Term Paper

STRATEGIC APPROACH TO MATERIAL PROCUREMENT MANAGEMENT

FOR CONSTRUCTION PROJECT
Vishrut Panchal
School of Building Science & Technology, CEPT University, Ahmedabad.
Vishrut1804@gmail.com

Abstract:
This paper is written to show the issue in material procurement management system in construction
projects as there is approx 60% of the capital cost in construction project consist of material cost.
Therefore, it is essential to have proper material procurement management system in order to
control productivity & cost of construction projects. Mismanagement of Procurement management
function is a frequent cause of delay in executing developmental & operational projects. At times,
this has lead to costly interruption & some time abandonment of important projects. The economic,
Financial, Social and political consequences in these cases have been serious, some time causes
great embarrassment to the concerned. This paper gives an overview about the various problem
faced by different organisations with respect to material procurement, Procurement management
system of different contracting organisations & relation of their system with problems they are
facing, & to come over these problems a model procurement management system & Strategies are
suggested.

Key Words:
Construction materials, Procurement, Management system, Problems, Strategies.

Introduction:
Procurement Management includes the process
necessary to purchase or acquire products needed
from outside the project team.
Materials management is defined as a coordinating
function responsible for planning and controlling
materials flow .In a detailed view, materials
management is a planned procedure that comprises
the purchasing, delivery, handling and minimization
of waste with the aim of ensuring that requirements
are met. Materials management is an essential
function that improves productivity in construction
projects. Hence, the efficient use and management of
material have an important influence on a company's
profit and can avoid delay in construction.

Functions of Procurement Management.

Planning: Materials planning include

quantifying, ordering and scheduling.
Procurement: It is described as the purchase
of materials from outside organization.
Logistics: logistics is a concept that
emphasizes movement and it may include
planning, implementing, and controlling the
flow and storage of all goods.
Storage: Storage of materials is the flow
component that provides for their movement
and placement.
Inventory Control: Inventory control is
classified as a technique devised to cover and
ensure all items are available when required.

Vishrut Panchal (UC 1708)

School of Building Science & Technology, CEPT University, Ahmedabad.

Page 1

Term Paper
Objectives
Management.

of

Procurement

To plan for allocation of resources and

subsequently
adjust
the
material
procurement within the allocated finances.
To purchase at the lowest possible cost
consistent with quality and service
requirements.
To maintain continuity to ensure that
scheduled activities are not interrupted.
To create goodwill for the organization
through healthy buyer-supplier relationship.
To be alive to the change in the market in
respect of new products.
To reduce the working capital requirement
through proper and scientific inventory
control and thus achieving economy.

Benefits
of
good
management system.

procurement

An effective material management system can bring

many benefits for a company. Previous studies by the
Construction Industry Institute (CII) concluded that
labour productivity could be improved by six percent
and can produce 4-6% additional savings (Bernold
and Treseler, 1991). Among these benefits are:
Reducing the overall costs of materials
Better handling of materials
Reduction in duplicated orders
Materials will be on site when needed and in the
quantities required
Improvements in labour productivity
Improvements in project schedule
Quality control
Better field material control
Better relations with suppliers
Reduce of materials surplus
Reduce storage of materials on site
Labour savings
Stock reduction
Purchase savings
Better cash flow management

Data collection & Analysis

Method of data collection:
Data collection was done in three stages to achieve
the objectives.
Stage 1: Different factors affecting the Procurement
management systems were identified by discussion
with professionals.
Stage 2: Opinion survey was done of 40 persons of
different designation to find the frequency & the
severity of each factor. With the help of frequency &
severity the Impact index of each problem was found
out.
Stage 3: Questionnaire survey was carried out on 4
different case studies to understand their material
procurement management systems & problems they
are facing in implementing procurement of material.
Identified Factors affecting the procurement
management system their Frequency of
occurrence, severity & Impact index.
S.No. Factors

1
2
3
4
5

6
7
8

Frequency
Index

Planning Stage
Procurement is
not Planned
0.65
before starting of
the project
False Planning
0.48
Undefined scope
0.38
Lack of
0.31
communication
Incomplete
drawings &
0.21
Specifications
Lack of
conformance to
0.29
requirements
Nonstandard
0.49
specifications
Incomplete /
ineffective
0.41
Meetings

Vishrut Panchal (UC 1708)

School of Building Science & Technology, CEPT University, Ahmedabad.

