ELECTIVE - IV FIFTH YR B.

ARCH

PROJECT PROCUREMENT AND

MATERIAL MANAGEMENT
Gayatri. M. Shirvandkar

Student, B. Architecture, PDEA College of Architecture, Pune, Maharashtra

Abstract – In the construction industry to manage a productive and cost effective site, efficient
material management becomes very essential. An important factor that affects the performance
of construction projects is the improper handling of materials during site activities. Hence
Material Procurement Management should be considered to improve the procurement process in
commercial projects. So, the purpose behind this report is to focus on one of the important
process in execution of any project which is Project Procurement and Material Management. This
report will cover all the information regarding procurement and material management of a
project which will include its purpose, types, importance, activities and benefits, etc.

INTRODUCTION

Project Management

Project management is the application of knowledge, skills, tools, and techniques to project
activities to meet project requirements.it is accomplished through the use of processes such as
initiating, planning, executing, controlling and closing etc.

Project Management can be classified into following categories:

PROJECT
MANAGEMENT

Project Cost Project Project Introduction to

Soft Skills in Contracts and Computer
Project Risk Estimation Procurement Quality and
Project Claims Application in
Management and Cost and Materials Safety
Management Management Contract
Control Management Management Management

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What is Material Procurement Management?

Procurement is a term describing the purchasing process for goods and services. In building
construction, material procurement is the process by which the materials required to construct a
building are selected, ordered, invoiced, paid for and delivered to the site. A procurement team
of one or more construction buyers may be responsible for procurement activities for products,
materials, plant and subcontractors. They typically work for the main contractor (although sub-
contractors may also have buyers on large projects) to ensure that supplies are provided in
accordance with the project programme, specification and budget. For construction materials
will typically be ordered from the supply chain, often from external suppliers with whom the
team may have had past successful dealings, or who may be specified in the contract
documents. Procuring materials is a crucial aspect of the construction process as contractors will
normally be inundated with requests from suppliers for the provision of goods and services.
They must therefore order materials that align with both the client’s and contractor’s objectives.

Materials management is considered as a means to achieve better productivity, which also

reflects cost reduction. Procurement is the acquisition of goods or services at the best ownership
cost, in the right quantity and quality, at the right time and place for the organization. Various
issues arise in material procurement at various stages of the project's life cycle, and the reasons
for these issues are presented in the contracting organisations' material procurement
management system. Materials represent a major expense in construction, so minimizing
procurement costs improves opportunities for reducing the overall project costs.

Material procurement and storage on construction sites need to be properly planned and
executed to avoid the negative impacts of material shortage or excessive material inventory on-
site. Ordering smaller quantities of material more frequently minimizes the locked-up capital in
material inventories; however, it increases the probability of material shortages and project
delays. On the other hand, ordering larger quantities of material less frequently minimizes the
probability of material shortage and project delays; however, it increases the cost of locked-up
capital in large inventory buffers on-site. Project managers need to consider this critical trade off
during the planning of material procurement and storage on-site.

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Why Material Procurement Management?

Material management is a service function. It is as important as manufacturing. Engineering and

finance. The supply of proper quality of materials is essential for manufacturing standard
products. The avoidance of material wastage helps in controlling cost of production. Material
management is essential for every type of concern.

The importance of material management may be summarized as follows:

1.The material cost content of total cost is kept at a reasonable level. Scientific purchasing helps
in acquiring materials at reasonable prices. Proper storing of materials also helps in reducing
their wastages. These factors help in controlling cost content of products.

2. The cost of indirect materials is kept under check. Sometimes cost of indirect materials also
increases total cost of production because there is no proper control over such materials.

