Topic 1: Construction Materials

Management and Control

Materials Management
A. Generally
Materials management is an important element
in project planning and control.
Materials represent a major expense in
construction (40% to 60% of the cost of all
construction works-these percentages vary
according to the type of works being
undertaken and the exact methods of
construction)

Often the difference between a profit and a

loss on a building contract is attributable to the
efficiency with which materials are procured
and utilized.
- minimizing procurement or purchase costs
presents important opportunities for reducing
costs.
Poor materials management can also result in
large and avoidable costs during construction.

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Example:
If materials are purchased early,
• Capital may be tied up and interest
charges incurred on the excess inventory
of materials.
• Materials may deteriorate during storage
or be stolen unless special care is taken.
For example, electrical equipment often
must be stored in waterproof locations.
Delays and extra expenses may be incurred if
materials required for particular activities are
not available.
Accordingly, insuring a timely flow of material
is an important concern of project managers.
Materials management:
• During the monitoring stage in which
construction is taking place.
• Decisions about material procurement-
during the initial planning and scheduling
stages.
The availability of materials may greatly
influence the schedule in projects with a fast
track or very tight time schedule:

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 Sufficient time for obtaining the necessary
materials must be allowed.
In some case, more expensive suppliers or
shippers may be employed to save time.
Efficient materials management involves:

1. Purchasing the right quality of materials

2. In the required quantities, and
3. Ensuring the availability on site at the
right time.

a) Quality Aspects of Materials

The contractors must know exactly the quality
of materials required for the works to avoid the
acquisition of materials unfit for their intended
purposes.
The quality refers to;

• Their chemical and physical dimensions

• Properties in use
Example: Brick – there is considerable
diversity in term of hardness, strength,
surface finish and colour.
In cases where the quality or standards of
materials are specified by the designers, the

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contractor has no choice but to purchase and
use the materials as specified in the contract.
In other areas, such as Turnkey Contract,
choice of materials is left to the discretion of
the contractor and the contractor in this case
must have a full knowledge of possible
substitutes both between and within materials
groups in order to maximize his profit.
The contractor needs to search for alternative
materials which either match all the existing
properties of the current material but yield a
lower unit cost, or else provide additional
properties for the same unit cost.
He is also required to have the knowledge of
the available suppliers for the various materials
in the market.

b) Sufficient quantity of materials

The amount of materials on site must always
be sufficient for the works.
Shortage of materials will lead to the
disruption of the work program and result in
delays in the completion of the project and an
increase in project cost.

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On the other hand, if the materials purchased
exceed the actual amount required for the
work, there will be wastage of the material
which involves over expenditure and also
unnecessary storage costs.

c) Availability of Materials on Site at the Right

Time
Ideally, contractors will require materials to
arrive on site just at the time when they are
needed and therefore materials should be
ordered to a project plan.
Where materials arrive too early, they may:
i. be subject to deterioration on site –
some materials are perishable and likely to
deteriorate in storage.
Moreover, storage facilities o site may not
be as good as that can be provided by the
manufacturers or suppliers.

ii. Be depleted by pilferage – due to theft

and his leads to higher security cost.

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iii. Cause access problem around site –
especially when the items are bulky, such
as brick and sand, and the site is not
properly organized.
Some of the materials may have to be
removed altogether and this leads to
additional cost to the contractor.
iv. Cause increase in storage cost – bigger
storage facilities may be required or else
some of the suppliers have to be kept
somewhere else at considerable extra
expense.

v. Cause increase in insurance cost –

especially for expensive materials.

vi. Cause working capital to become tie up

in stocks of materials – Materials have to
be paid far earlier than is strictly
necessary, a situation the contractor will
be very anxious to avoid.

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Where materials are late in arriving on site,
they may:
i. Cause costly delays in the construction
program – Labour cost increases as the
workforce remains idle because of non
delivery of key materials and also the
production morale will be damaged due to
frequent stoppage of work.

ii. Result in late completion – Higher

interest charges on borrowed capital as the
time period is extended.

The effective method to ensure that items will

available on the required date i.e without the
need to accept premature deliveries, is by
warning the suppliers of the intention to
purchase. This can be done by issuing the
purchase orders as soon as the requirements
become known.

