope of Work: This includes all the stages from clearance to the availability of materials and equipment which includes.1. Cutting & dozing of earth 2. Loading and unloading of material 3. Transportation 4. Spreading 5. Compaction 6. Procurement of bitumen from refinery 7. Storage of bitumen Scope of work also includes calculation of various costs assisted with different items of work such ad i. ii. Owning Cost Operating cost of the equipment

iii. iv. v.

Transporting cost. Cost of ordering and replenishing of bitumen at site etc. One of the most important task of the planner is to assess the requirement of the plant and equipment on a particular job.

For this following details to be cleared 1. Total quantity to be done 2. The output of the equipment proposed to be used. The actual output of equipment is a combined effect of factor related to job and the management. While assessing annual output number of working days ( actually the number of working hours) has relevance. Working days depend on the climatic condition i.e. temperature, rainy season etc. Assuming normal condition in this case.

Estimating the requirement of the Equipment: Equipment on a road work or on any work has earlier to be purchased, obtained on hire or transferred from some other project. In either of the cases a fairly accurate estimate of the requirement of equipment is not wasted. This need planning well in advance. Factors to be considered are: o o o What is most desirable sequence of operations involved in the work? Which of the operation are to be performed by the machinery In case some or all equipments is to be transferred from other projects. How the programme of both the projects to be arranged so that there is no undue to and from movement of the equipment and at the same time the work is completed in optimum time. Basic data required for estimating the equipment are :

o o

Quantities of item of work Period of completion of the project

Quantities of items of work: o o o o o Earth work Transportation Loading / unloading Compaction Spreading and levelling

Period of completion of work: This depends on the duration required for the various constituents items and the sequence in which they are proposed to be executed. When a particular time is assigned to complete the job. In such cases the duration of the constituent operations has to be adjusted taking into consideration the activity interrelation and overall period of completion. While fixing the activity durations due allowance should be made for bad weather, monsoon, loss of time due to shifting equipment, break down, repairs and maintanence. Various equipments to be used in this process are: Earth cutting - Excavatior , Dozer Spreading earth Motorized scraper Compaction Vibro Roller Transportation Trucks / Dumpers Materials are the inputs to the construction activity on, which certain operations are performed using the other resources to create a facility. Materials obviously, from the single largest component of the total cost of the facility. Material cost being in the range of 40% to 50% of the total cost,

their input on the total project is enormous. With increasing competition and squeezing profit margins, it is becoming ever more expedient to minimize cost for clients and contractors alike. It stands to reason that we concentrate our efforts on the largest chunks of the cost i.e. the materials. This is sought to be achieved through the application of the management process to the materials. IMPORTANCE : Materials management is very important for timely completion of the project. A delay in providing the materials for construction will naturally put the project behind schedule from which it may never recover or the cost of building it back on schedule may be very high. Such shortage disrupt the workflow and apart from the lowering morale, need additional organizational efforts to generate the flow again. Men and machines remain idle while they await the arrival of the materials. These delays are simply not a matter of few weeks or days; they have a cascading effect on the entire project performance. Because the construction is delayed, the billing get held up and affects the cash flow. Added to it the additional overheads that will be required to carry on the project to its final completion and the liquidated damage that a contractor may have to pay for exceeding the time, limit or the loss in production and revenue for the owners. These are but direct and visible effects of the delays. Invisible effects are much more devastating and long lasting. Internally, it may create friction among various departments, specifically the construction, are sweating it out to maintain the schedule; the materials management department is taking things easy and creating avoidable pressure on the schedule. Externally, it may cause embarrassment to the organization and dissatisfaction among its customer. This loss of face may take a long time to heal. Thus considerable managerial skill must go into ensuring the time provision of verity of materials to be used in construction. Of course, it is too much to expect that shortage will never occur. Construction is an activity with high uncertainty and risk where changes are a part and parcel of life. The changes may generate material demands to be fulfilled at short notice and the management must meet this challenge. But when shortage occurs very frequently and that too common / normally used materials, there is a cause for concern and it indicates management failure. Procuring material at short notice is a costly