3. The equipment is properly utilized because there are no break downs due to late supply of
materials.

4. The loss of direct labour is avoided.

5. The wastages of materials at the stage of storage as well as their movement is kept under
control.

6. The supply of materials is prompt and late delivery instances are only few.

7. The investments on materials are kept under control as under and over stocking is avoided.

8. Congestion in the stores and at different stages of manufacturing is avoided.

Purpose of Material Procurement Management

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1 2.
De Determination of
source & supply
1 1.
1 3.
De Determination of
De Vendor Selection
requirements

1 8.
STAGES OF MATERIAL 1 4.
Payment
De Order Processing
Processing PROCUREMENT

1 7. 1 5.
Invoice De Purchase Order
Verification Monitoring
1 6.
De Goods receipt

The goal of materials management is to provide an unbroken chain of components for

production to manufacture goods on time for customers. The materials department is charged
with releasing materials to a supply base, ensuring that the materials are delivered on time to
the company using the correct carrier. Materials typically account for a large portion of a
construction project's budget. Some sources suggest, that materials may account for more than
70% of a construction project's cost. Despite these statistics, when project budgets and
efficiency are considered, labour and cost reduction are discussed. Materials management often
gets overlooked, even though successful projects are a result of a successful blend of labour,
materials and equipment management. When materials are tracked efficiently project time can
be optimized, costs can be saved and quality can be maximized.

Materials management is the process of planning and controlling material flows. It includes
planning and procuring materials, supplier evaluation and selection, purchasing, expenditure,
shipping, receipt processes for materials (including quality control), warehousing and inventory,

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and materials distribution. After the construction project finishes, maintenance of materials can
also be looked as a part of materials management.

Objectives of Material Management

To fulfill all these objectives, it is necessary to establish harmony and good co-ordination
between all the employees of material management department and this department should
have good co-ordination with the other departments of the organization to serve all production
centers.

Primary objectives can be stated as:

- Right price

- High turnover

- Low procurement and storage cost

- Continuity of supply

- Consistency in quality

- Good supplier relations

- Good information system

Secondary objectives can be stated as:

- Forecasting

- Inter- departmental harmony

- Product Improvement

- Standardization

- Make or buy decision

- New materials and products

Need of Material Management

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The need for materials management was first felt in manufacturing undertakings. The servicing
organizations also started feeling the need for this control. It is necessary that these materials
are properly purchased, stored and used.

Any avoidable amount spent on materials or any loss due to wastage of materials increases the
cost of production. The object of materials management is to attack materials cost on all fronts
and to optimize the overall end results. Materials management connotes controlling the kind,
amount, location and turning of the various commodities used in produced by the industrial
enterprises. It is control of materials in such a manner that it ensures maximum return on
working capital.

1. To h ave ad eq u ate m ate rials o n han d w h en n eede d

2. To p ay th e lo w est po ssib le p rices, co nsistent w ith qu ality and

valu e req uirem en t fo r pu rch ased m aterials

3. To m in im ize in ve nto ry in vestm en t

4. To o p erate effi cie ntly

Challenges of Materials Management

The major challenge that materials managers face is maintaining a consistent flow of materials
for production. There are many factors that inhibit the accuracy of inventory which results in
production shortages, premium freight, and often inventory adjustments. The major issues that
all materials managers face are incorrect bills of materials, inaccurate cycle counts, un-reported
scrap, shipping errors, receiving errors, and production reporting errors. Materials managers
have striven to determine how to manage these issues in the business sectors of manufacturing
since the beginning of the industrial revolution.

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The Major problems involved in the material procurement management systems are listed such
as 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.

Supply issues of Materials Management

The issues arise due to unsuitable storage materials when furnished to the website. Survey
shows that purchasing and performance delivery.

The frequent problems of construction industry, customers have an essential position to play
with the aid of its procurement methods, the purchaser impacts the manner a construction
project is done, because the tactics affect the form of the project delivery system.