Normally there are two ways of specifying the

delivery dates:

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 i. Specific instruction on each order –
delivery will not be needed until a
certain date.

ii. Deliveries can be scheduled in batches

– a ‘call of’ procedure.
The deliveries in this case are to take
place over a long period i.e the stocks
being called off as and when needed,
at agreed rate.

Generally, the amount of control on the

delivery depends on two factors; volume and
value.
Control will always be applied more vigorously
to parts which involve greatest investment of
either storage space or money.
For inexpensive items such as nails, screws,
tags and so forth, it would be nonsensical to
attempt to order these items to any plan.

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The whole quantity could be ordered in
advance and with the generous supply to
spare.
Rigid control would not be necessary as the
application of such control could cost more
than the value of the materials themselves.

With most commonly utilized materials, there

is unlikely to be any severe problem in
obtaining satisfactory delivery.

Most types of brick, timber, cement and glass

are widely available from local suppliers and
very little forward planning of orders is
necessary.
However, to minimize the risk of delays in the
delivery due to unforeseen circumstances, for
examples: materials delivered may be
defective or of the wrong specifications, safety
margin still need to be allowed for when
placing orders for these materials.
Special attention is required from the
contractor where:

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i. Large quantities are required in
relatively short notice – as a result of a
variation for example. The contractor has
to place order as soon as the need arises
and he must also identify the alternative
source of supply for the material in the
market.

ii. Materials of a special quantity or

non-standard types of components -
for example, materials which may only be
available from a single source of supply.
The contractor must then ensure that
orders are placed sufficiently early to allow
for delays in delivery.

iii. Imported materials – ditto

The contractors must also know the building

material supply industry and understand the
channels of distribution for commonly used
materials.

If a firm is to acquire its materials at the best

price on the best terms and conditions, it will
need to research the structure of the supplying
industry and identify the alternative sources of
supply.

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Advantages:

A great opportunity for the construction

industry to;

• reduce cost and increase profit

• Better materials use can, additionally,
result in improved project, economy,
conservation of natural resources and
reduced pollution.

• A few hours spent in planning can produce

project cost savings through:

1. Reducing the amount of materials

purchased
2. Better use of the materials
purchased
3. Reduced labor in handling materials
and having to purchase make-up
materials
4. Reduced waste and disposal costs

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B. Purchasing Procedures
Construction firms who typically produce
higher profit margins, pay much more
attention to purchasing materials and often
employ specialist staff to carry out purchasing
and to ensure that materials are procured at
the lowest possible cost.
A competent purchasing department is very
important to the overall organization and a
prerequisite for the successful and profitable
completion of any job.

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 The Purchasing Cycle
a) Contractor/user/buyer who starts the
purchasing cycle

The purchasing cycle is initiated by the

discovery of a need for raw materials or
components.

The origin of this discovery may lie in stock

control, stores, engineering or production
control, depending on the type of goods and
the organization of the firms.

Once the need has been recognized, action

will be started by a request to the company’s
purchasing department.

This may be in the shape of a purchase

enquiry, asking the purchasing department
to obtain details of suppliers and their quoted
prices and delivery times.

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b) Supplier selection by contractor

The first responsibility of the buyer is to

select a suitable source of supply. The
intended goods may be;

i. Supplied by one supplier only. This is

normally for highly specialized goods, for
examples, certain type of sanitary or
light fittings, stadium seats and so on.

The sole supplier may also be the agent

for oversea products such as Italian tiles,
for example.

The purchasing manager needs to

identify the source of supply and he has
no choice but to select that supplier.

ii. Manufactured by one firm but there is a

choice between different stockists or
suppliers.

iii. Manufactured and distributed by many

firms.

For cases ii and iii above, the supplier must

be chosen after a process involving a

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collection of several competitive quotations.
Normally, the criteria for the selection of a
supplier are:

i. Price – the lowest-priced quotation is

naturally preferred.

ii. Time – the supplier must be able to

meet the delivery time as required by the
buyer.

iii. Quality – must conform to buyer’s

requirements i.e fit for its intended use.

c) Order preparation by contractor

(purchase order)

The order has to be type written and sent to

supplier by hand or fax or e-mail or
registered post to ensure that the order is
safely delivered to the supplier.

Unless emergency measures are

contemplated, two weeks should always be
regarded as a minimum purchase lead time,
even for ex-stock quotations.