affair, even if it is possible times. Often, the choice of supplier, the price and sometime even quality becomes a secondary consideration in such situations. The obvious remedy to avoid this shortage is to carry stock materials so that they are available at site long before they are actually needed. This will entail a capital investment, which may take long to be recovered as reverse. Opportunity cost on such an investment or interest charges, if on credit, will add to the cost of materials and consequently the project. In addition it will require storage area, watch ward and administrative back up. There will always be less due to wastage, pilferage, damage or deterioration to contend with as they increase with the increase of stock. It is a tight rope walk really, and walk we must have been developed various technique for resolving these as put-off materials management and we must practice to maximize the benefit to the organization. The third project objective, quality, is obviously direct department on hte quality of materials, which from the facility. A facility can be as good as the input material. Thus in fulfilling the project objective of cost, quality and time, materials management has the most important role to play. Definition i. The line of responsibility, which beings with the selection of suppliers and ends when the material is delivered to its point od use (Ammer,1969). ii. A concept which bring together less than on; manager the responsibility for determining the manufacturing requirements, scheduling the manufacturing process and procuring, storing and dispersing materials. As such, it is concerned with and controls activities involved in the acquisition and use of all materials employed in the production of a finished product ( Zenz, 1968). iii. Materials management is the single manpower organization concept embracing planning organizing, motivating nad controlling of all those activities and personnel principally concerned with the flow of materials in to and within an organization ( Fearon, 1973) The above three definations differ in their emphasis on functional aspect of materials management. But, they presuppose a separate functional organization denoted exclusively to

activities associated with material from acquisition to use. This is an indication of the key place it assumes within the business organization. Although the definitions have been proposed for a manufacturing organization, they are equally applicable to construction. Scope of the functions of materials management has enlarged and includes all activities and decision making areas concerned with acquisition and delivery of the material to the point of use.

Scope of the Material Management: Material management covers a wide scope. It includes procuring materials, their transportation, storage, issuing material to various sites for use in construction, maintaining records and data for effective control and to provide useful guide for further. Some important functions are briefly described below. Procurement: It deals with acquiring materials necessary for construction from suitable sources. Though, basically it is concerned with buying and is concerned with the relevant aspects like identifying sources, determining the prices, etc. It has a wider scope of identification of better substitute materials as well as helping in arriving at decisions as to whether to buy or to produce certain items. Its aim is to contribute to the overall reduction in material cost through efficient procurement processes. Transportation Materials used on construction site undergo considerable movement. Beginning with transport from source to store it includes: a) Transport from main stores to sites/site storages. b) Transport from site storage to place of processing (mixing of mortar, concrete) c) Transport from processing places to work place All the movements are related to materials but the following three factors need to mention in this context:

a) Materials may be in the original form semi finished (e.g. mixed mortar, mixed concrete, dressed stones etc.) b) Movement of semi finished material comes under the purview of construction team rather than materials management team. c) Likewise expenses incurred on the movement (b above) may be charged to the construction cost rather than of materials. Material management has to clearly identify the movements that they are concerned and to ensure transportation is done quickly and economically. Inventory Control : This can be considered as the most important function of materials management. It is mainly concerned with laying the policies regarding how much quantity of materials should be held in stock so that the aim of ensuring continuity of construction with the minimum investment in materials is fulfilled. Storage: When certain materials have to hold in stock before they are used, it is necessary to store them properly guard against deterioration pilferage etc. In a construction organization storage needs to be carefully considered depending on factors like number of construction works, their nature magnitude and locations. Source of Supply: Selection of supplier is responsibility of purchase department. The management policies lay down the procedure as to how purchase dept. should go about this task. Selection of the source would naturally begin with the knowledge of sources of supply. This knowledge can be gained from number of sources below. This is satisfactory in small purchases and when a few items of simple nature are involved. Information is available on the basis of memory or the personal enquiries of purchase officer. a) Catalogues, trade journals, trade directories

The manufacturers of material supply the relevant information in the form of catalogues, trade journals, trade directories which serve as a useful guide for the purchase dept. precautions needed when using these are: (A) the latest catalogues have been referred to, (B) the quality of the material have to be thoroughly ascertained and (C) terms and conditions need to studied carefully. b) Advertisements of manufactures of suppliers Manufactures and suppliers often advertise their material in newspapers and magazines. Though the details given in advt. may have a considerable element of exaggeration to influence the buyer, they would serve the purpose of identifying the sources of materials. c) Advertisement by purchasing organizations This is considered to be the most reliable source of knowing, not only the sources of supply but getting all the relevant details such as quantity available, delivery time, price, terms and conditions of payment etc. Organizations may invite the offer from various suppliers through sending enquires to selected sources obtained after reference to catalogue, journals etc. It is desirable that an organization maintains a register of suppliers for different materials and updates it from time to time adding new names and deleting those who are either no longer in the business or whose performance was not satisfactory.

Factors to be considered for Purchasing: After the method of purchasing is determined and after requisitions from all customer centers are obtained, a decision to purchase the material is taken. It involves factors like 1) Quantity of material to be purchased 2) Time of delivery 3) Place of delivery 4) The price 5) Receiving and inspection 6) Transportation

1) Quantity of material to be purchased depends on stock in hand and inventory policies.

