Planning Construction Materials [5 Hours]

3.1 ABC Classification of Construction Materials 2080207920772074207320722070

Importance of Material Management 2074

Material management is the systematic planning, organizing, and controlling of the flow of materials from their initial purchase through internal operations to the service point. Its importance in construction includes:

1. Cost Control: Materials account for 50–70% of total project cost. Effective management directly reduces project expenditure.
2. Schedule Adherence: Timely availability of materials prevents work stoppages and project delays.
3. Quality Assurance: Proper material management ensures that specified quality standards are maintained through proper procurement, inspection, and storage.
4. Wastage Reduction: Systematic planning and control minimizes material wastage during handling, storage, and usage.
5. Cash Flow Management: Optimal inventory levels prevent blocking of capital in excess stocks while ensuring materials are available when needed.
6. Productivity Improvement: When the right materials are available at the right time and place, workforce productivity increases.
7. Reduced Pilferage & Theft: Systematic inventory records and stock controls minimize losses due to theft and unauthorized use.

Classification of Construction Materials 2073

The primary purpose of classifying materials is to control their quality, cost and timely supply. Factors affecting the classification of materials are:

• Storage space
• Useful life
• Supply reliability
• Inventory cost
• Ease in construction
• Transportation factor
• Prices
• Procurement time and sources
• Life of the project

Construction materials can be grouped into any one or a combination of the following categories:

• (a) Bulky and non-bulky materials
• (b) One-time purchases, repetitive use, and minor materials
• (c) Vital, Essential and Desirable materials — VED Classification
• (d) Foreign, imported materials
• (e) High, Medium and Low-priced materials — HML Classification
• (f) High usage value, medium usage value and low usage value materials — ABC Classification

The most commonly used method for classifying construction materials groups them into high usage value, medium usage value and low usage value. This classification is achieved using ABC Analysis.

ABC Analysis 2080 2079 2074 2073 2072 2070

ABC analysis is the method of classifying items involved in a decision situation on the basis of relative importance. Its classification may be on the basis of monetary value, availability of resources, variations in lead-time, part criticality to the running of a facility, customer parts unique to that product, and others. The ABC analysis suggests that inventories of an organization are not of equal value. Thus, the inventory is grouped into three categories (A, B, and C) in order of their estimated importance.

'A' Items — High Priority

• Tightest control, frequent deliveries, close follow-up, and accurate records
• Planning and scheduling done by MRP (Material Requirements Planning), DRP (Distribution Requirements Planning), EOQ (Economic Order Quantity) or JIT (Just in Time)
• 10% of inventory volume accounts for 70% of total inventory value

'B' Items — Medium Priority

• Medium priority when low or out of stock; good records maintained
• Important, but less important than 'A' items and more important than 'C' items
• EOQ and other lot sizing methods can be used effectively
• 20% of inventory volume accounts for 20% of total inventory value

'C' Items — Low Priority

• Simplest method of control; Min/Max used for ordering
• Marginally important; usually expensed with no detailed records
• 70% of inventory volume accounts for 10% of total inventory value

Worked Example: ABC Classification 2077

Example Data:

Step 1: Calculate Annual Value (already done above). Total = Rs 2,83,30,000

Step 2: Arrange in descending order of annual value and calculate cumulative %:

Result: A items (Steel, Cement) = 20% of items, ~79% of value. B items (Sand, Aggregate) = 20% of items, ~17% of value. C items (remaining 6) = 60% of items, ~4% of value.

Significance: A-class items (Steel, Cement) require tightest control — frequent orders, careful rate analysis, strict quality checks, and accurate record keeping. B-class items need moderate control. C-class items can be bulk-ordered with simple Min/Max control.