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The specifications in the purchase order
consist of two parts:

i. Commercial Conditions of Purchase

The most obvious commercial terms to be

stated on a purchase order are;

• The quantity of goods or equipment to

be supplied

• The agreed purchase price, as quoted

by the customer and accepted by the
purchaser.
• The delivery date required

• The address to which the finished

goods are to be delivered.

• Invoicing instructions.

• A purchase order serial number, for

identification, filling and retrieval.

Example of a purchase order form

It is usual to print a set of standard

conditions of purchase on the reverse of such
forms to protect the interest of the buyer.

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 One such set of purchase conditions may
include the following:
• Definitions – buyer, seller, goods,
contract etc.

• Payments – Payment upon delivery

• Prices – Fixed for the duration of the

contract, not subject to escalation charges

• Quality and descriptions – to conform to

the descriptions

• Indemnity – Seller to replace defective

components that may occur within 12 months
after delivery.

• Patents – Seller is responsible for any

infringement of any patent, trademarks, etc.

• Loss and damage – all responsibility shall

lie with the seller for whatever cause.

• Rejections – buyer has the right to reject

inferior or damaged goods at any time.

• Arbitrations – any dispute to be referred

to arbitration.

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 Example of Purchase Order Form
ii. Specification of Goods

This is important to ensure that materials of

the right quality are delivered. The
specification may be as follows:

- By referring to a manufacturer’s catalogue

or part numbers – normally for standard
components or materials such as paint,
glass, sanitary fittings, etc.

This is a sufficiently rigid description of

goods but buyer needs to be careful as the
supplier normally reserves the right to
change the design or properties of goods
without notice.

- By providing own drawings and

specifications – this is a good practice on
the part of the buyer especially for made to
order or special materials such as doors,
windows, ceilings etc.

It removes ambiguities in the requirements

but it costs considerably more to produce
drawings, drafting detailed descriptions,
etc.

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d) Supplier Receipt

When the chosen supplier has received the

order, he will be expected to return an
acknowledgement confirming the broad
details of price and delivery.

These details must be compared with the

original quotations and the buyer will query
any discrepancy.

e) Expediting by Contractor

As far as the buyer is concerned, the period

which follows will be one of waiting, and a
great deal of reliance will have to be placed
on the ability of the supplier to meet his
obligations.

This is also the time for expediting instead of

doing nothing.

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The expeditor’s main tasks are:

i. To remind the supplier of his

obligations i.e to make delivery on the
agreed date.

ii. To chase up goods which are overdue

for delivery.

The aims of expediting are:

i. To ensure that scheduled deliveries will

be achieved.

ii. To provide adequate warning of any

impending delays.

Common expediting method is as follows:

i. Placing a note on the purchase order

(in file or computer) of when a
reminder should appropriately be
given to the supplier.

ii. On the specified date, the expeditor

to issue reminder to the supplier

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 asking supplier to confirm that he is
going to meet delivery commitment.

This can be done through telephone,

e-mail, fax or registered post.

If difficulties encountered in obtaining goods

on time, the alternatives available to the
buyer are:

i. To locate alternative source of supply

for the material.

ii. To initiate a new method of approach

to the original supplier. For examples,
by offering to provide own transport to
collect the goods or asking a more
senior officer such as company’s
director or project manager who
normally carry more weight, to deal
with the supplier.

iii. To seek advice from the designers by

suggesting a more readily available
materials or substitutes.

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 f) Delivery by Supplier

The supplier is expected to deliver the goods

of the right quality and quantity and on time.

The buyer to keep the invoice for records

and to monitor the material cost and also for
some construction contracts, to claim for
fluctuation of prices.

g) Goods inwards inspection by

contractor

The consignment must be examined by the

goods inwards inspectors to make sure that,

i. No damage to the goods has

occurred in transit

ii. Right quantity is supplied

iii. Right nature of goods is supplied

If the goods are received according to the

exact order specifications, the good inwards
department will inform;

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i. The account department so that
payment of the supplier’s invoice can
be made

ii. The purchasing departments for its

action to cut short any further
expediting action and closing the books
on particular order.

If the consignment is not received in a

satisfactory condition, the goods inwards
department will;

i. Return the goods accompanied by

goods rejection notes.
ii. Inform the account department not to
make payment of the supplier’s
invoice.
iii. Inform the purchasing department for
its action to redouble expediting effort.

h) Stores receipt by contractor

When the correct articles have been received

they will be passed into stores to await
withdrawal for actual use.