2) Time of delivery depends on:-

The time the purchaser needs to complete the formalities like preparing detailed documents, inviting quotations, scrutiny and acceptance of the offer and placing the order. The time supplier needs to arrange for the supply, which involves the acceptance of order from the purchaser, procuring the material from manufacturer and processing it if necessary. The time involved in loading, transportation and unloading, if the supplier is not delivering the material at the finally indicated place and therefore involving transportation, the purchaser has to arrange for the transport. At times, the materials have to be tested before finally accepting them and it also involves time and has to be considered. The total duration is the sum of the duration involved in (a) to (d) above and the purchasing dept. requires to obtain requisitions and initiate purchasing procedure to provide adequate time for these items. 1. Place of delivery would be the main storage, regional storages and site storages. This would depend on the location of the source and cost and time of transport. 2. The aim of purchaser should be to purchase the materials at most competitive price. This is usually achieved by inviting open quotations. This results in (a) expenditure incurred in publishing advertisements, (b) possible delay and (c) un-resourceful suppliers submitting offers. Where public advertisement is not a necessity, advantage of competitive rates can be obtained by sending out enquires to suppliers who are known and dependable. 3. In a large organization a separate section may have to be created for this function, but the function is closely related to purchasing. The person responsible for this function

must closely compare the material received with details mentioned in the orders placed with the supplier, or the samples of the same. The points to noted will be (a) quantity, (b) color, (c) finish, (d) size and /or gradation (e) strength or some other attributes. In some cases testes will have to be carried out in the laboratory. The material received may Be as per the order placed and samples prescribed. Not confirm to the order and may be: Of different specifications Short in quantity or In damaged condition In all such cases, a report is prepared and copies are sent to the accounts department and store department. In case the material is not in the acceptable form, the purchase dept. sends a Rejection advice to the supplier who has to make good the discrepancy which may include collecting back, material and arranging for fresh supplies. The bills are paid only after receiving and inspection sends the Acceptance Note in respect of the materials. Depending on the terms of agreement the materials obtained from the supplier will have to be transported to the place of storage. Transportation from stores to worksites is generally looked after by the construction unit/contractors. The main responsibilities connected with transportation are: Selecting mode of transport and routes, Fixing of agencies, Fixing rates, Auditing freight charges, Minimizing transportation cost by arranging the various supplies so as to synchronize their transportation.

Transportation: In the context of materials management, transportation is concerned with the movements of materials from one place to another. This function should consider transportation as its important of activities. Normally, the orders placed with the supplier includes transportation of the material but often the supplier is not an expert in transportation and since he is mainly concerned with sale of his material, he generally takes the help of transporting agencies and as such he does not pay careful attention to economies of transport. Moreover, there are situations such as supply of materials by rail to nearest rail station from where the material has to be transported from the store. Very often construction organizations have to transport materials from its main store to work sites. An organization is also required to take decision as to whether the transportation be given to outside transportation agency of to have necessary transport arrangement of its own. Functions in Transportation Following functions need to be considered for transportation of materials: Selection of the carriers and routings, Ascertaining rates, Scrutiny and payment of transportation charges, Allocation of transportation charges to materials transported to arrive at unit transport charge so that the complete cost of material can be charged to work where they are used. Follow up in respect of the shipments which are lost, Lodging claims for delays, shortages, damages etc. Depending on the quantity of materials requiring transportation, there may have to be a separate section in the purchasing dept. to deal with matters exclusively related to transportation. A lot of data is generated in respect of the use of materials on a construction project in all its phase. It is necessary to record all the data carefully and analyses it so that useful to conclusions

are established. These are useful in estimating requirements of projects to be taken up in the future and also for monitoring the projects. Prices of Materials: A variety of materials is used in construction project. After the materials are purchased (either through open invitation of offer, negotiations etc.) the bills of suppliers are settled after due scrutiny. But this data has to be transformed into a record in the terms of the materials its specification, unit and price. Such Details need to be maintained for all stores, sources and over varying periods. This, therefore, includes all factors like source of supply, quantity purchased at a time. Price fluctuations for a material over a period can also be studied and a trend in the price fluctuations can be established. This analysis is of considerable help in projecting the probable price of material in future. Example: Equipment Scrapper (motorized) Foot Roller Output/day 140 Cum. 600 Cum.

