Table 1. Classification Methods for Construction Raw Materials
Efficient material management can turn a construction project into a profit centre from a cost centre if rational material classification, inventory management, and economical order quantity practices are followed. Most construction companies in India do not appear to have such practices in place. In this work, the benefits of efficient material management practices are discussed and a case study of material procurement schedule in a precast infrastructure company is made. The results indicate that materials were procured without any analysis with reference to their importance, inventory cost control, pre-plan for using available storage space efficiently, seasonality, and other critical factors necessary to ensure smooth progress of the work. The study also reveals the need for developing material management practices designed for construction sites. In conclusion, the paper suggests the importance of following efficient material management practices in construction projects and the need to develop new material management practices suitable for construction sites considering its dynamics and constraints.
Cost and time overruns are a recurring feature in construction projects (Patel, Chaturvedhi, Megha, Katta, Narasimha Prasad, 2015). While this appears to be more common in projects where the Government is the owner, it is prevalent even in private projects. Real estate sector growth is particularly hampered due to cost and time overruns (Rathod & Pimplikar, 2013). While the reasons for the overruns could be several, it is possible to reduce the cost and time overruns through efficient material management at construction sites. With construction materials forming 50-60% of the cost of the project (Kini, 1999), material management is the cost centre for a project. If through efficient management practices cost and time overruns can be reduced, the material management can be looked upon as a profit centre. Minimising material procurement and inventory costs can result in substantial savings in project costs (Patel & Vyas, 2011). Dey (2000) has suggested that ineffective material management practices resulting delay in material availability at construction sites was a major reason for time overrun. Ogunlana, Promkuntong, & Jearkjirm, (1996) have concluded that poor material management practices, shortage of construction materials at project sites, along with several other reasons were responsible for delay in housing projects in Thailand.
The prime objective of material management is effective commitment of the company's funds and having materials of the Right Quality, from Right Source, at Right Price, of Right Quantity, and at Right Time (Chaffey, 2009). Several inventory control techniques, just in time practices are available for material management. However, while employing such techniques, the supply and demand situations are to be looked into for the material management practice to be beneficial or else it could prove to be counterproductive.
Need for efficient material management practices at construction project sites does not appear to have received adequate attention and appreciation. The literature available on this topic is rather limited. In this study, the different techniques for construction material classification and management are discussed. The materials along with their costs are collected from a precast infrastructure company and material management practices being followed are studied. Improved material management practices and economical order quantities are suggested based on material classification and economical order quantity techniques.
Material management at construction project site involves planning, procurement, handling, stocking, waste control, and logistics activities (Kasim & Ang, 2010). Illingworth (2000) defines planning as “understanding what has to be built, and then establishing the right method, in the most economical way to meet the client's requirements”. Through proper planning, holding up of works, wastage of materials, no access for proper storage and handling can all be avoided. Procurement aims at minimising or eliminating disruption of work; achieving minimum investment in reserve inventories; maintaining adequate standards of quality and avoiding duplication, waste and obsolescence (Datta, 2012). Kent (1991) states that procurement is a series of actions like selection of suppliers, vendor rating, price negotiation, issue of supply orders, delivery of materials at site, and so on.
Agapiou, Clausen, Flanagan, Norman, & Notman, (1998) state that the primary focus of the logistics concept in construction is to improve coordination and communication between project participants. This needs to happen during the design and construction phases particularly in the materials flow control process. The logistics concept requires accurate scheduling of materials to programmed delivery dates, keyed to actual site layout, and storage arrangements. The logistics approach also involves a new role for materials suppliers, including early involvement in the design phase and overall responsibility for the flow of information relating to materials. Proper site planning with identification of different types of material moving in a construction site, their entry and exit routes, would help in better logistics management at a construction site. This also ensures better safety practices in a construction site.