Advantages of ABC Analysis 2080

• It facilitates selective control
• Saves valuable time of management
• Eliminates unnecessary paperwork in various other control
• Categorization of materials makes cost-effective and control possible

Disadvantages of ABC Analysis

• A wrong classification leads to cost increment and schedule delay
• The analysis is unsuitable during market fluctuations

Methodology (Procedural Steps) of ABC Analysis

1. List all the materials required in the construction project. Care should be taken that none of the items are missed.
2. Calculate annual values of all items. Annual value = Annual consumption (or inventory or usage) × Unit cost.
3. Arrange these items in descending order on the basis of their respective consumption value.
4. Express the annual usage value of each item as the percentage of the total value of all items. Also compute the cumulative percentage of consumption value.
5. Obtain the percentage value of each item. If number of items is 20, each item = 100/20 = 5%. Also find the cumulative of these values.
6. Draw a graph between the percentage of items on X-axis and annual percentage value on Y-axis. Mark cut-off points where the slope of the graph changes.
7. In general: 70% of total value covers 10% of items (A group); 20% of value covers 20% of items (B group); 10% of value covers 70% of items (C group).

3.2 Material Wastage Standards 2081207920712070

Definition of Material Wastage Standard 2081 2071

Material Wastage Standard is the predetermined acceptable percentage of materials that is expected to be wasted during handling, storage, transportation, and execution of construction work. It is expressed as a percentage of the theoretically calculated quantity of materials derived from the Bill of Quantities (BOQ).

• It accounts for inherent wastage associated with all types of materials in construction.
• Quantity surveyors must include standard wastage percentages in material estimates to ensure adequate provisioning.
• The actual quantity to be provisioned = Theoretical quantity × (100 + Standard Wastage %) / 100
• Standard wastage depends on: nature of work, type of material, and method of application.
• Example: Cement has 2% standard wastage, sand 3%, reinforcement steel bars 10%, steel mesh 15%.

Material wastage occurs during usage, handling and the execution of work. Materials quantity estimates are prepared by the quantity surveyors from the contract drawings. But there is inherent wastage associated with all types of materials. Material surveyors must include standard wastage in materials estimates.

Wastage of materials is expressed in terms of percentage of materials calculated theoretically from quantities of work involved and is termed as standard wastage.

The materials to be provisioned for wastage are:

Theoretical quantity of materials × (100 + standard wastage %) / 100

Standard wastage of the construction materials depends upon many variables, such as:

• The nature of work
• Type of materials
• The method of application

Typical Standard Wastage in Housing Projects

Importance of Material Wastage Standards 2079

1. Accurate Estimation: Wastage standards enable accurate estimation of material quantities, ensuring sufficient materials are ordered to complete the work without shortages.
2. Cost Control: Knowing the expected wastage helps in budgeting the correct material cost. Without wastage standards, either excess materials are ordered (blocking capital) or insufficient quantities lead to work stoppages.
3. Performance Benchmarking: Actual wastage can be compared against standard wastage to identify areas of inefficiency and take corrective action.
4. Tender Preparation: Contractors use wastage standards while preparing rate analysis and bid estimates. This ensures competitive yet profitable pricing.
5. Accountability: When wastage exceeds standards, investigation is warranted — helping to identify and address mismanagement, theft, or poor workmanship.

Controllable Wastage (Causes) 2079 2070

Standard wastage caters for wastage during utilization. There are other kinds of wastage which can be controlled significantly through good management practices:

• Design-related: Wastage on account of designers specifying non-standard materials, having unattainable specifications
• Purchasing-related: Wastage due to incorrect purchasing — over-buying, wrong buying, unnecessary buying and untimely buying
• Transport & handling: Wastage in transportation and handling, including breakage and pilferage
• Storage-related: Wastage during storage resulting from deterioration, improper storage, breakage, obsolescence, and theft

