Procurement and

Materials Management:
A Decade of Improvement
Percent Improvements
• Reduced bulk surplus (40%)
• Improved supplier performance (24%)
• Cash flow savings (23%)
• Reduced site storage, handling (21%)
• Improved craft productivity (16%)
• Improved project schedule (16%)
Background

• Project Materials Management

Handbook originally issued by CII in
1988
• Updated to include value-added
concepts
• Procurement & Materials
Management: A Guide to Effective
Project Execution
Team Membership
Al Franks, Jerry Whetstone Amoco Corporation
David Timberlake Bechtel Group. Inc.
Steve Daniels, Jim Scotti Brown & Root, Inc.
Doug Moore Chevron Corporation
Mark Coleman CITGO Petroleum Corporation
Lance Bell Clemson University
Glen Meadows Commonwealth Edison Co.
Bob Ferguson Fluor Daniel, Inc.
Greg Pisklo Hilti Corporation
Ed Ruane J. A. Jones Inc.
James Steenbergen Union Carbide Corporation
Jim Goodwin H. B. Zachry Company
Approach
• Surveyed membership to identify
awareness and use of effective
procurement and materials concepts
• Executed structured interviews
• Utilized survey input, site reports,
and team member experience in the
update process
Immediate Usefulness
• Update includes:
– Checklists
– Sample reports
– List of concepts and technologies
– Sample templates
– Guidelines to assess contractor’s
systems
– References
New/Developing Concepts
• Internet, intranet • Supply chain
• Supplier alliances management
• On-site supplier • Evaluated receipts
stocks settlement
• Bar code controls • MRP and trial
allocation
• Common
commodity codes • Document imaging
• Global logistics • Procurement cards
planning • Simulation
packages
Gaps

• Survey of CII members

• Sizeable gaps between

awareness and implementation
of procurement and materials
management concepts
Evaluated Receipts Settlement

Minimal
Awareness

Moderate Owner
Awareness Contractor

Intent to
Implement

Current
Utilization

0 20 40 60 80 100
Bar Coding (Tool Control)
Minimal
Awareness

Moderate Owner
Awareness Contractor

Intent to
Implement

Current
Utilization

0 20 40 60 80 100
Management Role
• Champion procurement and materials
management as a value-added
process.
• Provide resources for implementation
and training.
• Implement effectiveness measures to
track improvements over time.
• Promote supplier alliances.
 Welcome to the …
Procurement and Materials
Management
1. What is a purchasing technique
for several companies to combine
their material requirements into a
single plan to attain greater
leverage with suppliers?

A. Consortium buying
B. Leasing arrangement
C. Subcontracting
1. What is a purchasing technique
for several companies to combine
their material requirements into a
single plan to attain greater
leverage with suppliers?

A. Consortium buying
B. Leasing arrangement
C. Subcontracting
 2. What are examples of
procurement and materials
management system metrics?

A. Stock outs
B. PO cycle time
C. Both A and B
 2. What are examples of
procurement and materials
management system metrics?

A. Stock outs
B. PO cycle time
C. Both A and B
 3. What is
“Evaluated Receipts Settlement”?

A. Analysis of warehouse operations

B. Payment w/o hard copy of invoice
C. Process similar to Alternate
Dispute Resolution
 3. What is
“Evaluated Receipts Settlement”?

A. Analysis of warehouse operations

B. Payment w/o hard copy of
invoice
C. Process similar to Alternate
Dispute Resolution
4. What are examples of services
expected of strategic, integrated
suppliers?

A. Take-off assistance
B. Accurate inventory control
C. Both A and B
4. What are examples of services
expected of strategic, integrated
suppliers?

A. Take-off assistance
B. Accurate inventory control
C. Both A and B
 5. What is the average percent
improvement CII members have
achieved in “craft labor productivity”
when effective procurement and
materials concepts were used?

A. 2%
B. 4%
C. 16%
 5. What is the average percent
improvement CII members have
achieved in “craft labor productivity”
when effective procurement and
materials concepts were used?