Handling of materials at construction sites despite usage of different tools and techniques remains an inefficient process. Tommelein (1994) attributes this to factors like uncertainty at the time of planning, difficulties associated with achieving real time coordination, and the lack of control in the field. The materials at a construction site are used by different teams at work and hence handling and stocking is a difficult process. Handling and stocking of materials is always a factor of who needs the materials, when they are needed, where are the materials, and when will they get to a construction site (Tommelein, 1994). Automated systems like MoveCapPlan have been developed and used on construction sites, but their usefulness considering the dynamic and varying nature of construction sites is not properly documented. Despite safety measures in place and continuous monitoring, material handling has high accident rates (Anil Kumar, Sakthivel, Elangovan, & Arularasu, 2015). With planned material handling process, the dynamic nature of this activity can be reduced which will make material handling less hazardous.
If materials are not properly managed during the construction cycle from inception to completion, it can generate large amount of waste materials (Teo & Loosemore, 2001; Formoso, Soibelman, De Cesare, & Isatto, 2002). Improper management could result in theft, damage, wastage of materials and at times shortage of materials. This would impact the profit and at times the very existence of the company. Mcdonald and Smithers (1998) demonstrated that with proper material management and site based waste reduction techniques at a construction site, about 15% reduction in waste generation can be achieved.
Space requirements for storage of materials at site needs to be considered at the time of finalisation of layout plan. Historical information and experience in space management, planning on the order quantity, and timings can help to reduce theft, damage, and wastage of materials (Stukhart, 1995). The movement of construction materials from the suppliers to the construction site needs to be actively planned (Pheng & Chuan, 2001). Unlike other industries, the raw materials for construction are large, varied, bulky, and heavy. They require proper planning for the supply process, handling, storage, and use on the construction work.
Safety in construction projects is not given due importance as companies are continuously looking for cost saving measures (Agrawal, Krishna, & Pattanaik, 2018). Following sound material classification practices, coupled with well planned site layouts, timely disposal of waste and unwanted materials can aid in better safety measures at construction sites. This would enhance the morale of the workforce and bring in more efficiency.
Proper classification of the raw materials into a generic group is the first step towards effective inventory control and material management. NCB-49, the lesson book on Construction Materials Management (NICMAR, 1998) has suggested classification of raw materials for effective material control as per Table 1.
Table 1. Classification Methods for Construction Raw Materials
Of these classification methods, ABC analysis appears most suited for construction project sites, as ABC analysis helps in classification and control of the inventory in terms of their annual usage cost. The other techniques are on the basis of some physical or other attribute, which are of secondary importance and can be considered after ABC analysis and a preliminary economic order quantity evaluation.
Wilfred, Deepak, Shivaram, Nataraj, & Khan, (2015) determined that 4 materials with an annual value of 70% belonged to Class A, 9 materials with an annual value of 25% belonged to Class B, and 20 materials with an annual value of 05% belonged to Class C. The cost variance and cost performance index values indicated that the project had efficient material management system. Kasim, Anumba, & Dainty, (2005) have opined that the overall performance of a project is affected by poor management of construction materials from design stage to construction stage. The authors have suggested that Information and Communication Technology (ICT) can be used to improve the material management at construction sites. However, examples of effective use of such tools and the actual benefit accrued from their usage have not been quantified.
Zeb and Khattak (2017) determined that in a RCC bridge construction project, 6 materials with an annual value of 73.37% belonged to Class A, 8 materials with an annual value of 20.96% belonged to Class B, and 14 materials with an annual value of 5.67% belonged to Class C. The S-curve for materials indicated that the difference between planned and actual consumption was substantial and better material estimation and management practices would have increased the profit margin for the company. Nanaware and Saharkar (2017) based on ABC analysis and economic order quantity analysis of a small residential project have determined that materials were being ordered without following healthy material management practices resulting in cost and time overruns in the project.
Collection of data is the biggest challenge in the construction industry. Most construction firms do not have accurate data recording and updating procedures. Many are reluctant to reveal such information even for research purpose due to obvious tax reasons and also fearing negative exposure. Also most companies do not appear to procure and record material procurement on a project to project basis. In this case study, materials procured by a precast infrastructure company for its various projects in an accounting year were collected. The number of orders, order quantities, and cost details of different construction materials used by this company were collected. The orders were compiled in excel sheets to arrive at total quantity, unit cost and moving average cost, etc.
