inventory management and cost analysis - · pdf fileinventory management and cost analysis...

INVENTORY MANAGEMENT AND COST ANALYSIS

D.Deepak 1, M.Sasi Kumar 2

[email protected], [email protected]

1 Student, M.E. Construction Engineering and Management, EBETi, Kangeyam, TN, India2 Assistant Professor, Department Of Civil Engineering, EBETi, Kangeyam, TN, India

ABSTRACT

Construction materials constitute alarge portion of the total cost inconstruction projects. It may account for50-60% of the total project cost. Materialmanagement includes finding theavailability, proper selection, procurement,inventory management and effective usageof materials at right time. In this inventorymanagement is one of the single largestcomponents to improve the productivity,cost efficient of a project and help toensure timely completion of the project. Onpreparing inventory chart and analyzingthe cost estimate, the proper cost controlover material procurement have beenachieved to avoid surplus expenditure andbetter field material control.

Key word –Inventory, Cost, Procurement

1. INTRODUCTION

The inventory management is ofmaintaining an adequate supply ofsomething to meet an expected demandpattern for a given financial investment.This could be raw materials, work inprogress, finished products, or spares andother indirect materials. Inventory is one ofthe indicators of management effectivenesson the materials management front.Inventory turnover ratio (annual demand/average inventory) is an index of businessperformance.

Inventory management deals withthe determination of optimal policies andprocedures for procurement of commodities.Since it is quite difficult to imagine a real

work situation in which required materialwill be made available at the point of useinstantaneously, maintaining inventoriesbecomes almost necessary.

Before doing the inventorymanagement for building the followingbasic information must be studied. Theproject site must be analysed completely forthe stock management. The work progressmust be known .And the interlockingactivities of various works must be knownin detailed manner.

For this inventory management, theproject has been done for the upcomingconstruction work of the residentialbuilding.

In this project the inventorymanagement is done for this residentialbuilding by analysing the site situation,quantity surveying according to the drawing,preparing the Microsoft Project scheduling,studying the interlocking activities. Creationof inventory chart is the final form of thisinventory management project.

1.1 SCOPE

In construction industry one of thebig problems is project delay due to materialshortages. To overcome this problems,material should be procured at correcttime and dumped at correct place. The basicpurpose of inventory holding stocks in amaterial flow system are to doublesuccessful stage of following system isimportant purpose of inventory.

International Journal of Scientific & Engineering Research, Volume 7, Issue 4, April-2016 ISSN 2229-5518 177

IJSER © 2016 http://www.ijser.org

IJSER

Main scope of the project is try toavoid the over dump and correctprocurement of the material for buildingworks at right time. This can be done withthe help of inventory management. In thisinventory system, the required amount ofbuilding material is calculated by detailedstudy of plan. The whole inventorymanagement chart is classified into differentdates for easy work flow. So the requiredamount of materials for different works isreleased according to it. It also increasethe efficiency of work and it will flowcontinuously without any barrier.

Supervisor can easily understand theinventory chart, quantity of materialsneeded for the work and purchase of thematerials is done according to it. Overdumping of materials occupies more landand amount will be released earlier. Withthe help of inventory chart the over dumpingis avoided.

2. METHODOLOGY

Fig 1. Methodology

A. Site selectionSite selection is a key factor for

project. The site must be easily accessiblefor all construction activities and must fulfil

the requirements of the function of thebuilding.

B. Analysis of site condition

Site condition must be analysedcompletely before doing the constructionactivity. Site is situated in rural area and thematerial availability (lead distance) alsoanalysed. Free space around the constructionland is effectively used for store and stockmanagement purpose.

C. Study of plan

For inventory management quantitycalculation is important, Study of plan isalso important. Plan and cross section ofindividual levels must be completely studiedfor quantity calculation. Vetted cross sectionand plans are used for quantity calculation.

D. Working method

The inventory management is doneby any one of the following methods givenbelow.

Based on schedule of works Based on works involved

Based on schedule of works

It means work progress will beprocessed according to the previouslyprepared schedule. Schedule must beprepared for the work progress. Inventorymanagement can be carried on the basis ofscheduling of the project.

Based on works involved

Inventory management can becarried on the basis of works involved in theconstruction activity. This project is basedon this type. For this type what are theactivities involved must be ordered in thecorrect manner. And the interlockingactivities are completely ordered.

