Planning Construction Material

Material provisioning (procurement) is the process of getting the right material, of the right quality, in the right quantity, at the right time, place and price. For a commercial complex needing, say, 10,000 bags of cement, the steps are:

 Requirement -> Specification -> Quotation/Tender
     -> Evaluation -> Purchase order -> Delivery
     -> Inspection -> Storage -> Payment

1. Identify requirements: from the BOQ and work programme, prepare a material schedule showing quantity and date needed (cement: 10,000 bags in lots by the pour schedule).
2. Prepare specifications: grade, brand/standard (OPC/PPC, NS 49/IS standard), packing, testing needs.
3. Raise purchase requisition with the approval of the project manager and budget check.
4. Select the procurement method: by value, public work uses the Public Procurement Act and Rules (direct purchase for small value, quotation, then open bidding); private clients may use enquiry among approved suppliers.
5. Invite quotations/tenders from approved suppliers; give specifications, quantity, delivery schedule, payment terms.
6. Evaluate and negotiate: compare price, quality, delivery period, credit terms, past performance and transport cost; select the best (lowest evaluated) supplier.
7. Place the purchase order/contract, showing rate, quantity, delivery schedule, penalty and quality conditions.
8. Follow up and expedite the delivery to match the work schedule.
9. Receive and inspect: check quantity, damage, batch/date and test samples; issue a goods received note (GRN).
10. Store and issue materials against requisition; keep a stock register (FIFO for cement).
11. Verify invoice and pay, and record for cost control and reorder.

Value engineering

Value engineering (VE) is a systematic, organised, function-oriented method of analysing a product, material or service to achieve its required function at the lowest total (life-cycle) cost without reducing quality, reliability or safety.

Value rises when the function improves at the same cost, or the cost falls at the same function.

Job plan

1. Information (collect data)
2. Function analysis (what does it do, why is it needed)
3. Creative phase (brainstorm alternatives)
4. Evaluation of alternatives
5. Development and recommendation
6. Presentation and implementation

Application in procurement of construction materials

• Replace costly or imported materials by local alternatives of equal function (for example, local stone or blocks instead of imported tiles, PPC instead of OPC where suitable).
• Use standard sizes and grades that reduce wastage and cost (standard steel lengths, modular tiles).
• Avoid over-specification: using M20 where M30 is not needed.
• Buy in bulk, through long-term supply contracts or directly from the manufacturer, to reduce the price.
• Compare life-cycle cost, not only initial cost (durable roofing, paint).
• Choose suppliers near the site to cut transport and storage cost.
• Use ABC analysis to concentrate VE effort on A items (steel, cement) that carry the most value.

ABC classification

ABC classification is an inventory control technique that divides materials into three classes according to their annual consumption value (quantity x unit rate), based on the Pareto (80-20) principle.

Typical A items: cement, steel, bitumen; B: bricks, aggregates, tiles; C: nails, binding wire, paint brushes.

Importance of material management

Materials form about 50-60% of the total cost of a building project, so their management is critical.

1. Cost control: buying at the right price, in correct quantity, avoids waste and overstocking.
2. Continuous work: materials available on time avoid idle labour and equipment and keep the schedule.
3. Reduced inventory cost: holding costs, damage and theft are lower.
4. Quality assurance: inspected materials as per specification.
5. Less wastage and pilferage through proper storage, issue and records.
6. Better cash flow: capital is not locked in stock.
7. Reliable estimates and records for cost accounting and future projects.

ABC classification

ABC classification is an inventory control technique that divides materials into three classes according to their annual consumption value (quantity x unit rate), based on the Pareto (80-20) principle.

Typical A items: cement, steel, bitumen; B: bricks, aggregates, tiles; C: nails, binding wire, paint brushes.

Inventory planning for repetitive (regularly used) materials

Materials such as cement, sand and bricks are used continuously, so their stock is kept between a maximum and a minimum level by ordering a fixed economic quantity whenever stock falls to a reorder level.