Construction Program:Sr.No 1 Activity Earth cutting & dozing 2 Transportation Quantity 100000 cum 20000 cum 3 Filling 80000 cum 4 5 Sand filling Bituminous work 3000 Cum 150000 ltrs 1000 1000 1000 50000 100000 20000 30000 30000 3000 6000 6000 5000 0-20 15000 21-40 30000 41-60 30000 61-80 25000 81-100

(a) Cutting and dozing 1,00,000 Cum. of earth Considering normal working hours as 8 hrs. / day. Assuming rate of earth work in excavation is Rs. 52.00/Cum. And rate of disposal of excavated earth with all of disposed earth be leveled and neatly dressed be Rs. 30.00/ Cum. Let the rate of filling the earth be Rs. 40.00/ Cum. Then,

1, 00,000 X 52.00 = 52, 00,000/20,000 X 30.00 = 6, 00,000/80,000 X 40.00 = 32, 00,000/Rs. 90, 00,000 (b) Loading 3000 cum of sand @ Rs.450 / Cum. = 3000 X 450 = Rs. 1350000 (c) Procurement of Bitumen @Rs.38/ltr = 150000 x 38 = Rs.5700000 Transportation 6x 100000 (say) = Rs. 6,00,000 Total Cost = Rs. (90, 00,000 + 13,50,000 + 63,00,000) = Rs. 1,66, 50,000/-

NO OF EQUIPMENTS REQUIRED:Excavator = OUTPUT 60 CUM / Hrs x 12 Hrs x 02 nos = 70 days Tipper = 7cum/trip (02 trip/Hr) x12 x 2 nos =70 days (20000+3000) cum qty. 2 SHEEPS FOOT ROLLER = 600 CUM / DAY EACH NO. OF DAYS REQUIRED = 66 DAYS. DOZER = = 02 Nos Equipment Deployment Schedule Sr.No Activity Quantity (Peak) 1 2 3 4 Excavator Tripper/Dumper Roller Dozer 02 nos 03 nos 02 nos 02 nos 01 02 02 03 02 02 02 03 02 02 02 03 02 02 0-20 21-40 41-60 61-80 81-100

Aims of good Materials Management: Materials management is expected to achieve following aims: a) Probable needs of materials requirement can be forecast within limits of accuracy. b) Adequate quantity of materials of the specified quality is received on the worksite at the appropriate time. Motto of materials management is to make available right quality of material in the right quantity at the right price at the tight time. c) Procurement schedules are prepared for materials taking into consideration the time required for placing orders, inspection, testing, deliveries etc. d) By maintaining proper record and analyzing them it is possible to generate useful data, which will serve as a guide in future. e) By studying market conditions, it is possible to (a) forecast fluctuations availability or otherwise, price change etc. and take appropriate timely action.

Functions of Materials Management: The above discussion will enable us to identify the following functions of materials managements a) Identification and estimation of materials required b) Procurement and allied functions c) Stock of inventory control d) Storage e) Disposal of surplus, materials, scrap etc. f) Control and analysis through a well designed information system.

Ordering and replenishment of Bitumen: Total qty. = 1, 50,000 ltr. 150000 ltr bitumen to be supplied over a period of 30 days. .: Annual Consumption ( let A) = (150000 x 12 ) ltr. Lot size ( let Q) = 50000 ltr. .: Average Inventory (Q/2) = 25000 ltr. Duration of Work = 30 days Avg. Consumption per day = (150000 / 30 ) = 5000 ltr. Storage facilities = 50,000 ltr. Rate of Bitumen (let P) = Rs. 38.00/ ltr.

Schedule Days 15 20 25 30 35 40 60 65 70 75 80 85 90

Opening Stock (ltr) 0 0 0 0 0 0 0 50000 25000 25000 25000 25000 25000

Order placed (ltr) 50000 0 25000 25000 25000 25000 0 0 0 0 0 0 0

Received (ltr) 0 0 0 0 0 0 50000 0 25000 25000 25000 25000 0

Total (ltr) 0 0 0 0 0 0 50000 50000 50000 50000 50000 50000 25000

Consumed (ltr) 0 0 0 0 0 0 0 25000 25000 25000 25000 25000 25000

Closing Stock 0 0 0 0 0 0 50000 25000 25000 25000 25000 25000 0

The first order would be given on 14th day of starting of work and then after every 2 days other orders can be given Recommendation / Suggestions: Materials management comprises various functions but at the same time is closely related with other departments. It is related with tendering and planning dept. in so far as the requirement of materials is considered. It is considered with construction department fir the day-to-day demand of materials. Accounting dept. is of course very closely related to materials management. The objectives of different functional heads may be different and sometimes objectives of one function may conflict with the other.

There has to be an integrated approach to achieve the goal of materials management. This concept is based on principal of co-ordination. Proper procurement of equipment and material is very necessary but before that it is important to make a record of what is available and what quantity is required. If any of the two is not available at the time of requirement can severely effect the construction which would delay the project which would again affect the overall cost.

Bibliography : 1. A Guide to the Project Management Body of Knowledge. William R.Duncan 2. Construction materials management for Construction Industry Managers SODE, NICMAR. 3. Construction Equipment management for Construction Industry Managers SODE, NICMAR.