study on stock management practices in construction companies
TRANSCRIPT
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Research Journal of Management
Vol. 2(4), 7-13, April (2013
International Science Congress Association
Study on Stock Management Practices in Construction Companies
Department of Civil Engineering, Kongu Engineering c
Received 5th
Abstract
The main objective of the study is to analyze the inventory
analysis is based on the primary and secondary data. The main source of primary data is by conducting questionnaire survey
and the source of secondary data is published Annual Report and stock s
secondary data of five consecutive years have been employed. Statistical tools like ABC analysis, FSN analysis are used. A
separate questionnaire survey is conducted for low level construction companies,
collected data is analyzed using Software. The secondary data is collected from medium and high level construction
companies. From the data analysis suggestions are given to improve the stock management practices follo
construction companies.
Keywords: Stock, inventory, primary data, secondary data, ABC analysis, FSN Analysis
Introduction
In industry inventory means ‘stock of goods’. Inventory is an
idle resource having an economic value awaiting
consumption or re-sale. Thus they are held primarily for some
transaction. ‘Today’s inventory is tomorrow’s production’. To
the finance manager, inventory connotes the value of raw
materials, consumables, spares, work-
goods and scrap in which a company’s funds have been
invested. He considers inventory as locked up capital. On the
opposite side are the user departments, which clamor for more.
To satisfy both sides, the inventory is to be controlled
manager exercises control over inventory. Inventory
management covers a large number of issues including
determining the size of the inventory to be carried; set
receipt and inspection procedure; determining the economic
order quantity; providing proper storage facilities; keeping check
on obsolescence and setting up effective information system
with regard to the inventories. Inventories should neither be
excessive nor inadequate. If inventories are kept at a high level,
higher storage costs would be incurred. A low level of
inventories may result in underutilization of capacity and lower
sales2.
Methodology
The following questions are designed for this
results are discussed below
For Low Level Companies: i. What kind of material stock will
you maintain in your company? ii. What kind of material stock
will you maintain in your company? iii. Based on which criteria
will you maintain stock for equipment spares?
maintain stock for cement how much percentage will you
retain? v. If you maintain stock for sand how much percentage
Management Sciences _________________________________
3)
International Science Congress Association
Study on Stock Management Practices in Construction Companies
Arunprakash N. and Nandhini N. Department of Civil Engineering, Kongu Engineering college, Perundurai,
Available online at: www.isca.in th March 2013, revised 17th March 2013, accepted 1st April 2013
dy is to analyze the inventory control practices adopted by the construction companies. This
analysis is based on the primary and secondary data. The main source of primary data is by conducting questionnaire survey
and the source of secondary data is published Annual Report and stock sheets of the company. For the purpose of analysis of
secondary data of five consecutive years have been employed. Statistical tools like ABC analysis, FSN analysis are used. A
separate questionnaire survey is conducted for low level construction companies, medium and high level companies. The
collected data is analyzed using Software. The secondary data is collected from medium and high level construction
companies. From the data analysis suggestions are given to improve the stock management practices follo
Stock, inventory, primary data, secondary data, ABC analysis, FSN Analysis
In industry inventory means ‘stock of goods’. Inventory is an
idle resource having an economic value awaiting conversion,
sale. Thus they are held primarily for some
transaction. ‘Today’s inventory is tomorrow’s production’. To
e manager, inventory connotes the value of raw
-in-progress, finished
goods and scrap in which a company’s funds have been
invested. He considers inventory as locked up capital. On the
nts, which clamor for more.