E. Quantity calculation

For material calculation, quantitycalculation is the first component to known

• Site selection

•Analysis of site condition

•Study of plan

•Schedule type - Phase I

•Quantity calculation

•MSP scheduling

•Analysis of interlocking activities

•Inventory chart preparation

•Work based type – Phase II

•Cost analysis – Budget preparation

•Comparing planned with actual

•Analysing the deviation



2. METHODOLOGY

Fig 1. Methodology






C. Study of plan


D. Working method









•Analysis of site condition

•Analysis of interlocking activities

•Inventory chart preparation

•Work based type – Phase II

•Cost analysis – Budget preparation

•Comparing planned with actual



2. METHODOLOGY

Fig 1. Methodology






C. Study of plan


D. Working method











IJSER

the volume of work for different quantitiesof different works.

F. MSP scheduling

To get better scheduling our projects andlevelling our resources Microsoft Project (MSP)is used. The tasks, milestones are componentsthat can be scheduled, cost estimated,monitored and controlled using this.

G. Analysis of interlocking activties

Inventory chart is prepared on the basisof work type, for this different interlocking ofactivities and activities ordered in a specifiedmanner (i.e. Form substructure to roof levelwork) must be known.

H. Inventory chart preparation

Chart is the form of output, easilyunderstandable by everyone. Therefore chartpreparation is final output of the project. Basedon activities, scheduled duration and materialsthe final inventory chart is prepared.

This analysis is carried out using MSPsoftware for analyzing planned and actualmaterial consumption through S curve analysis.Reasoning over the deviations curve is the sshaped graph produced by the the cumulativeexpenditure of certain parameters (man-hourscost) against time and it is the representation ofproject path. This analysis is carried forcomparison of planned and actual cost formaterial.

Fig 2. S Curve Analysis

3. PRINCIPLE OF INVENTORY

MANAGEMENT

Materials inventory management isimportant, as materials constitute a largeamount in construction costs. This isbecause the poor inventory management canaffect not only to the increase in costs, butalso contribute to schedule and projectdelays. Therefore, those engaged ininventory should have an awareness of theinterlocking activities contained in theprocess.

Inventory control is essential toprovide flexibility in operating a system. Itis important to business because, it reducescost while aiding customer relations, whichpermits smooth operation of production andutility process of the firm. Inventorymanagement is that aspect of current assetsmanagement, which is concerned withmaintaining optimum investment ininventory and applying effective controlsystem so as to minimize the total inventorycost.

Basic inventories decisions are twotypes. They are

The inventory item is empty and tofill again

How much of an item to order whenthe inventory of that item is to befilling again.

Inventory should not be performedwithout considering the design andconstruction schedule of a project. It isessential that procurement will beconsidered as a grand plan involving anumber of stages. The construction industryis how maturing to recognize the need andimportance of the inventory.

Procurement is next step of theinventory. Inventory defines when andwhere the material is need as per plan ordesign according to interlocking activities.Inventory is normally performed at severallevels and it will depend on the interlocking



IJSER

activities. If we not known the interlockingactivities entire system lead to delay of thefore coming activities.

Different functional managers of anorganization may view inventory fromdifferent points, leadings to conflictingobjectives. This calls for an integratedsystem approach to planning of inventoriesso that conflicting objectives can bescrutinized to enable the system to operate atminimum total inventory - related-cost-explicit costs such as purchase price as wellas implicit costs such as carrying, shortage,transportation and inspection costs.

3.1 Inventory Planning

Production planning requirespurchase and inventory planningdecisions for an organization tocontrol expenses and finances.

To get the purchase benefits,discounts, reduced transportation andordering cost the bulk purchase maybe economical. Inventory of suchmaterials are stored for longer time.

4. MICROSOFT PROJECT (MSP)SCHEDULING

The construction project owner orclients have given the finish date of theproject to be completed before that we havea chance to plan for it. This is why we needto get better scheduling our projects andlevelling our finite resources. The tool thatis most widely used is Microsoft Project(MSP) it applies in project scheduling andresource levelling. In this we can able to fixthe units of resources or we have to fix theduration of the project.

Most organisations have ahierarchical structure to break down thework. Typically, it looks like the Stage,Phase, Task, and Milestone. This is a way toorganise and define the total scope of theproject by decomposing the work to be doneinto tasks that the project team can execute

and create the required deliverables. Thetasks, milestones are components that can bescheduled, cost estimated, monitored andcontrolled. A network diagram is used toshow dependencies in a graphical form.MSP generates network diagramautomatically.