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 The stock records must be updated to show
the addition of the new arrivals into stock
holding.

During the progress of the construction work,

there will be a gradual depletion of stock as
usage takes place until the stock records
indicate a reorder need. Then the whole
purchasing cycle is set in motion once more.

C. Storage Procedures
Storage forms the last link in the material
control chain.

Whichever method of purchasing has been

used and whatever type of goods involved,
once the goods has been accepted by the
contractor a decision on storage has to be
made.

Improper storage could lead to problems on

site: accessibility problem on site, damage
materials, theft and so on.

Most problems arising out of the physical

storage of goods could be resolved by
implementing a proper storage procedure,
which as follows;

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Storage Procedures

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a) Accommodation – requirements for
floor space, shelving, stockyards, etc.

For example, a large lorry on site

crammed with goods which can not be
unloaded because there is nowhere to
put them.

Space problems occur mainly due to lack

of foresight and by inadequate planning.
Project manager must know;

i. Types of materials required for the

job – to provide suitable storage
facilities. Examples: Shelves for
pipe fittings, stockyards for
aggregate, sand, etc.

ii. Amount of materials to be ordered

each time – to provide sufficient or
suitable space.

iii. When materials to be delivered –

to be ready with the necessary
storage facilities for the materials
to be delivered.

An effective method is to provide the

material controller with a schedule of

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purchasing activities from the purchasing
department.

b) Labeling for unambiguous

identification

Correct labeling of items is essential to

avoid issuing mistakes.

Stores staff can not be expected to

identify all the varied items by their
appearance, for example, to determine
whether a valve is a sluice valve or a
gate valve.

A recommended solution is identify;

i. Parts and fittings such as pipe

fittings, ironmongery, tiles etc. by
giving numbers to them. The
numbering of parts may be based
on the manufacturer’s catalogues
or as invented by the stores staff.

ii. Raw materials such as timber,

cement etc. by giving the
appropriate SIRIM specification or
by cross-section dimension and
thickness.

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c) Location – the ability to find the
goods when they are needed.

Location is a problem directly

proportional to the size of the stores.

Example: A certain piece of item has

been known to vanish so that
replacement had to be ordered to satisfy
immediate project needs.

Then, when the job was finished, the

missing item turned up on the self at the
back of the store.

The remedy is by:

i. Labeling each shelf, bin, pigeon

hole, rack or hook with an ‘address
code’ letter or number. Examples:
pigeon hole A/1, rack 2, etc.

ii. Preparing an index of all stock to

refer addresses to the appropriate
items, listed in part-number order.

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An item can be found easily,
provided that the part number is
known.
Example: 12mm diameter stopcock
in pigeon hole a/1 i.e: by matching
part-number with the address of
the item.

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 Example of a stock index form
d) Preservation – problems of limited
shelf-life, contamination and storage
environment.

Many materials are susceptible to

deterioration through mechanical shock,
heat or damp and they must be suitably
protected.

Example: Cement should be placed on

raised floor inside the store. If store
outside, they must be properly covered.

Cement can be easily damaged if

exposed to weather and should be issued
in a first-in, first-out sequence.

e) Handling Methods and Equipment

Proper handling is important to avoid

wastage or damage to the materials.

Fragile items such as glass, sanitary

fittings, etc should be carefully handled
by men or by using forklift.

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Goods in soft packages such as cement,
lime etc and goods in tin such as paint,
adhesive etc. should also be handled
carefully and hook must never be used
when dealing with these materials.

f) Clerical Routine – Manual or

computerized by stores staff

This is designed to provide accurate

feedback of all material withdrawals to

i. Stock control department. This

department relies on the given
information to update its own
records and to generate stock
replacement orders if necessary.

ii. Cost department: the information

is necessary to determine the
amount spent on materials to date
as well as for claims of payments
purposes.

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g) Security – prevention of theft, willful
damage or misallocation.

Security of stock demands that:

i. The storage areas should be locked

up outside working hours.

ii. Stores entry should be restricted to

authorized storekeepers.

iii. Security personnel to be employed

if necessary.

These steps are necessary to prevent:

i. Theft – by either own staff or

outsiders.

ii. Illegal withdrawal – by workers

or contractor himself. Illegal
withdrawal from stores may
happen to replace items lost or
damage on site or to overcome
shortage materials on other
sites.

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