The sort of procurement procedures which are perceived rational, for one, depends at the
underlying assumptions about the characteristics of procurement. A recognised guideline in lean
construction is that production must be conceived along with transformations, flow and value
generations. Alternatively, it is visibly necessary to recognise and cope with the risk of value loss
with an identical diligence as the other issues had been to date. Material management plays an
important role in project planning and control. Materials represent a major expense in
construction, so minimizing procurement or purchase cost.

Main Types of Procurement Management

There are three main types of procurement activities: direct procurement, indirect procurement,
and services procurement.

Procurement Types
Direct procurement Indirect Procurement

Services Procurement

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Direct procurement management: It involves the direct purchase of raw goods, machinery, that
directly contribute to the company’s end product. The key stakeholders in direct procurement
processes are procurement officers and contracted suppliers.

Indirect procurement management: It involves the purchasing of goods like office supplies.
These goods don’t directly affect the company’s end product or bottom line, but they support
the day-to-day management of the business. A small company may task office managers with
indirect procurement processes while large corporations may employ a facilities management
company to manage those purchases.

Services procurement management: This type of procurement can involve hiring temporary
staffers, leasing software, and bringing in short-term vendors to work at an event or seminar.

Components of Material Management are:

1. Material estimation, budgeting, planning and programming.

2. Scheduling, purchasing and procurement

3. Receiving and inspection.

4. Inventory control, storage and warehousing

5. Material handling and transport

6. Waste management

Effective Material Management in Construction Projects:

While materials count for a considerable amount of construction costs, the way materials are
managed seems to be improvised rather than approached methodically. In the construction
industry, one of the common challenges people face is issues with their inventory and onsite
material management. Management of materials have over the years been a great problem to

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most firms in the construction industry. In construction project operations, there is always a
tendency of mismanagement of materials by construction firms. As the size of the contract
increases, so does the scale of activities on materials management. Changing procedures,
installing and using new information technology and elevating managerial practices to the point
where decision models are in everyday use have been known to be stressful to organizations
that pursue such improvements. In many cases, the inability of the organization to embrace such
changes dooms the improvement initiatives.

Routes to Strategic Procurement

The procurement strategy needs to take multiple factors into consideration, like the timeline,
budget and quality of the project. here are several different routes a company can take when it
comes to strategic procurement in the construction sector. When selecting a route, the long-
term objectives of the client’s business plan must be carefully considered. Key factors that will
influence procurement include:

 Speed  Risks and opportunities

 Cost  Budget and financing
 Quality  Specific constraints on the project

Major types of Procurement in Construction Industry:

Traditional Contract

This is one of the most basic types of procurement where the responsibility of a contractor is
limited only to build. All design works and management of contract are carried out by a
consultant or an engineer. The fact that the construction industry has been working with this
method for a long time is its main advantage since it has established parameters that have been
laid out for assessing the value for money of this type of procurement path. However, the poor

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influence that the contractor as an operational party has over the design cost involved, and risk
allocation are considered to be the main disadvantages of this approach.

Design and Build

The design and build procurement route starts with the appointment of a main contractor to
design and construct the works. In this way, it gives the client a single point of responsibility for
delivering the project.

A design and build project may follow either a single-stage or two-stage tender process.

Single-stage tender: The typical route for procuring in the construction industry, where the
contractor submits a tender return with a fixed lump-sum cost. This means the complete
contract can be awarded based on tenders received.

Two-stage tender: This route is used to allow for early appointment of a contractor, before all
the information needed to calculate a fixed price is complete. During the first stage the
contractor usually submits their programme, preliminaries, project team and overheads & profit.
The selected contractor is then appointed under a pre-construction services agreement to work
for the client under a consultancy basis. During the second stage a fixed price will be negotiated
for the project works.

Management Contract

Management contracting is one of the important types of procurement in the construction

industry. In this approach, in addition to the client, the consultants and contractors and
specialized contractors become a participant. The contractor acts as a manager for the project
whereas specialized contractors undertake the real build aspect in their specialized field. Finance
and operation are carried out by the client in such projects. This method is adopted when there
are possibilities to identify projects in packages.