Through interactions with the material management team and construction team the problems faced in planning, procurement, stocking, waste reduction, and logistics at the different project sites were ascertained. The fish bone diagram drawn using this detail is shown in Figure 1. From this it can be made out that most of the problems discussed in the previous paragraphs were experienced in these projects due to improper material management practices at different stages. The dynamic nature of the construction industry, work order changes, and the company's policy of centralised material procurement could also have contributed to these problems.
Figure 1. Analysis of Material Management Issues
A total of 2103 materials of varying quantities at a cost of 
28.77 crore are procured by this company during a financial year. Although no record of orders placed for material procurement for each project was available, it could be made out that several project managers were ordering same material simultaneously.
An ABC analysis is performed on these 2103 items and the results are tabulated in Table 2. From this table it is seen that 28 items which account for only 1.33% of the total 2103 items have an accumulated cost of 19.94 crore, which is 69.31% of the total cost. These items are identified as 'A' class items. Further, 113 items accouting for 5.37% of the total items have an accumulated cost of 5.94 crore, which is 20.63% of the total cost. These items are identified as 'B' class items. The balance 1962 items accounting for 93.29% of the total items have an accumulated cost of 2.89 crore, which is 10.05% of the total cost.
Table 2. ABC Analysis Results
The ABC analysis is based on Pareto principle which states that 80% of the total consumption value is based only on 20% of the items. In the above analysis it is however seen that 89.95% of the accumulated cost is on account of only 6.70% of the total 2103 items. This can be attributed to the fact that in precast infrastructure works, there are fewer items of higher cost implications than a conventional construction project. Graphical representation of the ABC analysis is given in Figure 2.
Figure 2. Distribution of Materials based on ABC Analysis
It is perhaps appropriate to club A and B class items together as the number of items is only 141 (28+113), which is 6.7% of the total items. Hence 141 items here constitute the 'critical few' while the balance 1962 items, 93.29% of the total items, are the 'trivial many'. There is much software available today which automatically do the A, B, and C classifications based on historical data. The construction industry needs to incorporate such software in their material management system.
Using the ABC analysis, Economic Order Quantities (EOQ) for the different items of work is calculated. The EOQ is independent of the unit price of the items, but is a function of the annual demand of product quantity, ordering cost, and the holding cost. In this analysis, the annual consumption of the material is taken as the annual demand. Ordering cost is worked out by deducting the cost of the material from the total expenditure incurred in the procurement of each material and averaging the same over the actual number of orders placed. Holding cost also known as carrying cost or storage cost is dependent upon several factors like cost of goods, damaged or spoiled, cost of storage space, labour and insurance, etc. Holding cost is expressed as cost of holding one unit in the inventory. In this analysis, holding cost is taken as 5% of the unit cost of the material. Figure 3 shows the variation in the number of orders as per EOQ and the actual number of orders that were placed, for class A and class B (few) materials, respectively. It can be noted from Figure 3 that the actual number of orders are usually more than that required as per EOQ for both A and B class materials. A similar pattern was observed in case of C class materials also. This irrational method of procurement results increase in inventory and holding costs besides improper usage of storage space. This also leads to increase in theft, duplication, wastage, deterioration, and obsolescence of the stored construction materials.
Figure 3. Comparison of Actual Order Quantities with EOQ for 'A and B' Class Materials
Table 3 gives details of the classification of materials based on different parameters indicated. While ordering items, the orders have to be prioritized based on these parameters. However, from Figure 3 it can be made out that the actual orders placed are unmindful of these parameters, which could result in material shortage, delay in works, and also the need to purchase materials at extra cost in urgency situations.
Table 3. Material Classification based on Different Parameters
Based on the above study, the following conclusions can be drawn on the material management practices in the Indian construction sector.
Construction works can be made more profitable if sound material management practices are employed on project sites, and feedback from the different segments involved is taken and incorporated. Companies specializing in particular type of projects can evolve suitable material management practices and benchmark the same with industry leaders for continuous improvement.