BLDG 6571 - Prelec 5

BLDG 6571 Lec 5 7/12/2017
BLDG 6571 PROJECT

MANAGEMENT
Lecture 5 Material Management
Dr. Mona Abouhamad
Represent a major expense in construction projects

(40~60%) of costs.
Poor materials management result in large and
avoidable costs during construction
if materials purchased early
Capital may be tied up and interest charges incurred on the
excess inventory of materials
Materials may deteriorate during storage
Special care is required (theft/vandalism)
electrical equipment often must be stored in waterproof
locations.
BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 2
Dr. Mona Abohamad 1

BLDG 6571 Lec 5 7/12/2017
Represent a major expense in construction projects

(40~60%) of costs.
Poor materials management result in large and
avoidable costs during construction
if materials purchased late
delays and extra expenses may be incurred
Therefore, insuring a timely flow of material is an

important concern of project managers.
7/12/2017 3
BLDG 6571 Lec 5 Dr. Mona Abouhamad
Decisions about material procurement required during
the initial planning and scheduling stages.
The availability of materials may greatly influence the
schedule in projects with a fast track or very tight time

schedule: sufficient time for obtaining the necessary
materials must be allowed.
More expensive suppliers or shippers may be employed
to save time.
Dr. Mona Abohamad 2

BLDG 6571 Lec 5 7/12/2017
When complex and specially fabricated items are to be

included in the construction, detailed specifications and
drawings become part of the purchase order.
Regardless of the complexity of the transaction, certain basic
elements are present in any purchase order.
1. Quantity or number of items required.
2. Item description. This may be a standard description and stock
number from a catalog or a complex set of drawings and
specifications.
3. Unit price.
4. Special instructions (shipping and invoicing procedures, cost, insurance, and
freight).
5. Signatures of agents empowered to enter into a contractual

agreement.
Dr. Mona Abohamad 3

BLDG 6571 Lec 5 7/12/2017
Dr. Mona Abohamad 4

BLDG 6571 Lec 5 7/12/2017
When the approval process is completed, the material
has been accepted as part of the project. Its details have

been carefully reviewed for conformance with the
contract documents. Also, through this process, the item
has been coordinated with all trades involved in its
installation and verified for inclusion into the project. The
material is now ready for fabrication and delivery.
For projects involving the large scale use of critical
resources, the owner may initiate the procurement

procedure even before the selection of a constructor in
order to avoid shortages and delays.
The largest amount of time is lost or gained in this phase.
The duration of the fabrication and delivery process
depends directly on the nature of the material and the

amount of physical transformation involved.
Dr. Mona Abohamad 5

BLDG 6571 Lec 5 7/12/2017
Materials delivered are checked for compliance with the
approved submittal as regards quality, quantity,

dimensions, and other requirements.
Discrepancies are reported to the subcontractor or
supplier. These discrepancies, whether they are

shortages or fabrication errors, are subjected to the same
monitoring and controlling processes as the entire order.
(1) Bulk materials
(2) Standard off-the-shelf materials, and,
(3) Fabricated members or units
The process of delivery, including transportation, field storage

and installation will be different for different classes of
materials.
The equipment needed to handle and haul these classes of
materials will also be different.
Dr. Mona Abohamad 6

BLDG 6571 Lec 5 7/12/2017
Materials in their natural or semi-processed state, which are
usually encountered in large quantities in construction.
Ex: earthwork to be excavated, wet concrete mix, etc
Some bulk materials such as earthwork or gravels may be
measured in bank (solid in situ) volume.
The quantities of materials for delivery is different when
expressed in different measures of volume, depending on the

characteristics of such materials.
Dr. Mona Abohamad 7

BLDG 6571 Lec 5 7/12/2017
Used extensively in the chemical processing industry.
Standard off-the-shelf materials can easily be stockpiled,
therefore, the delivery process is relatively simple.
Standard piping and valves are typical examples of standard
off-the-shelf materials
Dr. Mona Abohamad 8

BLDG 6571 Lec 5 7/12/2017
Items pre-processed in a shop to simplify the field

erection procedures.
Ex: steel beams and columns for buildings
Welded or bolted connections are attached partially to the
members which are cut to precise dimensions for adequate
fit.
if the work can be done in the shop where working
conditions can better be controlled, it is advisable to
do so, provided that the fabricated members or units
can be shipped to the construction site in a
satisfactory manner at a reasonable cost.
Dr. Mona Abohamad 9

BLDG 6571 Lec 5 7/12/2017
Once goods are purchased, they represent an inventory used
during the construction process.
The general objective of inventory control is to minimize the
total cost of keeping the inventory while making trade-offs

among the major categories of costs:
What are the cost of inventory ?
21
BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017
Dr. Mona Abohamad 10

BLDG 6571 Lec 5 7/12/2017
Fabrication
Approval Installation
Order and delivery
Process process
process
Request
Purchase
for Inventory
Order
Quotation
Vendor
selection
(1) purchase costs,
(2) order cost,
(3) holding costs, and,
(4) unavailable cost.

BLDG 6571 Lec 5 7/12/2017
Unit purchase price from an external source including

transportation and freight costs.
(For construction materials, it is common to receive discounts for
bulk purchases, so the unit purchase cost declines as quantity

increases) What did we call that ?
There are also advantages in having homogeneous materials.
bulk order to insure the same color or size of items such as bricks
may be desirable.
Reflects the administrative expense of issuing a purchase order
to an outside supplier.
Order costs include expenses of *making requisitions,

*analyzing alternative vendors, *writing purchase orders,
*receiving materials, *inspecting materials, *checking on
orders, and *maintaining records of the entire process.
Order costs are usually only a small portion of total costs for
material management in construction projects, although

ordering may require substantial time.