 Stock
  |\        Max level
  | \      /|\       /|
  |  \    / | \     / |
  |ROL.\../..|..\../..|.. reorder level
  |     \    |   \    |
  |Safety stock (min)--|-------
  |__|_lead_|__|_lead_|__ Time
       time

Quantities:

• Reorder level (ROL) = daily consumption x lead time + safety stock
• Maximum level = ROL + EOQ - (minimum consumption x minimum lead time)
• Minimum (safety) level = ROL - (normal consumption x normal lead time)
• Average stock = Minimum level + EOQ/2
• EOQ = $\sqrt{2DC_o/C_h}$, where $D$ is annual demand, $C_o$ ordering cost per order and $C_h$ carrying cost per unit per year.

Process: estimate consumption from the work schedule, fix lead time and safety stock, compute EOQ, place an order at ROL, check on receipt, and review levels when the rate of work changes.

ABC classification (graphical)

Items are ranked by annual consumption value (quantity x rate), highest first, and the cumulative percentage of value is plotted against the cumulative percentage of items. The curve is steep at first and then flattens, and is divided into three zones.

 Cum. % value
 100 |           ______________ C
  90 |        __/
  80 |      _/    B
     |    _/
     |   / A
  50 |  /
     | /
   0 +--------------------------
      10   30           100  Cum. % items
 A: ~10-20% items, ~70-80% value
 B: ~30% items,    ~15-20% value
 C: ~50-60% items, ~5-10% value

Analysing value of construction materials by value engineering

1. Prepare the list of materials with quantity and rate; classify by ABC. Apply VE mainly to A items, which give the largest saving.
2. For each A material, state its function (for example, cement: binding; steel: tension resistance).
3. Check whether the same function can be provided at lower cost: alternative grade, local material, standard size, or different supplier.
4. Evaluate alternatives by cost, quality, availability and durability, using value = function/cost.
5. Select and specify the best alternative, then include it in the tender or purchase order.
6. Review the result: saving in cost without loss of performance.

Inventory planning for repetitive (regularly used) materials

Materials such as cement, sand and bricks are used continuously, so their stock is kept between a maximum and a minimum level by ordering a fixed economic quantity whenever stock falls to a reorder level.

 Stock
  |\        Max level
  | \      /|\       /|
  |  \    / | \     / |
  |ROL.\../..|..\../..|.. reorder level
  |     \    |   \    |
  |Safety stock (min)--|-------
  |__|_lead_|__|_lead_|__ Time
       time

Quantities:

• Reorder level (ROL) = daily consumption x lead time + safety stock
• Maximum level = ROL + EOQ - (minimum consumption x minimum lead time)
• Minimum (safety) level = ROL - (normal consumption x normal lead time)
• Average stock = Minimum level + EOQ/2
• EOQ = $\sqrt{2DC_o/C_h}$, where $D$ is annual demand, $C_o$ ordering cost per order and $C_h$ carrying cost per unit per year.

Process: estimate consumption from the work schedule, fix lead time and safety stock, compute EOQ, place an order at ROL, check on receipt, and review levels when the rate of work changes.

ABC classification of the given materials

Annual value = quantity x rate.

Class limits taken as A up to about 75%, B to about 90%, and C the rest. Thus A: steel re-bar, tiles; B: cement; C: marbles, brick, aggregate, sand.

Significance of classification

• Management attention and control are concentrated on a few A items that carry about 74% of the value.
• Reduces inventory carrying cost; A items are ordered often in small lots, C items in bulk.
• Helps in selecting suppliers and in negotiation on A items.
• Reduces the chance of shortage of critical items.
• Saves time and effort in record keeping and purchasing.

Classification basis

The ABC classification (annual consumption value basis) is the most beneficial for planning construction materials. It shows the few high-value items (steel, cement) that need tight control, ordering and supplier follow-up, and the many low-value items that need only simple control, so effort and capital are used where the saving is greatest.