Construction Management

The process for construction management is largely similar to that of Management Contracting
with the exception that within this route the Client is not in direct contractual relationships with
the trade contractors as it is with the former. They appoint a management team and a
construction manager on a fee basis which can be obtained in competition.

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Private Finance Initiative (PFI)

A single contractor will be appointed to build, design and operate the project, in order to deliver
services demanded by the public sector. This contractor will have expertise in design,
construction, facilities management and funding capability. The contractor will finance the
project and lease it to the client for an agreed period. After this, the development will revert to
the client.

Joint Venture or Partnering

The barriers between parties often could result in major problems in the construction contract.
In order to overcome barriers, different parties must establish a working environment based on
trust, mutual objectives, teamwork, and sharing risks and rewards. The success of such types of
procurement largely depends on a memorandum of understanding between the parties
involved. Identifying responsibilities of each party is slightly difficult in the joint venture
procurement system.

Functions assigned for Material Management

Functions

Production & Non-

Material
Material Purchasing Production Transportation Recieving
Handlings
Control Stores

1.Production and Material Control:

Production manager prepares schedules of production to be carried in future. The requirements

of parts and materials are determined as per production schedules. Production schedules are
prepared on the basis of orders received or anticipated demand for goods. It is ensured that
every type or part of material is made available so that production is carried on smoothly.

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2.Purchasing:

Purchasing department is authorized to make buying arrangements on the basis of requisitions

issued by other departments. This department keeps contracts with suppliers and collects
quotations etc. at regular intervals. The effort by this department is to purchase proper quality
goods at reasonable prices. Purchasing is a managerial activity that goes beyond the simple act
of buying and includes the planning and policy activities covering a wide range of related and
complementary activities.

Non-Production Stores:

Non-production materials like office supplies, perishable tools and maintenance, repair and
operating supplies are maintained as per the needs of the business. These stores may not be
required daily but their availability in stores is essential. The non-availability of such stores may
lead to stoppage of work.

4.Transportation:

The transporting of materials from suppliers is an important function of materials management.

The traffic department is responsible for arranging transportation service. The vehicles may be
purchased for the business or these may be chartered from outside. It all depends upon the
quantity and frequency of buying materials. The purpose is to arrange cheap and quick transport
facilities for incoming materials.

5.Materials Handling:

It is concerned with the movement of materials within a manufacturing establishment and the
cost of handling materials is kept under control. It is also seen that there are no wastages or
losses of materials during their movement. Special equipment’s may be acquired for material
handling.

6.Receiving:

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The receiving department is responsible for the unloading of materials, counting the units,
determining their quality and sending them to stores etc. The purchasing department is also
informed about the receipt of various materials.

Steps involved for effective Material Management

Bid Procurement:

It is common for the scope of a project to change while it is coming together, which means the
bidding process can be affected. A good example of this is if the property owner decides they
want to change the materials to something with higher quality, without the overall budget of the
project being changed. The general contractor will usually agree to this and then work with their
onsite specialty contractors, like the electrical contractors, to determine what accommodations
can be made and how to make them. The electrical contractor is usually one of the last
contractors to be brought into the project, and if all of the details of the project have already
been determined before they are brought it, they may be asked to lower their bid to
accommodate the situation.

This situation can be avoided by simply maintaining communication and involvement among all
of the contractors throughout the project. Bringing in all the contractors in the beginning,
including the electrical contractor, will help to avoid this problem. The contractors can all
provide more realistic costs and timelines to the owner, and they will be able to help the general
contractor determine what accommodations can truly be made to the project in order to make
the changes the owner is wanting.

Material purchasing

In general, material purchasing falls into two categories:

1. Major Materials: materials that are specific to the project, and include things like
switchgears, lighting fixtures, and alarm systems

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2. Miscellaneous Materials and Commodities: off-the-shelf items like cables, fittings,

conduits, ties, and straps.