BLDG 6571 Lec 5 7/12/2017
Holding costs or carrying costs are primarily the result of capital
costs, handling, storage, obsolescence, shrinkage and

deterioration.
Capital cost results from the opportunity cost or financial expense
of capital tied up in inventory.
Handling and storage represent the movement and protection

charges incurred for materials.
Storage costs also include the disruption caused to other project
activities by large inventories of materials that get in the way.
Obsolescence is the risk that an item will lose value because of
changes in specifications.
Shrinkage is the decrease in inventory over time due to theft or
loss.
Deterioration reflects a change in material quality due to age
or environmental degradation.

BLDG 6571 Lec 5 7/12/2017
Many of these holding cost components are difficult to predict
in advance; a project manager knows only that there is some

chance that specific categories of cost will occur
As a general rule, holding costs will typically represent 20% to
40% of the average inventory value over the course of a year;

thus if the average material inventory on a project is $ 1 million
over a year, How much is the expected holding cost ?
The unavailability cost is incurred when a desired material
is not available at the desired time.
Shortages may delay work, thereby wasting labor

resources or delaying the completion of the entire
project.

BLDG 6571 Lec 5 7/12/2017
The amount of time required for processing the order
and shipping the item is uncertain.
Therefore; the project manager must decide how much
lead time to provide in ordering the item.
The lead time L for ordering an item is the time period
ahead of the delivery time, and will depend on the trade-off

between holding costs and unavailability costs.
D may vary from 0 to the number of additional days required
to produce certain delivery on the desired date.

BLDG 6571 Lec 5 7/12/2017
Let T be the time for the delivery of a particular item,

R be the time required for process the order, and
S be the shipping time
The minimum amount of time for the delivery of the item
T=R+S

BLDG 6571 Lec 5 7/12/2017
T is the chance that an item will be delivered on day t is
represented by the probability p(t). Then, the probability

that the item will be delivered on or before t day is given by:
If a and b are the lower and upper bounds of possible
delivery dates, the expected delivery time is then given by:

BLDG 6571 Lec 5 7/12/2017
When should the item order be placed?
1. Calculate the expected time of delivery.

2. What is the appropriate lead time to ensure
that:
a. No unavailability cost is paid
b. No holding cost is paid
3. What is the appropriate lead time to ensure
that there is at least a 90% probability the
material will not arrive late for use?

BLDG 6571 Lec 5 7/12/2017
The probabilities of delivery for an air handling unit are shown

in the table.
The activity of installing the units is expected to take 3 days and
has an ES and LS of 55 and 57 respectively
1. On what day should the unit be ordered to ensure
No unavailability cost is paid
No holding cost is paid
2. If the unit is ordered on day 49 what is the probability of paying
1. Holding cost
2. Unavailability cost
3. If the project has liquidated damages of 5,000 $/day and the

holding costs are estimated at 1 000 $/day.
what the most suitable time to order the material?

BLDG 6571 Lec 5 7/12/2017
Halpin, Daniel W. Construction management. John Wiley &

Sons, 2010.
Project Management for Construction, Chris Hendrickson -
Chapter 4 (4.6-4.9)
http://pmbook.ce.cmu.edu/04_Labor,_Material,_And_Eq
uipment_Utilization.html

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BLDG 6571 Lec 5 7/12/2017

BLDG 6571 PROJECT

Represent a major expense in construction projects

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 2

Dr. Mona Abohamad 1

Represent a major expense in construction projects

Therefore, insuring a timely flow of material is an

Decisions about material procurement required during

the initial planning and scheduling stages.

The availability of materials may greatly influence the

schedule in projects with a fast track or very tight time

More expensive suppliers or shippers may be employed

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 4

Dr. Mona Abohamad 2

When complex and specially fabricated items are to be

5. Signatures of agents empowered to enter into a contractual

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 6

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 7

Dr. Mona Abohamad 3

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 8

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 9

Dr. Mona Abohamad 4

When the approval process is completed, the material

has been accepted as part of the project. Its details have

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 10

For projects involving the large scale use of critical

resources, the owner may initiate the procurement

The largest amount of time is lost or gained in this phase.

The duration of the fabrication and delivery process

depends directly on the nature of the material and the

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 11

Dr. Mona Abohamad 5

Materials delivered are checked for compliance with the

approved submittal as regards quality, quantity,

Discrepancies are reported to the subcontractor or

supplier. These discrepancies, whether they are

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 12

(1) Bulk materials

(2) Standard off-the-shelf materials, and,

(3) Fabricated members or units

The process of delivery, including transportation, field storage

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 13

Dr. Mona Abohamad 6

Materials in their natural or semi-processed state, which are

usually encountered in large quantities in construction.

Ex: earthwork to be excavated, wet concrete mix, etc

Some bulk materials such as earthwork or gravels may be

measured in bank (solid in situ) volume.

The quantities of materials for delivery is different when

expressed in different measures of volume, depending on the

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 14

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 15

Dr. Mona Abohamad 7

Used extensively in the chemical processing industry.

Standard off-the-shelf materials can easily be stockpiled,

therefore, the delivery process is relatively simple.

Standard piping and valves are typical examples of standard

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 16

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 17

Dr. Mona Abohamad 8

Items pre-processed in a shop to simplify the field

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 18

BLDG 6571 Lec 5 Dr. Mona Abouhamad 7/12/2017 19

Dr. Mona Abohamad 9