MSP helps in utilising the resourceconstantly throughout the project. Ensuresthe resource is not over allocated. It helpsthe project manager to avoid delays causedby the bad allocation. MSP canautomatically level resource based onresource calendar, task, dependencies,constrains. We can delay certain task, assigndifferent resources, change the taskdependencies, add task, remove task,material requirements etc,.

From this MSP scheduling,analysing of activities and their schedulingcan be done. According to their scheduledduration, material resources procurementsheet is prepared finally analysing thedeviation from the planned to the actual.



IJSER

Fig 3. MSP Scheduling

5. ANALYSIS ON COST

5.1 ABC Analysis: The ABC inventorycontrol technique is based on the principle

that a small portion of the items maytypically represent the bulk of money valueof the total inventory in constructionprocess, while a relatively large number ofitems may from a small part of the moneyvalue of stores. The money value isascertained by multiplying the quantity ofmaterial of each item by its unit price. Theitems “A” Category – 5% to 10% of theitems represent 70% to 75% of the moneyvalue. “B” Category – 15% to 20% of theitems represent 15% to 20% of the money.“C” Category – The remaining number ofthe items represent 5% to 10% of the moneyvalue. The relative position of these itemsshow that items of category A should beunder the maximum control, items ofcategory B may not be given that muchattention and item C may be under a loosecontrol.

5.2 EOQ analysis: The EOQ refers to theorder size that will result in the lowest totalof ordering and carrying costs for an item ofinventory. If a firm place unnecessary ordersit will incur unneeded order costs. If a firmplaces too few order, it must maintain largestocks of goods and will have excessivecarrying cost.

6. CONCLUSION

Inventory management deals withmaterial procurement. From this study howto do an inventory management for buildingstructure is known. Where there may bedeviations occur during construction, due tothe quantities calculated are as per drawingsbut during execution many deviationsoccurs on site. The main factors to beconsidered during the chart preparation arethe site condition and the interlockingactivities. While considering these activitiesthe inventory chart is more effective.Inventory chart based on activates is basicchart for site engineers and managementpeople to schedule the material procurementand allocate the cost according to it, to avoidsurplus expenditure spend for the material.



IJSER

REFERENCES

1) Ashwini R. Patil, Smita V. Pataskar(2013), “Analyzing Material ManagementTechniques on Construction Project”International Journal of Engineering andInnovative Technology Vol.3, Issue 4, Pp.96-100.

2) Khyomesh V. Patel,Prof. Chetna M.Vyas(2011), “Construction MaterialsManagement On Project Sites” NationalConference on Recent Trends inEngineering & Technology.

3) Narimah Kasim, Siti Radziah Liwan,Alina Shamsuddin, Rozlin Zainal, andNaadira Che Kamaruddin(2012),“Improving On-Site MaterialsTracking For Inventory Management InConstruction Projects” InternationalConference of Technology Management,Business and Entrepreneurship., Pp.447

4) Narimah Kasim , Aryani Ahmad Latiffi ,Mohamad Syazli Fathi , (2013) “RFIDTechnology for Materials Management inConstruction Projects – A Review”International Journal of ConstructionEngineering and Management, 2(4A),pp. 7-12.

5) Patil Yogendra R., Patil Dhananjay S.(2015), “Feasibility Study Of Just In TimeInventory Management On ConstructionProject” International Research Journal ofEngineering and Technology, Vol: 02 Issue:04, Pp 687

6) Rohit S. Agawane, Maruthi S , Dr. J. R.Patil (2015)“Selection Of EffectiveProcurement Management Method AndStudy Of Other Parameters AffectingProcurement Management” InternationalResearch Journal of Engineering andTechnology Vol: 02, Issue: 03, Pp.176

7) Sahil.R.Choure*, M.R.Apte (2013) “On-Site Material Management” International

Journal Of Engineering Sciences &Research Technology.

8) SK.Nagaraju (2012), B.Sivakonda Reddy,Prof. A. Ray Chaudhuri “ResourceManagement in Construction Projects – Acase study”, An International Journal, Vol.2,No. 4, Pp.660

9) S.Sindhu, Dr.K.Nirmal kumar,V.Krishnamoorthy (2014), “PerformanceAnalysis Of InventoryManagement SystemIn Construction Industries In India”international journal of innovative researchin science, engineering and technology vol.3, issue



IJSER

inventory management and cost analysis - · pdf fileinventory management and cost analysis...

Documents