To satisfy both sides, the inventory is to be controlled1. Finance
manager exercises control over inventory. Inventory
management covers a large number of issues including
determining the size of the inventory to be carried; setting up
receipt and inspection procedure; determining the economic
order quantity; providing proper storage facilities; keeping check
on obsolescence and setting up effective information system
with regard to the inventories. Inventories should neither be
excessive nor inadequate. If inventories are kept at a high level,
higher storage costs would be incurred. A low level of
inventories may result in underutilization of capacity and lower
The following questions are designed for this survey and the
What kind of material stock will
What kind of material stock
Based on which criteria
or equipment spares? iv. If you
maintain stock for cement how much percentage will you
If you maintain stock for sand how much percentage
will you retain? vi. If you maintain stock for coarse aggregate
how much percentage will you retain
for primer how much percentage will you retain
maintain stock for Steel rod how much percentage will you
retain? ix. If you maintain stock for coarse aggregate how much
percentage will you retain?
how much percentage will you retain
for equipment spares how much percentage of amount will you
spend? xii. Are you maintaining
keeping? xiii. When will you re
will make which of this following?
Fig
Schematic flowchart of the process routed in this work
_______________ ISSN 2319–1171
Res. J. Management Sci.
7
Study on Stock Management Practices in Construction Companies
INDIA
2013
control practices adopted by the construction companies. This
analysis is based on the primary and secondary data. The main source of primary data is by conducting questionnaire survey
heets of the company. For the purpose of analysis of
secondary data of five consecutive years have been employed. Statistical tools like ABC analysis, FSN analysis are used. A
medium and high level companies. The
collected data is analyzed using Software. The secondary data is collected from medium and high level construction
companies. From the data analysis suggestions are given to improve the stock management practices followed in
If you maintain stock for coarse aggregate
how much percentage will you retain? vii. If you maintain stock
for primer how much percentage will you retain? viii. If you
maintain stock for Steel rod how much percentage will you
If you maintain stock for coarse aggregate how much
x. If you maintain stock for bricks
how much percentage will you retain? xi. If you maintain stock
for equipment spares how much percentage of amount will you
Are you maintaining documentation for stock
When will you re-order? xiv. Maintaining stock
ll make which of this following?
Figure-1
Schematic flowchart of the process routed in this work
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Research Journal of Management Sciences _______________________
Vol. 2(4), 7-13, April (2013)
International Science Congress Association
For Medium And High Level Companies
that there is need for stock management system in the
organisation? ii. Whether you agree that
safety stock in your planning calculation?
importance will you give to stock management comparing to
other works? iv. How much percentage amount of project cost
will you invest in stock management? v. What according to you
is the major benefit of going for an inventory management
system in your company? vi. Does managing stock helps in
growth of company? vii. In what way managing stock helps in
growth of company and progress of the project?
of material access available for stock data?
of professionals are managing your company stock?
type of stock management system you are adopting?
the company is selecting the vendor? xii.
which your company uses to categorize the items?
type of cross check you follow for stock management?
will you control stock overflow in construction site?
Whether training is given for stock management practices?
What are all the data that your company is k
inventory? xvii. Where the stock is usually stored?
far is the distance from project site to storage yard?
Results and Discussion
For Low Level Companies: Inference from the above
figures: The above figures clearly says that
management is the only way to control project cost and stock
overflow. Maintaining receipts documents for the stock is the
only record to crosscheck the inventory. They also transfer the
stock and use the stock in other activity when there i
overflow. Most of the stocks are procured and used by the
company itself. ABC analysis is the best way to classify the
items. Almost every company keep the material access as
centralized.
Figure-2
Kind of material stock
41%
18%
12%
23%
6%Cement
Sand
Coarse aggregate
Steel rods
primer
Sciences ________________________________________________________
International Science Congress Association
For Medium And High Level Companies: i. Do you agree
that there is need for stock management system in the
Whether you agree that you are including
safety stock in your planning calculation? iii. How much
importance will you give to stock management comparing to
How much percentage amount of project cost
What according to you
s the major benefit of going for an inventory management
Does managing stock helps in
In what way managing stock helps in
growth of company and progress of the project? viii. What type
available for stock data? ix. What categories
of professionals are managing your company stock? x. Which
type of stock management system you are adopting? xi. How
xii. Describe the method
gorize the items? xiii. What
type of cross check you follow for stock management? xiv. How
will you control stock overflow in construction site? xv.
Whether training is given for stock management practices? xvi.