Preventive Measures for Material Wastage 2070

1. Proper Storage Facilities: Construct adequate storage sheds, keep cement in dry areas above ground level, store steel bars on raised platforms to prevent rusting, and protect moisture-sensitive materials from rain.
2. Trained Workforce: Train workers in proper material handling techniques. Careless handling of bricks, tiles, and glass leads to significant breakage.
3. Accurate Measurement & Mix Design: Use proper batching for concrete (volume/weight batching), avoid excess water in concrete mix, and ensure correct mortar ratios to prevent wastage from rejected/reworked work.
4. Proper Cutting Plans: For steel reinforcement, timber, and pipes, prepare cutting schedules that minimize off-cuts and scrap. Use bar bending schedules for rebar.
5. Inventory Control: Maintain proper stock records using ABC analysis. Issue materials only against authorized requisitions. Conduct periodic physical stock verification.
6. Security Measures: Employ watchmen, install CCTV, restrict access to material stores, and maintain gate pass systems to prevent theft and pilferage.
7. Quality Inspection on Receipt: Inspect materials upon delivery for quality and quantity. Reject substandard materials immediately rather than discovering defects during use.
8. Just-in-Time Delivery: For perishable materials (ready-mix concrete, lime), schedule deliveries close to usage time to prevent deterioration.

3.3 Material Provisioning Process 2080207820712069

The determination of type, quantity, and specification of construction materials needs a detailed study of total contract documents, including bill of quantities, drawings, specifications, and vendors enquiries. Such study consumes considerable time and effort.

Steps in Material Provisioning Process 2080 2078 2071 2069

1. Study contract documents (BOQ) to identify items and quantities required for purchase.
2. Identification and classification of vendors/sources of supply and pre-qualification.
3. Indent and client’s approval.
4. Finalize and monitor supply orders.
5. Monitor order execution.
6. Expediting the materials supply.
7. Conduct pre-shipment inspections where necessary.
8. Inspect goods received at the site and initiate claims warranted for in-transit losses/theft/damages, short receipts, and rejections of items.
9. Close the contract after confirming no residual demand from concerned site. Inform planning, costing and the project manager accordingly.

Broadly, the material provisioning process involves:

• (a) Identification of materials package
• (b) Materials quantity estimation
• (c) Scheduling materials requirement
• (d) Materials procurement inquiries
• (e) Finalization of a source of material procurement
• (f) Monitoring materials delivery schedule

Material Procurement in Rural Areas 2080

As a project manager for a building project in a rural area of Nepal, the material provisioning process requires special considerations:

1. Study Contract Documents & Identify Requirements: Thoroughly review BOQ, drawings, and specifications. List all materials with quantities, specifications, and required delivery dates aligned with the construction schedule.
2. Classify Materials (ABC Analysis): Categorize materials into A (cement, steel — high value), B (sand, aggregate — medium), and C (nails, binding wire — low value) to prioritize procurement efforts.
3. Identify Local vs. Non-Local Sources: In rural areas, materials like sand, aggregate, stone, and timber may be locally available. However, cement, steel, plumbing/electrical fittings must be sourced from district headquarters or urban centers. Identify reliable suppliers for each category.
4. Plan Transportation & Lead Time: Rural areas often have poor road access, especially during monsoon. Plan longer lead times (add 1–2 weeks buffer). Arrange transportation — consider road condition, bridge load limits, and seasonal accessibility.
5. Bulk Ordering for Critical Materials: For A-category materials (cement, steel), place bulk orders to take advantage of economies of scale and to avoid delays from repeated small orders. Ensure adequate storage at site.
6. Quality Inspection & Testing: In rural settings, adulterated or substandard materials are common. Arrange for quality testing (especially cement and steel) — either on-site testing or through samples sent to accredited labs.
7. Monitor Supply & Expedite: Track orders and follow up regularly. Maintain buffer stock (safety stock) for critical materials. In rural Nepal, supply disruptions are common due to bandhs, road blockages, and festivals.
8. Record Keeping & Claim Management: Maintain meticulous records of materials received, inspect for damage/shortages, and process claims for any transit losses promptly.

3.4 Material Inventory Basics 208120792078207420712070

Inventory Definition

The term inventory implies the cost of the materials in stock at a time. This stock of materials is held to act as a cushion between supply and demand.

Inventory Management

Inventory management involves the control of the inventories that are in the production and construction process or produced to be sold in the normal course of the firm’s operations. It is a technique to maintain the optimum level of stock of goods. Efficient inventory management helps determine what to purchase, how to purchase, from where to purchase, and where to stock, etc.