The purchasing process can often involve negotiating with manufacturers over the price and
quantity, which can be a long process sometimes. The person in charge of purchasing materials
needs to work out a schedule for when the materials arrive, to ensure they are there when
needed. The miscellaneous materials are generally purchased through a distributor, in either a
blanket purchase or based on a bidding process; though blanket purchases are not as common,
due to the competitive market. These materials are easier for the contractor to acquire on
shorter notice, so waiting until later in the building process may not hold up your construction.
The major materials need time to be fabricated specifically for this job, so they need some time
to be put together. Waiting too long to order these can lead to major delays in the construction
process. The manufacturer can be short on supplies or need a longer amount of time to finish
fabricating everything.

Id Ideal Procurement cycle for a typical construction project

Many contractors will order materials daily as needed, collecting the lists that each area needs
for the next day. The problem with this is that the materials may not be there before the
workers arrive in the morning, so they may be stuck waiting for part of the day until the order

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arrives on site. A simple solution to this is to determine what will be needed in advance, then
scheduling everything to arrive a day before it is actually needed. Many distributors are willing
to work with you to break up the project into a schedule of shipments based on what is needed
when another solution that many people are turning to is purchasing a prefabricated steel
building kit. These kits come with everything you need for your building and allow you to get
your building up in half the time it takes to construct a building out of traditional materials. They
are also just as customizable as a building made from traditional materials. Since the kit comes
with what you need, you will not need to worry about construction being held up by waiting for
something to be delivered.

Material procurement

After your supplier has been selected and your materials ordered comes the waiting process.
Your contractor will have to develop a system for receiving and tracking your materials as they
begin to arrive. Many companies do this by creating a material requisition schedule that
specifies the different materials and quantities for each of them, along with the set dates they
should all arrive. To avoid having a surplus of materials, many contractors will only order 80
percent of what is estimated as needed for the project, then order the rest when it is closer to
completion, when they have a better idea on what is needed.

Customarily, materials will be delivered directly to the job site, but sometimes it is not feasible
due to storage limitations; in these cases, the material is sent to the contractor’s warehouse or
other storage location. However, if something is not needed right away, it may also be stored in
the warehouse instead of onsite for space or security reasons. Sending everything to a
warehouse is also common if the contractor is planning on having everything prefabricated
before bringing it to the job site. Once you have determined when and where everything is
supposed to be delivered, things may become complicated, and you can end up with delays,
storage problems, unexpected costs, and more. Some of the complications you may encounter
include:

A miscommunication may lead to materials not arriving at the time needed

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Delivering a material to the wrong location, for instance, sending it to the job site instead of the
warehouse, or vice versa

Receiving the wrong quantity. Too many materials can lead to storage problems, while not
getting enough can lead to being held up. Waiting for an important material that holds up
construction work until it arrives

There are several ways you can avoid such problems from popping up in your project. The best
way is to make sure that everything is clearly written down before it is submitted. Keeping
communication with your suppliers will also help to avoid these pitfalls. Working with trusted
suppliers is also key to making sure everything runs smoothly. Sometimes you may pay a little
more for your materials, but in the end, it is worth it if it helps to make sure your project runs
smoothly.

Points to be Considered While Purchasing Materials

 Proper specification

 Invite quotations from reputed firms

 Comparison of offers based on basic price, freight & insurance, taxes and levies

 Quantity & payment discounts

 Payment terms

 Delivery period, guarantee

 Vendor reputation (reliability, technical capabilities, convenience, availability, after-sales

service, sales assistance)

 Short listing for better negotiation terms

 Seek order acknowledgement

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Storage and inventory management

Material tracking, inventory, and storage often lead to challenges on the job site. If there are too
many people involved in the process, a simple miscommunication can lead to materials being
misplaced, causing things to be held up or reordered. Keeping track of your materials is a huge
challenge in construction, especially if it is a large job. A good tracking system is also important
for helping minimize theft and loss, and it will help you find something quickly and easily. An
easy solution is to implement an electronic tracking system. Automated systems with bar codes
are popular, as you only have to scan something to mark that it has been received or removed
from the site. It also gives a logical way to organize your inventory, so you know exactly which
shelf something is on. There are many types of electronic systems and you can determine which
one is the best fit for you. Some systems can even be set up to automatically order something
for you when your inventory gets low or you run out of it.