What are all the data that your company is keeping related to
Where the stock is usually stored? xviii. How
far is the distance from project site to storage yard?
Inference from the above
above figures clearly says that they are stock
management is the only way to control project cost and stock
overflow. Maintaining receipts documents for the stock is the
only record to crosscheck the inventory. They also transfer the
stock and use the stock in other activity when there is stock
overflow. Most of the stocks are procured and used by the
company itself. ABC analysis is the best way to classify the
items. Almost every company keep the material access as
Kind of material stock
Figure
Criteria to maintain stock for equipment spares
Figure
Criteria to maintain stock for materials
Figure
Stock
Cement
Sand
Coarse aggregate
Steel rods
primer
11%
45%
11%
22%
60%10%
20%
10%
62%
13%
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Res. J. Management Sci.
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Figure-3
maintain stock for equipment spares
Figure-4
Criteria to maintain stock for materials
Figure-5
Stock for sand
11%
45%
Availability of fund
Equipment usage
Equipment condition
Job condition
Project cost
60%
Availability of
fund
Market condition
Site location
Climatic condition
Project cost
25%
Below 5%
5% - 15%
16% - 25%
26% - 35%
36% - 50%
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Research Journal of Management Sciences _______________________
Vol. 2(4), 7-13, April (2013)
International Science Congress Association
Figure-6
Stock for Coarse aggregate
Figure-7
Stock for primer
Figure-8
Stock for cement
25%
75%
62%
25%
13%
62%
25%
13%
Sciences ________________________________________________________
International Science Congress Association
aggregate
Figure
Stock for Brick
Figure
Stock for Steel rod
Figure
Stock for equipment spares
Below 5%
5% - 15%
16% - 25%
26% - 35%
36% - 50%
Below
5%
5% -
15%
16% -
25%
Below 5%
5% - 15%
16% - 25%
26% - 35%
36% - 50%
25%
37%
25%
13%
37%
50%
13%
75%
25%
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Res. J. Management Sci.
9
Figure-9
Stock for Brick
Figure-10
Stock for Steel rod
Figure-11
Stock for equipment spares
25%
37%
Below
5%
5% -
15%
16% -
25%
37%
Below
5%
5% -
15%
16% -
25%
75%
Below 1%
1% - 5%
6% - 10%
11% - 15%
16% - 20%
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Research Journal of Management Sciences _______________________
Vol. 2(4), 7-13, April (2013)
International Science Congress Association
Figure-12
Maintenance of document
Figure-13
Re-order
For Medium and High Level Companies
Figure-14
Need for stock management
100%
67%
22%
11%
100%
Agree
Disagree
Not always
Sciences ________________________________________________________
International Science Congress Association
Maintenance of document
For Medium and High Level Companies
Need for stock management
Figure
Safety stock in your planning calculation
Figure
Stock management compared to other works
Figure
Benefit of going for an inventory management
yes No
Rate
fluctuatio
n
Site
demand
Agree
Disagree
Not always
100%
40%
20%
40%
50%
25%
25%
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Res. J. Management Sci.
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Figure-15
Safety stock in your planning calculation
Figure-16
Stock management compared to other works
Figure-17
Benefit of going for an inventory management
Agree
Disagree
40%
Very high
high
medium
low
very low
50%
It has made
storage and
retrieval of
material easier
Improved sales
effectiveness
Reduced
operational cost
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Research Journal of Management Sciences _______________________
Vol. 2(4), 7-13, April (2013)
International Science Congress Association
Figure-18
Stock in growth of company
Figure-19
Type of material access
Figure-20
Categories of professionals managing stock
40%
20%
40%
60%
40%
Skilled and
trained
Only skilled
but not
trained
Sciences ________________________________________________________
International Science Congress Association
Stock in growth of company
Type of material access
Categories of professionals managing stock
Figure
Type of stock management system
Figure
Vendor selection
Figure
Method to categorize the items
Centralized
Partly
Centralized
De-
centralized
Skilled and
trained
Only skilled
but not
trained
57%
40%
40%
20%
17%
33%
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Res. J. Management Sci.