Data and assumptions

• Annual demand $D = 6000$ bags; working days = 200, so daily use = 6000/200 = 30 bags/day.
• Ordering cost $C_o =$ Rs 25,000 per order; lead time = 5 days; safety stock = 190 bags.
• Storing charge = 15% of unit price per year. The unit price is not given, so it is assumed as Rs 900 per bag; then $C_h = 0.15 \times 900 =$ Rs 135 per bag per year.

EOQ

So about 1,491 bags per order (about 4 orders a year).

Goods in transit (GiT)

Yes. The supplier takes 5 days to deliver, and consumption continues in this period, so material ordered but not yet received is in transit:

Re-order level

Answer: EOQ = 1,491 bags (for the assumed Rs 900/bag), GiT = 150 bags, re-order level = 340 bags.

Data

$D = 20{,}000$ bags/year, $C_o =$ Rs 10,000/order, $P =$ Rs 900/bag, carrying cost = 5% of price, so $C_h = 0.05 \times 900 =$ Rs 45 per bag per year. Working year = 365 days, so daily use = 20,000/365 = 54.79 bags/day. Safety stock = 10 days, lead time = 5 days.

EOQ

Stock levels

• Safety (minimum) stock = 10 x 54.79 = 547.9 bags $\approx$ 548 bags
• Lead-time consumption = 5 x 54.79 = 274.0 bags
• Re-order level (ROP/ROL) = 273.97 + 547.95 = 821.9 bags $\approx$ 822 bags
• Maximum stock level = safety stock + EOQ = 547.95 + 2,981.42 = 3529.4 bags $\approx$ 3,529 bags
• Minimum stock level = safety stock $\approx$ 548 bags
• Average stock level = (3,529.4 + 547.9)/2 = 2038.7 bags $\approx$ 2,039 bags

Total inventory cost

• Number of orders = 20,000/2,981.42 = 6.71 per year
• Ordering cost = 6.71 x 10,000 = Rs 67,082
• Carrying cost = (EOQ/2) x 45 = 1,490.71 x 45 = Rs 67,082
• Total ordering + carrying cost = Rs 134,164
• Purchase cost = 20,000 x 900 = Rs 1,80,00,000

Answer: EOQ = 2,981 bags; ROL = 822 bags; maximum = 3,529 bags; minimum = 548 bags; average = 2,039 bags. Total inventory cost (ordering + carrying) = Rs 134,164; including purchase cost, Rs 18,134,164.

Economic order quantity

EOQ is the order size that makes the total of ordering cost and carrying cost a minimum:

where $D$ is the annual requirement, $C_o$ the ordering cost per order and $C_h$ the carrying cost per unit per year.

Calculation

$D = 1000$ t, $C_o =$ Rs 10,000, carrying cost = 15% of Rs 90,000 = Rs 13,500 per tonne per year.

Number of orders = 1000/38.49 = 26.0 per year.

Re-order point

Lead-time consumption = 4 days x 50 t/day = 200 t. Safety stock = 50 t.

Answer: EOQ = 38.49 tonnes (about 38.5 t); re-order point = 250 tonnes.

A, B and C categories

Materials are classified by annual consumption value (quantity x rate):

• A: few items (about 10-20%) forming about 70-80% of total value (cement, steel); strict control.
• B: about 30% of items with about 15-20% of value (bricks, aggregate, tiles); moderate control.
• C: many items (50-60%) but only 5-10% of value (nails, binding wire, small tools); simple control.

EOQ of cement

$D = 12000$ bags, $C_o =$ Rs 10,000, $P =$ Rs 750/bag, $C_i = 15\%$, so carrying cost $C_h = 0.15 \times 750 =$ Rs 112.5 per bag per year.

Orders per year = 12000/1460.6 = 8.2.

Answer: EOQ $\approx$ 1,461 bags.

Economic Order Quantity (EOQ) is the quantity of material to be ordered each time that gives the lowest total of ordering cost and carrying (holding) cost per year. It is $EOQ=\sqrt{2DC_o/C_h}$, where $D$ is annual demand, $C_o$ ordering cost per order and $C_h$ carrying cost per unit per year.