A. 2%
B. 4%
C. 16%
 True or False
6. The following are examples
of areas that should be
included in a contract for
transportation services:
• Carrier liability
• Origin and destination services
• Rate structure
 True or False
6. The following are examples
of areas that should be
included in a contract for
transportation services:
• Carrier liability
• Origin and destination services
• Rate structure
 7. Which of the following are
characteristics of a contractor’s
comprehensive computer system?

A. Electronic links to ERP

B. Multi project procurement
database
C. Electronic distribution of catalogs
 7. Which of the following are
characteristics of a contractor’s
comprehensive computer system?

A. Electronic links to ERP

B. Multi project procurement
database
C. Electronic distribution of catalogs
 8. What are the trade terms
published by the International
Chamber of Commerce (Paris)
that divide obligations between a
buyer and supplier in 10 areas?

A. Uniform Commercial Code

B. Napoleon’s Code of Warfare
C. INCOTERMS
 8. What are the trade terms
published by the International
Chamber of Commerce (Paris)
that divide obligations between a
buyer and supplier in 10 areas?

A. Uniform Commercial Code

B. Napoleon’s Code of Warfare
C. INCOTERMS
 9. What are very common
applications of bar code
technology?

A. Receipt of fabricated items

B. Tool control
C. Both A and B
 9. What are very common
applications of bar code
technology?

A. Receipt of fabricated items

B. Tool control
C. Both A and B
 10. What multi-industry initiative
has developed more than a million
standard material identifiers and
descriptions?

A. CIMIS
B. APICS
C. NAPM
 10. What multi-industry initiative
has developed more than a million
standard material identifiers and
descriptions?

A. CIMIS
B. APICS
C. NAPM
11. What is an effective software
platform with which to develop
a materials management
computer system that interfaces
with design systems?

A. Trial and error

B. MRR
C. Object-oriented programming
 11. What is an effective software
platform with which to develop
a materials management
computer system that interfaces
with design systems?

A. Trial and error

B. MRR
C. Object-oriented programming
 12. What important function of a
materials control system compares
material requirements to
requisitions, purchases, and
inventory to ensure material
availability for construction?

A. Packaging
B. Trial allocation
C. Proration
 12. What important function of a
materials control system compares
material requirements to
requisitions, purchases, and
inventory to ensure material
availability for construction?

A. Packaging
B. Trial allocation
C. Proration
13. What communications link
will exert fundamental change
on procurement and materials
management in the next
several years?

A. Fax machines
B. Electronic commerce
C. Morse code
13. What communications link
will exert fundamental change
on procurement and materials
management in the next
several years?

A. Fax machines
B. Electronic commerce
C. Morse code
 True or False

14. The following are benefits

of a “Supplier Alliance”:

• Shared vision and goals

• Lower total costs
• Integrated vs. duplicate teams
 True or False
14. The following are benefits
of a “Supplier Alliance”:

• Shared vision and goals

• Lower total costs
• Integrated vs. duplicate teams
 Final Question
15. How can you learn more about
Procurement and Materials
Management?

A. More supplier lunches

B. Fewer supplier lunches
C. Attend the
Implementation Session
 Final Question
15. How can you learn more about
Procurement and Materials
Management?

A. More supplier lunches

B. Fewer supplier lunches
C. Attend the
Implementation Session
Summary
• Innovative concepts have emerged in
past decade.
• Utilization of these concepts has
resulted in significant improvements.
• Not all CII are aware of or utilizing
these concepts.
• New CII publication provides details
of these concepts.
 Implementation Session
• Pros, cons, benefits, & advantages:
– Lance Bell (Clemson): Moderator
– Bob Ferguson (Fluor Daniel): Electronic Tools/Systems
– David Timberlake (Bechtel): Logistics
– Jim Scotti (Brown & Root): Supplier Alliances
– Ed Ruane (J. A. Jones): Collective Group of Concepts

• Share experiences
• Take-home tool
Percent Improvements
• Reduced bulk surplus (40%)
• Improved supplier performance (24%)
• Cash flow savings (23%)
• Reduced site storage, handling (21%)
• Improved craft productivity (16%)
• Improved project schedule (16%)
 Our thanks to Varese Sarabande
Records Inc. and Robert A. Israel for
the use of the theme song...

The Price
Is Right
(See you in the LaSalle Room)