Severity
Index

Impact
Index

0.49

0.32

0.61
0.36

0.29
0.14

0.51

0.16

0.57

0.12

0.46

0.13

0.63

0.30

0.46

0.19

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Term Paper

14
15
16
17
18

19

20
21

22
23
24

25

26

0.31

Procurement Stage
Delay in Fund
0.28
Received
Availability of
0.29
material / quantity
Delay due to Long
0.53
Lead material
Late Deliveries
0.54
Wrong Matarial
0.43
Delivered
Wrong Quality
0.44
Delivered
Unavaliability of
Temporary
0.42
Material/Enabaling
Structures
Political
Issue/Transport
0.62
Strike
Re handling of
0.28
materials
Store & Inventory
Inadequate Storage
Area of materials
Theft
Damaging /
Wastage
Absence of
Codification &
Staging according
to Specification
Improper Track
record

0.23

0.62

0.20

0.57

0.18

0.54

0.15

0.43

0.13

0.53

0.28

0.46

0.25

0.59

0.25

0.39

0.17

0.37

0.15

Case Studies
0.59

0.37

Introduction to case Studies:

Case Study

0.25

0.07
Name of
Project

0.40

0.33

0.13

0.33

0.42

0.14

0.18

0.53

0.09

0.43

0.59

0.25

4
Gift City,
Gandhinagar
.

13

Vendor Satisfaction

0.51

contractor

L&T
Construction

12

0.04

Skap
Industries,
Mundra.
IDBI Bank,
Ahmedabad.

11

0.18

Hetu
Construction
Pvt. Ltd.
Vallabh
Corporation

10

Vendor Selection
Uncontrollable bid
0.21
list
Incomplete
proposals &
0.46
Documents
Non Competant
0.33
Vendor Selected

Inferences of Impact index analysis

Frequency & severity of problem during
planning stage are same. Whereas when in
the procurement stage frequency and
severity increases.
Some of the factors like procurement
planning at the planning stage of the project
have high frequency and severity index. It can
be seen from the analysis done above that it
lies at 3rd position or rank of importance
index i.e. table 9. So it should be the main
concern every time during the planning of
procurement and also at initial stage.
Some of the other problems that might be
encountered in project according to
importance index i.e. table 1 are political
issue, transport strikes, improper track
records, non- standard specification, false
planning etc.
These factors should be given importance
according to its impact index at the time of
planning the procurement, & should be
checked at every stage of project in order to
decrease the effect of particular factors on
project time & cost.

Hotel Grand
Hayatt,
Ahmedabad

Frequency Severity Impact

Index
Index
Index

JMC Projects
(I) Pvt. Ltd.

S.No. Factors

Cost of
Project

Rs. 22.5
cr.

Rs. 28
cr.

Rs. 260
cr.

Rs. 22
cr.

TABLE 2 INTRODUCTION TO CASE STUDIES.

0.54

0.62

0.34

TABLE 1: FREQUENCY, SEVERITY & IMAPCT INDEX OF FACTORS

Overview of Questionnaire.
The questions was asked to understand the of
procurement strategy of organization on different

Vishrut Panchal (UC 1708)

School of Building Science & Technology, CEPT University, Ahmedabad.

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Term Paper
stages of the project Viz. Planning, Purchasing, Store
& Inventory. Apart from this problem they are facing
with respect to Time, Quality & Cost is observed.
A. General: general category deals with the
aspect of the project like Name of the
project, Name of contractor, Cost of project,
& organization chart of their material
Procurement management department
B. Planning: This category deals with the aspect
like Vendor selection Procedure & Evaluation
Criteria for Vendors, forecasting methods,
Are they prepared for the Temporary works
& irregular supply of Material
C. Purchasing: it includes aspects like type of
purchasing, their procedure of payment to
vendors.
D. Store & Inventory: It includes aspect like
their method of stacking & storage of
material, their way of stock verification.
E. Other: This category includes the parameters
like coordination between departments,
Logistic
facilities,
Quality
Testing
Arrangement, Use of computerize system,
Performance review of vendors etc.
Inferences of questionnaire survey.