In a construction site, overstocking of construction materials will mean high handling cost, and understocking will result in stoppage of work due to lack of inventory.

Need for Planning Inventory

Typically, each construction project starts with zero material stock. If left-outs are disposed of, it ends up with zero stock. For each construction activity, prior to commencement it should have zero stock; it should get replenished regularly and end up with zero stock when the activity is complete.

Inventory management helps to avoid over and under stocking and also helps to maintain the minimum required level and quantity to minimize total inventory cost.

Objectives of Inventory Management

1. To maintain adequate stock of raw materials and finished goods for smooth construction and production.
2. To ensure an adequate supply of required quantity at a reasonable price.
3. To provide the information about inventories for planning and control of inventory.
4. To optimize the investment in inventories by minimizing carrying and ordering cost.
5. To minimize the stock-out and shortage.

Types of Inventory

• (a) Raw materials, equipment
• (b) Work in progress
• (c) Finished goods
• (d) Stock of Cash

Inventory Cost Terminology 2074

Inventory Cost Formulas

Total Ordering Cost (TOC):

TOC = N × O = (A/Q) × O

Where N = Number of orders, O = Ordering cost per order, A = Annual requirement, Q = Order quantity

Total Carrying Cost (TCC):

TCC = (Q/2) × C

Where C = Carrying cost per unit (given in % of unit price)

Cost of Safety Stock:

TSS = S.S. × C

Total Inventory Cost (TIC):

TIC = TOC + TCC + TSS = (A/Q) × O + (Q/2) × C + S.S. × C

Economic Order Quantity (EOQ) 2081 2078 2074 2071

EOQ refers to the quantity of a single purchase order which leads to economy in purchasing inventories. It is also known as re-ordering quantity. It is that level of inventory where the ordering cost is equal to the cost of storage. It is the quantity at which the total inventory cost (TIC) is minimum.

At EOQ: Total Carrying Cost = Total Ordering Cost (TCC = TOC)

Derivation of EOQ

Setting TCC = TOC:

(Q/2) × C = (A/Q) × O

Q² = 2AO/C

EOQ = √(2AO/C)

Total Cost at EOQ (excluding material cost):

TIC at EOQ = √(2AOC)

Total Cost at EOQ (including material cost):

Total = EOQ × Price per unit + √(2AOC)

Stock Levels

Re-order Level / Re-order Point (ROL/ROP)

The level of inventory at which the re-order should be placed.

ROL = Safety Stock + Lead Time × Average Consumption − Goods in Transit

Goods in Transit (GIT)

Goods which have been ordered but not yet received. To check for GIT:

1. Calculate order frequency = Days in year / Number of orders
2. Compare with lead time:
   • If lead time > order frequency up to 2×: GIT = 1 × EOQ
   • If lead time > order frequency up to 3×: GIT = 2 × EOQ
   • If lead time ≤ order frequency: No GIT

EOQ with Quantity Discount

If the supplier offers a certain percent quantity discount for a certain order size:

TIC (discount) = TOC + TCC − Discount on purchase value

Accept the discount offer if TIC of the offered order size < TIC of the existing order size.

3.5 Inventory Planning Process 207920772073

Inventory of Repetitive Materials 2079 2077 2073

Planning for the repetitive materials involves determining the economic order quantity, fixing the maximum and minimum stock limits, the lead time for stock replenishment, and reordering point (ROP) for each item of A and B category construction materials (i.e., high value materials).

The basic simplified model of inventory replenishment pattern depicts:

• Economic order quantity (working stock)
• Safety stock
• Minimum stock level
• Maximum stock level
• Number of replenishment or re-order points (ROP) during the usage period

Inventory of Non-repetitive One-Time Purchase Materials

These are non-regular and mostly one-time purchase items of construction materials. These materials are purchased for a specific use, such as architectural fittings and fixtures, HVAC and electrical works, and movable and fixed equipment. For these items, the commencement of activity and execution completion of job are the key events, with a low average requirement during the execution period.