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Figure-21
Type of stock management system
Figure-22
Vendor selection
Figure-23
Method to categorize the items
43%
Vendor/
Supplier
By our
company itself
40%
Price
Performance
Previous
experience
50%
ABC
Analysis
HML
method
FSN
Analysis
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Research Journal of Management Sciences _______________________
Vol. 2(4), 7-13, April (2013)
International Science Congress Association
Figure-24
Type of cross check
Figure-25
Control of stock overflow
Figure-26
Distance from project site
60%
40%
30%
10%
10%
50%
Transfer to
other site
Block the
purchase order
Resend the
materials
80%
20%
Sciences ________________________________________________________
International Science Congress Association
Type of cross check
Control of stock overflow
Distance from project site
Figure
Data kept related to
Table
ABC Analysis for Coconut Village
(Analysis is done for single house in that village and it is
based on the estimated data)Sl.
No Description
Amount
(Rs)
Coconut
Village 3447020
1 Cement 511000
2 Sand 489400
3 Steel 403260
4 Coarse
Aggregate 92400
5 Bricks 416000
6 Electrical
works 108865
7 Solid
blocks 186305
8 Plumbing 259800
9 Grill 98490
10 Wood
works 125000
11 Teak wood 35000
12 Painting 312600
13 Glass
works 33600
Inference from the analysis
analysis for a coconut village done for a private company. the
analsis is based on the consumption values. Classification foe
ABC Analysis is listed below
consumption value, ii. Class B type
value, iii. Class C type - Low consumption value From the
Analysis 5 A items, 6 B items & 5 C items. It has been
witnessed that the items belonging to category
much attention and the procurement of the same also causes
delay. Hence class C items needs special importance.
Online
offline
Transfer to
other site
Block the
purchase order
Resend the
materials
< 10 km
10 km –
25 km
11%
45%
44%
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Res. J. Management Sci.
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Figure-27
Data kept related to inventory
Table-1
ABC Analysis for Coconut Village
(Analysis is done for single house in that village and it is
based on the estimated data) Cumulative
(Rs)
Percentage
(%) Class
511000 14.82% A
1000400 29.02% A
1403660 40.72% A
1496060 43.4% A
1912060 55.47% A
2020925 58.63% B
2207230 64.03% B
2467030 71.57% B
2565520 74.43% B
2690520 78.05% B
2725520 79.07% B
3038120 88.14% C
3071720 89.11% C
Inference from the analysis: The above table shows the
analysis for a coconut village done for a private company. the
analsis is based on the consumption values. Classification foe
ABC Analysis is listed below i. Class A type – High
Class B type – Moderate Consumption
Low consumption value From the
Analysis 5 A items, 6 B items & 5 C items. It has been
he items belonging to category “C” are not paid
much attention and the procurement of the same also causes
e class C items needs special importance.
45%
Ordering date
Receipt
documents
Ordering Cost
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Research Journal of Management Sciences ________________________________________________________ ISSN 2319–1171
Vol. 2(4), 7-13, April (2013) Res. J. Management Sci.
International Science Congress Association 13
Conclusion
After conducting the questionnaire survey it has been observed
that, almost 60% of the companies maintain stock for cement
based on the fund available. They consider that maintaining
below 5% cement stock will make them profit. Only 50% of
companies maintain stock for steel bars and most of them
maintain steel rod stock between 5%-10%. Companies also
maintain stock for sand but their rate is between 5% -15%.
Every companies are maintaining equipment spares and their
rate is below 1%. Only 37% of companies maintain stock for
bricks because more stock on brick will lock the capital. Every
organization include safety stock in the planning calculation and
40% of them give very high importance for stock management
comparing to others. Only 60% of companies use skilled and
trained professionals for stock management. Among the
companies following inventory control techniques ABC
Analysis is the most used control technique. The 50%
Companies use the stock overflow in other activities. Almost all
companies say that maintaining stock will fetch them profit and
they also do documentation work stock maintenance.
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