Functions of Inventory Control

 To provide maximum supply service, consistent with maximum efficiency & optimum
investment.

 To provide a cushion between forecasted & actual demand for a material

Your tracking system should also be able to record damaged materials separately from the
current inventory. This part of tracking can also help you determine if there is an issue with
where something is being stored or whether the way it is being moved is problematic.
Rehandling inventory as it is moved from storage to the job site is another area where there can
be issues in material management. Things can get lost or damaged if they are not handled
properly, which can create difficulties in the project. Using onsite storage instead of a warehouse
will help reduce the risks, but you still need to be vigilant no matter how you are storing things.
Your tracking system will also help avoid losses when something is being moved.

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Keep in mind that every job will have different needs for its material management, you will need
to make some adjustments for each project. But, if you have a solid system in place, you will
have to make only slight changes from project to project. There are countless systems that will
help you manage your materials more efficiently, and help you avoid losses and damage; you
just need to find the right one that works for your company.

Points to be Considered for Effective Storage of Materials

1. Stores must be of adequate space

2. Materials must be stored in an appropriate place and in a correct way

3. Group-wise & alphabetical arrangement helps in quick identification & retrieval

4. First-in, first-out principle to be followed

5. Monitor expiry date

6. Follow two bin or double shelf system, to avoid stock outs

7. Reserve bin should contain stock that will cover lead time and a small safety stock

Construction project management Programme

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Setting up a Materials Management System

 Assign unique project number schemas in the event multiple projects are being managed

 Defined part number catalogues must be used for managing tagged equipment, sub-
components, commodities and bulk material to ensure that resource names in the MMS
system match construction drawings

 Material descriptions, unit of measure and material classifications must be descriptive and
accurate to ensure all material can be found quickly and efficiently

 Project controls cost coding structure must be in place at the beginning of the project to
avoid confusion later on in the project

 Construction Work Packages must be finalized prior to the start of construction

 Material storage locations must be clearly defined and marked (warehouses, laydown
yards, module yards, field and vendor shops)

 Key shipping dates must be accurate to ensure proper equipment is available to off-load
material

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 Quality requirements, hold points, inspections, and certifications must be tracked digitally

 Preservation requirements and record keeping must be kept up to date

 Logistics requirements and documentation should be readily available

 Material acceptance and release from storage forms and processes must be followed

 Implementing site materials management processes and procedures for inventory counts
and receiving

 Automating Integration with Project ERP and Engineering systems will ensure proper data
integrity in the System

References

https://www.sciencedirect.com/science/article/abs/pii/S0263786317300595

https://www.towereight.com/what-is-procurement-strategy-construction/

https://www.masterclass.com/articles/what-is-procurement#what-is-procurement

https://www.nbmcw.com/article-report/infrastructure-construction/project-management-
arbitration/effective-materials-management-in-construction-projects.html

https://bvmengineering.ac.in/misc/docs/published-20papers/civilstruct/Civil/101002.pdf

https://en.wikipedia.org/wiki/Materials_management

https://www.irjet.net/archives/V7/i6/IRJET-V7I6929.pdf

https://www.yourarticlelibrary.com/material-management/materials-management-meaning-
importance-and-functions/53156

https://en.ppt-online.org/508843

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https://www.tactivesoft.com/blog/role-of-construction-procurement-management/
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%20business.

https://www.spendedge.com/blogs/types-procurement-construction-industry

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