Material wastage standard

A wastage standard is the permitted percentage of loss of a material during handling, storage, cutting and use, taken in estimates and rate analysis. Consumption above the standard is treated as excess wastage and must be investigated. Typical allowances: cement 2-3%, sand 5-10%, aggregate 5-10%, bricks 5%, steel bars 3-5% (cutting loss), tiles 5-10%, paint 5%, concrete 2-3%.

Uses: fixing the quantity to be purchased, comparing actual with standard consumption to judge the site efficiency, and controlling cost.

Application of value engineering in material procurement

VE studies the function of each material and gets the same function at the lowest total cost:

1. Rank materials by ABC analysis and apply VE to high-value (A) items.
2. Define the function and required specification of each item; remove unnecessary requirements (over-specification).
3. Generate alternatives: local or substitute materials, different grades, standard sizes.
4. Evaluate alternatives on cost, quality, durability, availability and life-cycle cost.
5. Use bulk or contract purchase, supplier near the site, and reduced transport and handling.
6. Choose the best-value alternative and write it into the purchase order; review savings.

Example: using PPC cement for plain work and block masonry in place of brick, if function and strength are the same, but with lower cost and less wastage.

Reasons of excessive material wastage

1. Poor storage: cement hardening by moisture, rusting of steel, damage of bricks and tiles in the open.
2. Careless handling and transport: breakage, spillage during loading and unloading.
3. Over-ordering and obsolete stock: unused, expired material.
4. Poor estimating and cutting plans: unsuitable bar lengths, tile sizes, giving large offcuts.
5. Rework due to design change or poor workmanship; mistakes in setting out.
6. Poor supervision and lack of skilled labour; wrong mix proportions, over-mixing.
7. Theft and pilferage because of weak security and records.
8. Bad site layout: materials stored far from use or rehandled.
9. Weather effects, such as rain on concrete or unprotected sand.
10. Poor quality materials that are rejected.

Preventive measures

• Safe, covered, well-drained storage; stack cement off the floor, FIFO issue.
• Order as per EOQ and the work programme; buy standard sizes.
• Cutting plans for bars and pre-planning of tile and block layout; use of precut and prefabricated items.
• Training of workers and strict supervision; check mixes and batching.
• Proper handling methods and mechanical aids; protect from weather.
• Stock records, issue against requisitions, and security measures.
• Fix wastage standards, compare actual consumption, and recycle materials where possible (reuse of formwork, crushed concrete).
• Good site layout, minimising handling.

Proper storing preserves quality, avoids wastage and keeps materials ready for use. Main considerations:

General considerations

• Location: near the work and access road, on firm, dry, well-drained, level ground, away from the working area and traffic, with enough space for turning vehicles.
• Protection from rain, sun, wind, moisture, fire and theft; fencing, security and lighting.
• Accessibility and sequence: use first-in first-out (FIFO) and keep items of different grades apart; labelling.
• Safety: keep fuel, explosives, bitumen, and paints separate and away from fire.
• Records: stock register and regular inspection.

Specific materials

Good stacking prevents damage, wastage and accident, and helps counting and issue.

Material inventory is the stock of construction materials held at the store or site (cement, steel, bricks, aggregate, fittings) to ensure continuous work, as well as the system of recording and controlling it.

Types

• Raw materials and consumables; work in progress; spare parts and tools; safety (buffer) stock.

Costs

• Ordering cost: preparing and placing orders, transport.
• Carrying cost: capital interest, storage, insurance, deterioration, theft.
• Shortage cost: idle labour and delay when stock runs out.

Control

• ABC analysis to focus control on high-value items.
• EOQ to find the order size, and a re-order level to decide when to order: ROL = daily use x lead time + safety stock.
• Stock register (bin card), goods received note and issue by requisition; periodic physical verification.

Good inventory control keeps stock low enough to save capital, yet high enough to avoid delay.