Infrequently-needed Stores

Stores or items required for various activities. These include minor consumed materials like screws, nails, etc.

3.6 Application of Value Engineering in Procurement of Materials 208120782075207320722071

Definition 2078

Value Engineering is an important tool for materials management. There is virtually no group of materials or service which cannot be value-analyzed. In project environments, where the designs are finalized before the start of the project, there is great scope for value analysis in the materials procurement phase.

As per Indian Standards, Value Engineering is defined as “an organized, systematic, creative discipline aimed at analyzing the function(s) of items, products, services, and procedures and processes, to achieve the required functions at the lowest total cost which includes not only initial cost but also ownership cost covering operation/maintenance, disposal costs, etc. through the desired or specified life cycle of the articles or materials.”

The basic equation of Value Engineering:

Value = Worth / Cost

Materials That Can Be Value-Analyzed

• Raw and semi-processed materials
• Parts, components, sub-assemblies (straight purchase)
• Contractor materials, parts, components, sub-assemblies
• Main items e.g. tiles, paints, polishes
• Maintenance, repairs and operation items
• Transportation and materials handling processes
• Stationery items
• Regular consumption materials
• Plant, machinery, equipment, tools, and appliances
• Power and water supply, utilities

Selection of Materials for Value Analysis

• Select materials of A (High usage value) and B (Medium) categories. Even a small percentage of reduction after Value Analysis for an A item will mean substantial reduction in costs.
• Select materials whose quality, prices and deliveries are not favorable. Value Analysis can aid in finding substitutes that can be obtained from other sources.
• Select materials being imported. Value Analysis can assist in locating domestic substitutes.

Importance of Value Engineering 2071

1. Cost Reduction: VE systematically identifies and eliminates unnecessary costs without compromising quality or function, often achieving 10–30% cost savings.
2. Improved Function: By focusing on function analysis, VE may discover alternative materials or methods that actually improve performance.
3. Better Quality: Value analysis often leads to the selection of more reliable, durable, or appropriate materials and processes.
4. Innovation: The creative phase of VE encourages thinking beyond conventional solutions, leading to innovative approaches.
5. Waste Elimination: VE identifies over-designed or redundant elements, reducing material waste and unnecessary labor.
6. Import Substitution: In Nepal’s context, VE can identify locally available alternatives to imported materials, saving foreign exchange and reducing lead times.

VE Job Plan Phases 2081 2072 2071

Value Engineering follows a structured approach known as the VE Job Plan:

1. Information Phase: Gather all facts — identify the function, current cost, and specifications of the item/process.
2. Creative/Speculative Phase: Brainstorm alternative ways to achieve the same function at lower cost. No idea is rejected at this stage.
3. Evaluation Phase: Analyze each alternative for feasibility, cost, reliability, and performance. Shortlist the best options.
4. Development Phase: Develop detailed proposals for the selected alternatives, including cost comparisons, drawings, and implementation plans.
5. Presentation Phase: Present the VE recommendations to the decision-makers (client/project manager) for approval and implementation.

Value Analysis Checklist

• Eliminate: If the function does not add anything desirable to the end product.
• Alternate: Explore better or cheaper alternatives.
• Standardization: If the component performing functions is non-standard, locate a standard item that serves the purpose at cheaper rates.
• Modification: If the cost of the item is not reasonable in terms of its function, modify or substitute or combine other functions to make it cheaper.
• Consumption reduction: Analyze the process to explore if consumption of the item can be cut down by value analysis.
• Redesigning Component: If the specifications and tolerances are too complex.
• Make the decision: If the method of manufacturing is simple and trouble-free. Analyze the reasonableness of material, labor, overheads and profit.
• Supply source: Locate another dependable source at lesser price or better material at the same price.
• Imported components: Can you do without it? If not, is it possible to obtain it from indigenous sources?

Summary of Key Formulas (Chapter 3)

Important Things to Consider