Case study 1 follows the almost every aspect of

procurement management system on construction
stage, Vendor selection stage but material
procurement plan is not prepared at the starting of
the project as result of this system problems occurs
due to factors like delay in receiving long lead
material, late deliveries, wrong delivery.
Case study 2 does not follow such aspect of
procurement management systems at the vendor
selection stage & planning stage & store & inventory
control stage so generally problems faces are non
competent bidder selected, wrong delivery, delay
due
to
long
lead
material,
political
issue/transportation hikes and improper track record.

Case Study 3: Case study 3 does not follow any of the

aspect of procurement management system on any
stage of project. So problems face are False

Planning. Undefined Scope, Non Standard

Specification, non competent bidder selected,
vendor satisfaction, incomplete proposal, delay in
fund received, availability of material/ quantity,
wrong deliveries, political issue/ transport strike,
improper track record, wastage.
Case study 4 is a large scale project & it almost
follows every aspect of good procurement
management system as result case study 4 is facing
very less problem compare to other 3 case studies.
Problem faced by this case study is generally political
issue/strike, un identified scope etc..

Suggested strategies to come over the different

problems in procurement management system.
Planning of material should be done according
to key dates of project.
Include planning for temporary work &
consumable items.
Calculation for lead time should be done.
Use data base of previous work
New vendors should be included or given a
chance frequently otherwise; regular vendors
might collaborate with each other and may
quote rates according to their profit & interest.
In the case of bulk items more than one vendor
should be selected because if one vendor fails
to deliver material in any situation others can
be approached.
Make system of registration of vendor in
organization only registered vendor should be
approached.
For bulk material more than one vendor should
be selected.
If alternate product / material is available in
low rates and it fulfils the purpose then it must
be used.
Clause of penalty in case of delay should be
included.
While negotiating with the vendor, he should
be given greed to future projects. And deal

Vishrut Panchal (UC 1708)

School of Building Science & Technology, CEPT University, Ahmedabad.

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Term Paper
with him on the bases of MOU for the future
project.
Agreement with vendor should be lawful
contract so he cannot escape from his
responsibilities.

http://accountlearning.blogspot.in/2010/05/clasificatio
n-and-codification-of.html

M. Sudareshan & P.Goalakrishnan- Material

Management an Integrated approach

Conclusions:
This study has practical approach to the material
procurement management system of the contracting
organizations & problem they are facing in implementing
the material procurement.
It is concluded that, various problems are present in the
material procurement during every stages of the project
life & reason of these problems are existing material
procurement management system of the contracting
organizations
Major problems involved in the material procurement
management systems are lack of planning before starting
of the project, false planning, procuring material with non
standard specifications, selection of non competent
vendor, late deliveries, wrong deliveries, political issues,
improper track record, etc. and these problems have great
impact on the time & cost of the project.
Contracting organizations can come over these issues with
the help of strategic approach to the material
procurement, proper planning before starting of the
project & organized management system.

References:

www.tutorialspoint.com/management.../pro
curement_management.ht.
www.tutorialspoint.com/management.../pro
curement_management.ht...
1

improving materials management practices on

fast-track construction projects n.b. kasim1, c.j.
anumba2 and a.r.j. dainty3
department of civil and building engineering,
loughborough university leicestershire, le11 3tu,
uk
EPS MCKinsly Surey EPC 360 Survey.
1
P.Gopalkrishnan- Handbook of Material
Management.
Material Management on Building Sites. Ian E
Chandler

Vishrut Panchal (UC 1708)

School of Building Science & Technology, CEPT University, Ahmedabad.

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